LCDs Pushing Plasmas to Sidelines of Flat Panel Market

by: Yankee Group

By Carl Howe

Last year I wrote an article talking about the rapid decline of plasma flat panel prices as we entered the second half of the year and started approaching the Christmas shopping season. At that time, I noted that name-brand 50-inch plasma panels had broken the $3,000 barrier and that we might see non-name-brand sub-$1,000 42-inch plasmas around Black Friday.

Well, a similar situation is brewing this year. As I write this, I note that as I look at best flat panel prices, I'm starting to see 50-inch panels such as the Panasonic TH-50PX60U approaching the $2,000 mark before shipping (current best price with shipping is about $2,300 -- these are big boxes we're talking about). 42-inch plasmas such as the popular Panasonic TH-42PX60U are now sub $1,500.

Now we could simply chalk this up to normal 30% per year price declines in flat panels, but I think there is more going on here. Overall, most video aficionados believe that the best plasmas today are pretty convinced that plasmas still generate the best HDTV pictures in home theater environments. And most of the new capacity being added nowadays is LCD, not plasma, so plasma pricing should be holding up better than it is.


But there's also an interesting marketing war going on between plasma and LCD technologies. The LCD guys, especially Sony (NYSE:SNE) and Westinghouse, are touting the theater-definition 1080P resolution as their big differentiator, despite the fact that there really aren't any 1080p content sources readily available yet. In the process, they are painting plasma technology as "old and staid." In fact, there was even an Opus Sunday cartoon a few weeks ago where a conservative character Steve notes that he is "staying the course" in upgrading to plasma, implying that that was the choice of people who really didn't want change.

This is a race to the bottom on product margins, which eventually will drive some companies out of business. The winners in this war will be not only those who make the best technology, but those who do the best job of marketing real consumer benefits that will command better margin products. Pioneer has done a pretty good job of doing that in the current plasma war, and Sony is similarly pushing premium consumer value with details like color-coordinated bezels with their XBR2 and XBR3 series LCDs. But this war is going to create a lot of casualties in the second and third tier manufacturers trying to break into the market.

All that said, the high ticket prices for flat panels promise to keep the holidays bright for companies like Best Buy (NYSE:BBY) and Circuit City (NYSE:CC). Amazingly, flat panels and iPods have actually been raising average revenues for consumer electronics purchases the last few years, despite the ever-declining prices of most categories. But there's still a lot of room for innovation toward iPod-like excitement around HDTV with consumers by marketing style, simplicity, and quality. Meanwhile, we predict that $1,000 to $3,000 flat-panels will be the Tickle-Me-Elmo product hits for adults this holiday season.

Update: No sooner did I write about the flat-panel TV plasma pricing precipice, part II, than Circuit City advertised on Sunday that it would sell a variety of off-brand 50-inch plasma panels for $1899 at its stores this weekend. It's feeling like plasma panel prices will fall nearly 30% again this year. Kind of amazing, since they did that last year as well.

Remember that the PC marketing really got going when PCs fell below $1,000. Don't be surprised to see much more large scale consumer adoption as HDTV 42-inch panels fall below that magical pricing point as well. When will we see that happen? I'm sure we'll see some isolated sale prices in that range next month on Black Friday (November 24th this year, the Friday after Thanksgiving here in the US). But I predict that 2007 will be the year of that price becoming routine at US retailers.

Of course, for those really wanting to go flat for less than $1,000 now, there are always EDTV panels, which are already in that vicinity. But no matter whether its EDTV or HDTV, the future of TV looks flat.

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