Consumers flock to flat-screen TVs as prices fall

By Published on .

In 1999, a Philips Electronic's spot introduced TV viewers to flat-screen televisions. The ad showed three twentysomethings carrying first a sofa, and then a flat-panel TV into a narrow beach house. Consumers looked at that TV and said, "Wow." Then they asked the price. When they found it would take about $15,000 plus installation, sticker shock kept it out of the range of most family budgets.

Fast forward to 2004 and flat-panel digital screens are everywhere. And as interest grows and more manufacturers enter the fray, prices are dropping.

One million plasma and LCD sets were sold last year, according to the Consumer Electronics Association . However, a recent CEA survey showed that a much higher 40%-50% of TV buyers were "interested" in purchasing a plasma or LCD set.

The CEA's numbers for digital TV sets are even better. More than 4 million digital set were sold in 2003 and an anticipated 6 million unit sales are expected in 2004 (one million were bought in the first two months of 2004). The industry is poised to take in about $2.5 billion in sales this year.

"It's a sexy technology and highly desirable, but it will take time before the average consumer is ready to buy," says Sean Wargo, director of industry analysis at CEA. "The average price of TVs sold is $400. The average price of a plasma TV is about $5,000. That's a big price delta to cross."

Philips, which trademarked "Flat TV," plans to capitalize on its well-known, first-to-market status with an ad campaign breaking in July. "We had huge mind share in the marketplace," says James Ninesling, Philips VP-marketing for Flat TVs. The 2004 campaign will focus on Philips' superior picture quality, he says. Partner promotions are part of the campaign; in one, he says a Philips Flat TV will be showcased in an ESPN booth,with both the TV and ESPN's high-definition signal highlighted.

Another barrier to widespread adoption is confusion about the variety of signals, including digital. The Federal Communications Commission has mandated that beginning this July, half of all 36-inch or larger TVs must come with a high-definition tuner; by 2007, tuners will be required in all new sets 17 inches and larger.

fashion plays a part

"Part of our marketing is about boosting the category in general," says Jamie Campbell, Gateway-director of product planning for digital TV. "But we're also telling our story. We find we bring in people who are a little more tech-savvy, but not experts. They're early- to mid-adopters who are more fashion-conscious, looking for that thin and good looking TV."

Major players in the digital TV market include traditional TV makers like Philips and Sony Corp. But such computer marketers as Dell and Gateway sell LCD and plasma TVs. Gateway became the top seller of plasma TVs at the end of 2003, with an attractive price (sub-$3,000) for its 42-inch, enhanced-definition set. A third tier offers new, unknown brands such as Tatung and Syntax, which are picking up customers with their ultralow-priced units.%

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