TVs under Pressure

by Stephen Atwood

As the year draws to a close, we once again turn our attention to the consumer television marketplace, one of the highest-profile and highest-volume segments of the display industry. The driving force of everyone's efforts since well before the beginning of the LCD and plasma eras has been achieving a large-screen flat-panel TV that can hang on a wall at a price everyone can afford. Well, here we are. Actually, we have been here for a few years now, but somehow it seems more like a total victory this year than ever before. Today, there are slim, bright, high-quality HDTVs in homes, businesses, public venues, and everywhere in between.

If you are shopping for a new TV this year, the choices are almost endless and the prices lower than at any previous time in history. Pick a size, pick a brand, pick a set of features, pick a store, decide what you are willing to pay, and your holiday shopping is done. It is safe to say that while there are many differences in features and performance among models, almost any set you find for more than $200 is capable of giving you a decent HDTV user experience. For less than $500, you can even find 50-in. 1080p LCD and 720p plasma TVs at retail stores. Just a year or two ago, these similar sets were selling for twice those amounts or more.

With these historically low prices, TVs should be flying off the shelves and manufacturers should be ecstatic, right? Well, not quite. The problem is two-fold. First, most consumers in many parts of the world have already recently made new big-screen TV purchases and there is nothing really wrong with the sets they have. So, demand is soft and sales are sluggish, pushing down prices and margins even further to the point where the ink on the bottom line is turning more red than green. Second, at these historically low prices, there is little or no margin left for the retailers, distri-buters, and manufacturers to make any profits. Downward price pressures brought on by intense competition and weak demand have wiped out traditional markups, and this has brought on waves of consolidation that are still under way.

The hope is that buyers will be tempted by the latest LED backlight version, or maybe decide to upgrade to a 3-D TV with "smart" features. In those cases, prices jump up fairly rapidly based on size and features, with most options priced between $1500 and $3500, which feels more like what we were seeing a couple years ago. Even hopes of selling large volumes of smaller-sized TVs for the kitchen, bedroom, and garage are not very high this year because of all the competition from tablets and smart phones and other so-called "second screen" devices. Sales of those devices have exploded and for many younger people a high-end tablet computer could actually become their "first screen." Plus, we should not forget that at least for North America and Europe the economy is weak and TVs, like many other consumer products, are discretionary purchases.

Author and industry analyst Pete Putman understands this well and explains how this has evolved into a really tough period for set manufacturers, who are facing downward price pressure and very little consumer demand for high-end features such as 3-D and Internet connectivity. As Pete explains in his Display Marketplace feature, "Now Is the Winter of Our Discontent," steep price erosion coupled with sagging consumer demand has driven some major brands to exit the marketplace and severely impacted the market share of many others. For those that persevere, the hope had been that new "bells and whistles" would convince consumers to come out once again for the holidays and make new purchases, but the data so far is not encouraging. To be fair, there will still be a huge number of TVs sold this holiday season, just not as many of the right mix to bring widespread profits back to this industry in the short term.

Unfortunately, the marketplace in Europe is well in line with North America and the rest of the world. We hear from author Bob Raikes in his Display Marketplace feature on the European TV market that the situation is essentially the same there, with the trend to increase the number of second sets in households declining mostly due to the wide adoption of tablets and other second-screen devices for Internet-delivered TV viewing. However, as we learn from Bob, the infrastructure of the TV marketplace in Europe is very different than that of North America and Asia due to several factors including trade regulations in the European Union. I think this demonstrates that regardless of how a marketplace is structured, supply and demand will still ultimately dictate the outcome.

Looking beyond this year, we wanted to know what was in the future for TVs and we found a couple of hot topics. The first involves a somewhat ad-hoc push to ultra-high definition (UHD) as the next new format for very-large-sized TVs. I talked about this last month in the context of Paul Semenza's article on the two major trends people hope will revive the TV marketplace. One trend is OLED and the other is UHD.

Solidly in the UHD camp are this issue's NHK authors Takayuki Yamashita and Hiroyasu Masuda. In their Frontline Technology article titled " 'Super Hi-Vision' as Next-Generation Television and Its Video Parameters," they propose a new system that not only addresses increased panel/content resolutions but also colorimetry, all-surround sound, and viewing-angle requirements. This is a very complex subject with many technical and logistical facets that NHK has been considering for some time now. It's safe to say that the authors' complete treatment of this subject shows it is a serious future endeavor but something very long-term focused – it's not going to result in a new wave of products in the near term, though there are some manufacturers that are starting to build 4K-resolution large-screen TVs for sale as early as next year. We thought this was so fundamental to appreciate that we asked our guest editor David Trczinski to develop the graphic concept you see on the cover showing the dramatic increase in content resolution from old-world NTSC to the latest proposed UHD format.

David not only helped us put together the NHK article; he also arranged to get the MIT Media Lab to report on their research work into holographic TV technology. Authors V. Michael Bove and Daniel Smalley describe the technical foundation, background, and latest developments in their efforts, which date back to 1989 and earlier. Their latest development, which they refer to as a "holovideo monitor," uses acoustic waves in a transparent medium to create the diffraction patterns necessary for image reconstruction. Their immediate goal is to demonstrate a full-color horizontal-parallax 100-mm-wide proof-of-concept desktop display of SDTV resolution with a bill of materials in the hundreds of dollars. While this is basically a 4-in.-wide holographic display that appears three-dimensional only in the horizontal axis, it's still an incredibly promising leap of technology. I talked a lot about the possible future for holographic TV in my editorial from last month where we also featured an interview with Dr. Bove on this subject. Now you can read the rest of the story and see more of the reasons for my continued optimism. Also, please take a minute to read David's guest editorial and hear his perspective on holographic TV and other related topics.

Meanwhile, you are probably wondering about OLED TVs and how they fit into the context of reviving the marketplace. Well, here again there have been some changes since we last reviewed this coming off the very successful product demonstrations by Samsung and LG at Display Week 2012 in June. The manufacturing-process maturity needed to make high volumes of these panels has not yet been achieved, and yields are apparently too low to support full-scale launch plans for this season. It's too bad because the demonstrations were so compelling that I'm sure there would have been sufficient high-end consumers ready to be first adopters. However, there's always next year. Jenny Donelan addresses the current status of the OLED TV launches along with other aspects of the retail landscape in her Enabling Technology feature and Industry News roundups.

It's worth noting that back in September 2009, for the OLED Technology issue of ID, I talked about the very long and arduous road that OLED technology developers had travelled so far. In 2009, it appeared as though several players were just on the cusp of commercialization. Several significant technical and manufacturing process milestones were still required to make the business models work, but for handheld devices as well as TVs the groundwork was in place. A lot more progress has been made in the ensuing 3 years and yet not as much as I expected. It's encouraging that in small formats, OLED displays have achieved significant volumes and are widely sought after by consumers. Therefore, I still stand by my 10-year horizon prediction. You might want to take the time to go back and see what the baseline was in 2009 compared to where the industry is today.

I want to thank our guest editor for this issue David Trczinski for his dedicated efforts to help create this year's TV Technology issue. I hope you enjoy reading it and we always welcome your comments and feedback. You can reach us by email at jdonelan@pcm411.com. •