THE FRONT LINE: AUGUST 24, 2005
THE LONG KISS GOODBYE
Are microdisplay rear-projection TVs on the way out?
As the prices of plasma and LCD TVs continue to plummet, LCD, DLP, and LCOS rear-projection TVs must follow suit. Are they reaching the point of no return? Some recent market studies indicate tough times ahead for RPTVs.
One of the more interesting sideshows in the consumer electronics industry is the ongoing turf war between microdisplay rear-projection TVs and flat-panel technologies, specifically plasma and LCD.
For several years, I have maintained that, given a choice between a bigger screen and a thinner TV, people will inevitably choose the thinner TV. Numerous market studies in the past year are supporting that thesis, and as the prices of plasma and LCD TVs continue to drop, RPTV prices are also being forced downward to a point where profit margins are getting squeezed.
A recent press release from market research firm Pacific Media Associates (www.pacificmedia associates.com) shows that selling prices for 40-inch to 45-inch flat-panel TVs (plasma and LCD) rose 14% on average from the first quarter to the second quarter of 2005, with sales increasing by 26%.
That same time period saw a drop in sales for same-size 3LCD RPTVs of 44%, while sales of DLP sets increased by 65% due to aggressive discounting. A quick look at the PMA stats will tell you why, with 40-inch to 45-inch DLP, 3LCD, and EDTV plasma TVs all hovering around $2,000, with 42-inch HD plasma at $3,500 and 42-inch LCD at $4,500.
And larger flat-panel TV prices are falling through the roof. A quick search at PriceGrabber.com showed numerous 50-inch plasma models starting as low as $2,600 with none priced over $4,900. That used to be 720p RPTV territory not too long ago, which is exactly why some manufacturers are now coming out with 1080p RPTV models — you can't get that kind of resolution in 42-inch and 50-inch plasma.
What's so special about the 40-45" TV segment? According to another PMA study conducted during the 2004 holiday shopping season, more than 25% of respondents said their next TV would have a screen size from 40-49 inches (can you say "sweet spot?"), while 20% were looking to buy a 50- 59" set. A further 20% indicated a preference for 30-39" screen sizes.
In other words, almost 75% of those polled were shopping for TVs in a range of screen sizes where plasma and LCD offerings are abundant. The only thing holding them back? Prices. 65% of those surveyed in 2004 said plasma prices were too high, and 44% said LCD TVs were too costly.
Concurrent with the drop in flat-panel prices came the news this week from DisplaySearch (www.displaysearch.com) that worldwide plasma shipments hit 1.13 million in the second quarter of 2005, an 89% increase over the same time period in 2004. For the first time, plasma TV shipments (2.9% WW market share) overtook microdisplay RPTV shipments (2.5% WW market share) everywhere in the world, except in North America.
In the report, DisplaySearch president Ross Young stated that, “A majority of consumers looking to replace their CRT RPTVs in Q2'05 opted for plasma over microdisplay RPTVs with the total projection (TV) category down 27% quarter to quarter and 17% year to year. Supporting this growth was a 28% decline in blended plasma TV prices over the past year.”
The late Mark Twain once said there are “lies, damned lies, and statistics,” but in this case, I think the numbers don't look good for long-term growth of microdisplay RPTVs in sizes under 55 inches. At 55 inches and above, RPTVs still have a substantial edge in price. But that only holds true in North America, where we have rooms large enough for really big RPTV screens.
There are indications that smaller LCD, DLP, and LCoS RPTVs will be squeezed out of the market by razor-thin margins. At the 2005 Projection Summit, Techno Systems Research (www.t-s-r.co.jp/e/) predicted that both LCD and DLP RPTVs would hit a target Bill of Materials (BOM) price of about $900 midway through 2006, with not much room to go any lower.
For 2005, LCD TV prices were predicted to drop 40% and plasma TV prices 25%. This would result in a 32-inch LCD TV for $999, a 42-inch EDTV plasma for $1,499, and a 50-inch 720p RPTV for just slightly more at $1,699.
Keep in mind that numerous studies have shown a price “pain threshold” of $2,000 for everything from notebook computers to portable data/video projectors. Get your SRP down to $1,999, and you'll have plenty of customers.
That's exactly what is happening with plasma TVs in the 42-inch segment. In fact, manufacturers of plasma are moving away from EDTV to HDTV plasma just to maintain margins (and stay competitive with LCD). Yet another report from Quixel Research (www.quixelresearch.com) showed that in that same second quarter of 2005, 50% of plasma TVs sold were high-definition models, with the $2,500 and under segment accounting for 30% of all sales.
Okay, enough stats. It's clear to me from every study I have seen that flat-panel TVs are the preferred choice for new TVs the world over, particularly in countries where the average size of a family or living room is much smaller than in North America. These markets want 32-inch to 46-inch screen sizes, and that territory's basically been conceded to plasma and LCD technology.
The only remaining battleground is North America, where 57% of all rear projection TVs were sold last year and where 69% are expected to be sold in 2009 (DisplaySearch). The wild card, of course, is the continual downward pressure on plasma prices. Don't be surprised to see $1,999 (estimated street price) 50-inch plasma by the 2006 holiday selling season, maybe sooner.
You can already see the RPTV manufacturers flinching. InFocus' much-ballyhooed 61-inch 61md10 super-thin DLP RPTV is available at several on-line merchants for as low as $3,700, as is RCA's similar product offering. (Both products were originally priced close to $9,000 when introduced in 2004.)
I found numerous 50-inch DLP sets for as low as $1,200 and several LCD RPTVs for under $1,800. You can even get a Syntax Olevia (nee: Brillian) 50-inch 720p LCOS RPTV for $1,200 from one Internet seller!
Are microdisplay RPTVs going away tomorrow? No, and not the day after that. But keep an eye on plasma and LCD pricing trends over the year, and you will see smaller RPTV screen sizes dropping from product lines as RPTV makers retrench at 55 inches and above, trying to hold the line against the flat-panel onslaught.