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December 12, 2006

TV prices dropping too fast?


Sometimes you just have to laugh – TV prices dropping too fast, Sony says:

Television prices are dropping faster than expected, and Sony’s not too happy about it.

Prices for liquid crystal display TVs should drop between 25 percent and 30 percent this year. That’s between 5 percent and 7 percent more than Sony anticipated, Stan Glasgow, president of Sony Electronics, said in a meeting with reporters in San Francisco last week.

And the problem is what exactly?

While this is good for consumers–and it would be hard to find a thrifty buyer sympathetic to Sony’s concerns–the quick plunge in prices could hurt the industry as a whole because it could leave consumer electronics manufacturers financially weakened and less able to invest in future technologies, Glasgow argued.

Mr. Glasgow seems to be unfamiliar with the concept of the free market where efficient producers survive and inefficient ones get forced out. Either that or Sony is on the inefficient side.

“LCDs will continue to experience heavy price erosion, but not at this level,” he said. “It is hard to see that business model (of drastic price cuts) sustaining itself.”

It won’t unless the manufacturers can sustain it.

However, aside from beating up Sony for cluelessness, the point is that there are bargains out there:

“Prices have come down pretty aggressively,” said Steve Baker, an analyst at NPD Techworld. “We saw more big names on Black Friday come out with more aggressive prices than expected. The surprise was that the big guys got dragged into the muck.”

Vizio, for instance, a bargain plasma TV maker, sold a 42-inch plasma for $999 while Panasonic also touted 42-inch plasma deals for around $1,300.

A variety of factors have played a role in the dramatic drop. LCD and plasma TV makers are engaged in a turf war for the key 40-inch to 49-inch TV market, Baker said. Many manufacturers are also trying to get rid of excess supplies of TVs shipped to Europe in anticipation of a big selling binge before the summer’s World Cup soccer tournament. Not as many sets sold as expected.

Consumers are buying bigger, fancier TVs, but they expect to buy them at far lower prices than they did a year ago, which squeezes sales margins. Additionally, the number of companies hawking LCD TVs is putting pressure on big companies like Sony. IDC analyst Bob O’Donnell estimated that there might be close to 90 manufacturers.

“You and I can start an LCD company tomorrow. You buy some panels and circuits, get a Taiwanese (contract manufacturer) and, bam, you’re in business,” he said. “Given that environment, there are people fighting for survival.”

On the latter point, it means you just need to check the reviews of the model and manufacturer for quality, or stick to the big names like Sony as they get dragged kicking and screaming to lower their margins.


Posted at 8:12 pm. Filed under Companies, LCD TV, Plasma TV, Sony, Television

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