How Low Will Holiday TV Prices Go?

The HDTV sets retailers tout as holiday must-haves are bigger and packed with more features than Santa's bag, but the televisions on holiday wish lists have prices smaller than that of a day's feed for eight reindeer.

Holiday shoppers face a television market filled with new 3-D and Internet-connected high-definition flat screens, but that won't prevent global demand for televisions from falling an estimated 1% in the fourth quarter, according to Paul Gagnon, director of North American TV research for consulting firm Display Search. A high conversion rate from old cathode-ray tube sets in North America and Europe and a lukewarm response to new technologies has flattened demand between holiday 2010 and this season. Inventory projected to be right in line with holiday demand isn't exactly sending prices through the roof, either.

Prices on LCD HDTVs, which make up 80% of all global television shipments, have dropped roughly 7% during that time and are falling at a much faster rate than those of plasma televisions. Though overall sales may increase slightly for all of 2011, shipments of plasma televisions are expected to drop 9% this year and 5% to 6% each year thereafter.

"We expect very low, single-digit unit increases," says Stephen Baker, vice president of industry analysis for market research firm NPD Group. "Aggressive price competition will help keep unit growth positive, although we anticipate revenue growth will be negative despite a fairly strong market for TVs above 50 inches."

The combination of economic uncertainty in the U.S. and Europe and the emergence of lower-priced sets made by Samsung and others has taken its toll on Sony(SNE), which announced plans in August to restructure every aspect of its TV division from development to production. The division that produces Sony's heralded Bravia sets has already closed TV factories in Mexico, Slovakia and Spain ! and outs ourced production to Taiwan's Foxconn. It has posted seven consecutive years of losses and is heading for an eighth after reducing its annual TV sales forecast this summer from 27 million sets to 22 million.

Rival Panasonic(PC), meanwhile, announced last month that it will cut its flat-screen production in half and close plasma and LCD factories in Japan after forecasting $5.4 billion in losses for 2011.

"Everyone is struggling with flat panel demand, not just the brands but the retailers as well," Baker says. "However, we continue to see that aggressive price promotion is successful at stimulating consumer demand."

Consumer Reports is already predicting an HDTV price plunge this holiday season based on retailers' Black Friday pre-sale offerings. Its electronics experts have set the low price for 32-inch LCD TVs at $200 thanks to Target(TGT) and Best Buy(BBY) offerings, while $330 to $350 price tags of off-brand, no-frills 40-inch televisions has the publication predicting a $300 TV of that size in the near future. Though Wal-Mart(WMT) and BJ's Wholesale Club(BJ) are already offering $400 42-inch sets and Best Buy is letting a 50-inch set go for $480, 3-D televisions are still a tough sell; even 42-inch 720p models go for $500 or more.

"Pricing for 3-D TV sets will be much lower this holiday as that technology migrates to smaller screens and competing 3-D technologies that are cheaper are pushed into the market from brands like Vizio and LG," NPD Group's Baker says.

New 3-D televisions make up only 11% of all TV shipments in North America, according to Display Search, while reaching 12% in China and 14% in Western Europe. The problem, as a survey by electronics review site Retrevo discovered, is that U.S. television buyers feel little to no need to upgrade or flat out don't consider a 3-D television an upgrade at all.

Only 33% of the shoppers Retrevo surveyed planned to buy an HDTV within the coming year. Of those shoppers, only 22% will buy a 3-D set, 23% will only go 3-D if the price difference from a normal set is nominal and 55% won't buy a 3-D set under any circumstance.

Why the reluctance? Roughly 40% of consumers say Avatar, 3-D cartoons and iffy 3-D transfers of blockbuster releases aren't enough to warrant the premium price, while 30% think the glasses are a problem regardless of whether they're the costly active-shutter pairs or the far cheaper theater-style passive sets.

For manufactu! rers and retailers looking to shrink the margins a bit this season, 3-D and Internet connections are about the only way they can keep prices aloft. Amazon(AMZN), for example, knocked $120 off the price of an 42-inch LG "smart TV" with Internet connectivity, but still offers it for a hefty $680.

"There will be downward pressure on products without those features because the brands and retailers want those products to have price-aggressive larger screens to sell and they will be designed to sell for a lower cost," Baker says. "This activity is totally separate from anything that might happen around Smart TV and 3-D."

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