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Digital Products Becoming Video’s Top Dog

Since the end of the 1940s, television sets and related products have formed the backbone of the consumer electronics industry, and, if you strip computers and monitors from the home information category, video is still our biggest dollar volume producer.

The reason why video products continue to sit on top of the money heap, despite the surge of new products in the audio, mobile and home information areas, is, in a word, “digital.” The arrival in the mass market of digital camcorders, digital home satellite receivers and DVD players has, since the late 1990s, helped bolster video product sales.

And today, joined at last by a meaningful demand for digital TV receivers and monitors, they are making up for the flagging sales of analog direct-view and projection TV, and TV/VCR combinations.

Going into the holiday selling season, 2002 sales to dealers of those analog TV products were down by more than 2 million units, or 12 percent. So it came as something of a surprise to me to see the Consumer Electronic Association’s report that the dollar volume through that same nine-month period was off by only 3 percent.

The obvious explanation is that falling retail pricing of larger sized analog direct-view and projection sets is providing consumers with big-screen bargains they just can’t pass up. With 25-inch sets selling at former 19-inch pricing, 27-inch down well below the $300 level and 36-inch down to where 27-inch used to live, consumers are finding the step-up to giant screens irresistible.

In fact, the pricing on digital color is probably helping analog along. The four-digit and five-digit pricing on comparable sized digital TVs make the pricing on their analog counterparts, both direct-view and projection, seem even more alluring.

But at the same time, consumers are showing signs of rallying to the digital TV flag, the same way they are switching from tape to DVD for pre-recorded video and to CD for audio. According to the latest data from CEA, digital products represented almost 30 percent of TV dollar sales in 2001, and will have come in at better than 40 percent in 2002. For this year, digital models are expected to generate just over half the industry’s TV dollar volume.

Up until recently, as far as I was able to see, retailers were carrying most of the digital TV consumer education load. But that started changing toward the beginning of the second half of last year, as some TV manufacturers began spending big bucks on advertising.

As far as TV commercials go, Zenith has broken well ahead of the pack with a heavy schedule of quality dramatic spots. Philips too has started spending, and, following its usual practice, RCA will be coming in strong.

And frankly, these traditional industry volume leaders will have to keep it up to head off the competition. These television rivals are not just the usual suspects, but a whole crop of relative newcomers who see the digital TV arena as a wide open opportunity to stake out a significant market share claim.

The guide to digital TV products and broadcasters that TWICE’s Greg Tarr so painstakingly compiles for CEA lists dozens of digital TV suppliers, many of whom I’ve never heard of. It sort of reminds me of the post-WWII start-up days of black-and-white television, when it seemed that anyone who had ever built a radio was going into TV set production. Confused TV buyers gravitated to brands they knew from the days of radio, and so it was that the Admirals, Magnavoxs, RCAs, Sylvanias and Zeniths carried the day.

But that may well not hold as true for digital TV. Today there are a scant number of the old, trusted, independent, locally owned family-run stores to guide consumers to established brands.

In addition, the reliable performance of even off-brand solid state CD and DVD players, color TVs and VCRs has given consumers the feeling that everything we sell works well, and that brand names, while still of value in making a buying decision, are not as important as they used to be.