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Sony, Samsung Aim to Avoid TV Price War With Ad Efforts

Category Spending Fell 27% in First Half as Rivals Turned to Promotion

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NEW YORK (AdAge.com) -- If you think it's a bad time to be in TV sales, try being in sales of TV sets.

With sales of TVs down more than 15% in the first quarter, marketers are largely sitting out the ad scene this year after several years of aggressive marketing and advertising. For the first six months of the year, media spending in the TV category fell $58.3 million, 27% lower than the same time period in 2008, according to TNS Media Intelligence.

And if hadn't been for one aggressive spender, Samsung -- which accounted for 40% ($23.8 million) of the total TV category in the first half, spending would have plunged 57%. *

The economy has taken much of the blame for the first-quarter sales falloff. There is some glimmer that sales are rising again with the second quarter up almost 9% over the first, and industry insiders are forecasting much improved third- and fourth-quarter sales.

However, it's not only the poor economy and consumers' making fewer big-item purchases that has TV makers holding back. It's also increased competition from newer bargain brands, such as Olevia, along with the disappearance of the No. 3 TV seller Circuit City, which is threatening to devolve the category into one big price war.

No pricing messages
"Circuit City is out, and as we head into holiday, other retailers are looking at grabbing that share," said Riddhi Patel, analyst at iSuppli. "We do consumer surveys, and as prices of brands like Sony and Samsung go down, increasingly people are going to pricing over brand. It's sad to say, but pricing has become the main driver."

Not so, at least so far, for category-leading brands Sony, Samsung and Vizio, which have started ad campaigns around LED sets for the season but are staying as far away from the pricing message as possible. These players insist that bargain prices aren't enough to drive sales. "We don't talk about price in the creative because it's not about price," said Tom Nowak, agency director for Vizio's agency Peterson Milla Hooks, Minneapolis. "People feel good about buying a Vizio at a great price, but people don't decide on price."

Vizio's marketing strategy is to be the quality-technology TV that's also a good value. For instance, coming ads will feature the new-to-the-market Vizio LED LCD TVs, Mr. Nowak said.

Rob Enderle, of Enderle Group
Rob Enderle, of Enderle Group
The LED feature, which produces brighter pictures on super-thin sets with lower energy costs, may be the hottest non-pricing push of the holiday season. Samsung has already begun a reported $65 million marketing effort created by Cheil USA, Ridgefield Park, N.J., for its LED-equipped sets, and LG is readying sets for later this year with marketing expected to emphasize its "borderless" feature of images going all the way to the edge of the sets.

"The backlit LEDs look good at the stores, but no one seems to be able to get people motivated to get off the couch and into the stores to buy them yet," said Rob Enderle, of Enderle Group. "The only thing that's sustaining sales right now is 'bang for the buck.' "

As for ad spending, it is the third and fourth quarters that are the traditional big blowout marketing periods as the holiday-gift giving season approaches. But will TV makers continue to hold back, or begin to spend again?

"There's an overcapacity issue with too many TVs in the market, so I don't see how they can avoid [price wars]," Mr. Enderle said. "But that pulls money off the advertising because the margins don't support big ad budgets, which is what you need to convince people to buy up. ... It becomes a very negative spiral."

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CORRECTION: An earlier version of this story discussed the light-spending Olevia brand. Syntax-Brillain no longer makes or markets the Olevia brand, as originally reported. Emerson Radio Corp. bought the Olevia brand in May from the company, which filed for bankruptcy last year.

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