Market research firm DisplaySearch, along with analysts from sister company Current Analysis West and corporate parent The NPD Group, provided marketplace projections on TVs, next-generation DVD formats and how retailers will sell them during a 2008 Outlook Webinar held last month.
Tackling the TV market was Paul Gagnon, director of North American TV market research for DisplaySearch. Gagnon predicted a rebound in TV shipments this year following an expected 4 percent decline in 2007 levels, including an 11 percent drop in the fourth quarter alone. He attributed last year's downturn to the loss of CRT volume and tight supply of LCD panels, particularly in 37-inch and smaller sizes, which constrained the market. This year's increases will be spurred by the looming DTV transition deadline and the long-awaited 2008 Summer Olympics in China, he said.
Broken out by display type, LCD is expected to grow from 23 million units in 2007 to more than 29 million this year, representing more than 81 percent of the TV market in North America. Declines in average selling price (ASP) should continue to slow this year as the LCD market reaches saturation levels and growth slows. The largest percentage price drops are will likely be seen in 52-inch 1080p LCD TVs, down a projected 21 percent compared with 23 percent in 2007. By contrast, panel prices for 720p LCD models are expected to remain fairly flat through the year, as margins are already very slim, Gagnon said.
The picture is somewhat different in plasma, where supply is exceeding demand, creating more room for reductions in ASP. Indeed, the steepest price declines of all TV types are anticipated in 50-inch 1080p PDP, where retails are expected to fall 26 percent. Still, the compression in that category has slowed dramatically, compared with the 63 percent decline last year.
In DLP rear-projection TV, retails are expected to fall a modest 7 percent in 720p sets in 50-inch to 54-inch sizes, and will drop 16 percent in comparably sized 1080p models.
Gagnon said 1080p displays of all types will likely see the largest year-over-year price reductions since margins on these sets "have more room to move." To be sure, full HD models continue to enjoy the best margins, which in some instances are nearly twice as high as their 720p counterparts.
Margins on larger-screen-size models will also continue to hold up well this year, he said.
On the DVD front, Paul Erickson, DisplaySearch's DVD and HD market research director, anticipated "significant improvement" this year in standalone sales of next-generation hardware, although sell-through is still likely to trail lifetime-proportional sales of standard DVD players. Ongoing headwinds include the struggle against up-scaling DVD models despite an overall decline in the DVD market, and the lack of any clear resolution of the format war in 2008, although an end to the conflict could be possible in 2009. The real-world threat to next-generation players from HD digital downloads is still not realistic this year due to bandwidth constraints, and will remain very small in 2009, he said.
All told, nearly 4.8 million standalone next-generation DVD players are expected to be sold this year, Erickson projects, as deepening 1080p TV penetration gradually increases the appeal of these products. Another catalyst to mass adoption will be the continued downward pressure on price, aided by some economies of scale from PC-related drives. Whether or not software pricing will fall in tandem remains to be seen.
Toshiba, Samsung and Sony will collectively control more than 90 percent of the market, according to DisplaySearch.
Analyzed by format, a large majority (better than 80 percent) of the installed Blu-ray base is expected to remain console-based, particularly as PlayStation3 pricing continues to gradually decline. Sales of stand-alone players will increase amid overall improvement in hardware pricing, as Sharp and Panasonic fight for share gains against dominant players Sony and Samsung, and new low-cost entrants such as Funai enter the fray.
Nevertheless, overall Blue-ray Disc player price erosion will continue to be led by Sony via its stand-alone players and PS3 platform, with expected normal low-end hardware to hit the $200 to $250 range by Holiday 2008. Competition from the HD DVD camp will also drive the price declines.
Erickson said the "aggression and regularity" seen in Blu-ray software promotions are expected to continue, resulting in continued software sales strength.
On the HD DVD side, greater economies of scale, particularly by the end of the second quarter, and the use of reference design by Chinese OEMs, will continue the downward ramp on pricing, with expected normal low-end hardware pricing to fall below $100 by Holiday 2008.
Manufacturers may also enjoy some drive-related economies of scale, driven by the format's increased inclusion in larger-volume Toshiba laptop SKUs and consumer models from Hewlett-Packard and other PC vendors, Erickson said.
Software promotional activity will increase as well, he projected.
Sales volume will be increasingly driven by the wholesale club and mass merchant channels (particularly Wal-Mart), as prices continue to decrease into mass-market affordability. This will help it maintain superiority over Blu-ray in overall stand-alone player sales, he said, although the lead will become tenuous if price differential falls to only $100 or less.
Dual-format units will have a higher profile this year as at least one more CE company enters the category and prices decline. Still, retails will remain relatively high compared with single-format units, relegating these models to the high-end niche.
Competitive variables to watch this year include:
- exclusivity by studios and major retailers;
- software pricing, which remains a barrier for consumers;
- the launch and adoption level of Chinese-made HD DVD players and CH DVD-format units;
- 1080p HDTV pricing and related consumer response;
- the level of discount for player/HDTV bundles;
- the ongoing price differential with up-scaling DVD products;
- the timeline and pricing of Blu-ray players from low-cost OEMs;
- increased leveraging of the Xbox 360 channel for HD DVD, including bundle pricing and other possibilities; and
- the infrastructure build-out and aggressiveness of the pay-TV industry on HD video-on-demand, which may have a larger impact in 2009
Also on hand was NPD industry analysis VP Steve Baker, who indicated that retailer are pushing toward bundles, add-ons and accessories as they focus on selling for profit versus for volume. Furthermore, dealers are making service and support a priority to provide a better experience in the store and at home, and ultimately access new profit opportunities.
The big question for 2008, he said, is how the CE industry can duplicate the success of TV in the future as flat-panel growth rates slow. "Will there ever be another category," he asked, "that can nearly double ASPs over four years and double revenue?"
N. America Price Outlook by Type
Flat-Panel Margin Outlook