How Flat Panel Retail Pain Translates Into Consumer Gains

The Boston Globe yesterday had its own take on the flat panel pricing precipice this season, noting that there has never been a better time to for consumers to buy a flat panel television. Of course, the fact is retailers are often taking losses on the products.

According to the article:

Aggressive price wars over flat-panel televisions, the Cadillac of TV sets revered for their big screens, clear pictures, and sleek physiques, have given shoppers the upper hand this holiday season. Merchants have slashed prices 40 percent on average over the past year, and electronics chains are offering years of no interest and no down payments as they try to fend off discounters and newcomers, such as Home Depot (HD), Office Depot (ODP), and Toys "R" Us, that are now selling low-cost LCD and plasma TVs.

"Prices are dropping faster than TVs are growing in terms of screen size," said Scott Erickson , a partner in Deloitte & Touche's consumer business practice. "The average American household that a year ago could only dream of putting in a 50-inch or greater television is actually doing it this year."

And we thought last year's 30% decline in prices was big.

One factor in the price declines that I haven't seen reported much is the fact that consumers seem to have accepted 1080p theater-definition resolution as a differentiating feature (see article for Blackfriars' definitions of TV displays above today's standard high-definition resolutions of 720p and 1080i). The result has been a near crash in the prices of most of this year's plasma displays, where 1080p resolution was the exception rather than the rule. This is in dramatic contrast to inexpensive LCD panels such as the Westinghouse LVM-42W2 that already feature 1080p resolutions. The irony of all this is that resolution is actually about the third or fourth most important factor in reproducing realistic video images and the fact that 1080p source material is currently nonexistent except for a few Sony (SNE) Playstation 3 games and Blu-ray movies.

Pioneer 50-inch 1080p theater-resolution plasma panel

The moral: Differentiation is a powerful marketing force, especially with complex products. But truth be told, it works best when all other factors are equal, and they almost never are. Despite the power of 1080p differentiation, brands and overall consumer experience also matter, and those will continue to keep Westinghouse from knocking Panasonic or Pioneer off their leadership pedestals any time soon. But regardless, flat panel sales for the next year will be anything but flat.