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Lower prices — not wiz-bang features — sell large TVs

As part of the annual CE Week event in New York City last week, the Consumer Electronics Association (CEA) presented its mid-year, state of the industry report on the television viewing products that are driving what little growth in profits there is to be had these days. In general, smart phones and electronic tablets continue to be the hot products.

The only thing that has helped maintain growth, however small, in HDTV set sales has been lower prices and not necessarily features like Internet connectivity or higher resolution. Steve Koenig, CEA director of industry analysis, said that TVs have become “cheaper, bigger and provide more real estate for less money."

He asked, "How long can this trend continue? Is it a race to zero?”

Sales of 50in and larger flat-panel TVs are up 12 percent from January through March 2013 over last year.

“It’s a large-screen market,” Shawn DuBravac, chief economist and director of research at the CEA,said in another presentation.

He reported that in 2011, just 11 percent of TVs sold were 50in or larger, but that is predicted to increase to 34 percent by 2016. This shift to larger screens is being spurred by low prices and “replacement buys.” Internet-connected TVs are also gaining minimal traction among buyers, with 36 percent of all sets sold this year expected to include a variety of “smart” features.

In a separate, more positive presentation, DuBravac said smartphone revenues are growing by 20 percent over 2012, and tablets, at a 45 percent pace. Roughly 40 percent of all U.S. households now own some form of a tablet, and 30 percent that don’t say they intend to buy one in the next 24 months, he reported, indicating additional sales potential there.

Several new Ultra HD (4K) TV sets were shown at the CE Week event, with Samsung, Sharp, Sony, Toshiba and others showing new models ranging from $5000 (Sony’s 55in XBR-55X900A) to $8000 (Sharp’s 70in LC-70UD1 4K LED TV), to $25,000 (for Sony’s 80in XBR-84X9004K LED model) to $699 (Seiki's new 36in SE39UY04). The smaller model is mainly being marketed to gamers and PC users.

(As an example of the new 4KTV feature sets, the Sharp Aquos 4K LC-70UD1 features a dual-core processor to display native 3840 x 2160 resolution and the upscaling of non-4K content. The set also includes four HDMI 1.4 inputs, two USB 2.0 inputs, an SD card reader, an optical digital output and a six-driver audio speaker system — including Sharp’s DuoBass subwoofer system that is built into the front bezel of the set.)

The CEA’s DuBravac said that sales predictions for Ultra HD sets are not expected to reach beyond 23,000 units for 2013, but could reach 1.4 million in 2016. OLED TV unit sales are predicted to be about 20,000 this year, and next year, UHD unit volume could be 212,000, versus 190,000 for OLED.

For his part, Koenig said that the tablet and its “second-screen dynamic” have significantly affected traditional TV viewing.

“There is more content on more screens and multitasking on multiple screens,” he said, adding that two-thirds of consumers use a companion screen when while watching TV.

Koenig said that in order to sell traditional TVs, manufacturers are having to cut into profits by offering severely reduced pricing. The industry saw peak revenues for flat panels in 2008, when U.S. shipments reached $26 billion, and has now dropped to below $20 billion, where it is expected to hover through 2016 — even with the emergence of Ultra HD and OLED sets.

LCD TVs hold the dominant sales position, accounting for nine of 10 displays shipped, while sales of plasma panels are falling fast. With just three major manufacturers remaining as players in the consumer plasma TV business, Koenig said, “I don’t see a lot of legs left in this market.”

He said OLED “could be more of a 2015 story,” while Ultra HD is destined to be a “second-half 2013 story,” adding that “it will be some years before we see meaningful volume … UHD holds promise, but that promise is somewhat distant at the moment.”

On the subject of 3-D, Koenig observed sales “have been somewhat one-dimensional,” with the pace of 2013 3-D unit shipment increases for January through March (just one percent) far off from the 2013 unit shipment forecasts offered in at the beginning of the year for 3-D-outfitted TVs (28 percent).