Are Today’s HDTVs Too Cheap?

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Samsung’s LED7000 HDTV

If Apple can do it, can TV companies?


Feb. 15, 2012 — by .(JavaScript must be enabled to view this email address)

What do you think about the cost of televisions these days? Do they cost enough? Should they cost more? Do you like the crazy price wars that happen every fall and lately are happening earlier every year?

Well, prices may be going up, at least for one TV manufacturer.

Our friend the HD Guru (Gary Merson) uncovered some information about Samsung which suggests that the company is trying to put the brakes on the race for the lowest price on many of its popular LED and plasma TVs. The plan, according to the Guru’s unnamed source, is to institute a unilateral pricing policy which would require that all online and brick and mortar stores abide by Samsung’s Minimum Advertised Price standard. If a dealer breaks MAP, then Samsung cuts them off.

First, Samsung didn’t confirm this item, so it may not be true. We’ll find out in a few weeks once the 2012 models start hitting the market. Second, if it is true, is it really a bad thing?

Sure it could mean that the insane deals consumers love may be less insane going forward. It also could mean online dealers like Amazon would no longer be the price leaders. It could also help make TVs profitable.

What, who ever heard of that?

Over the past few weeks most of the major TV makers released their financial reports, and they’re all dismal.  Sony, Panasonic and Sharp all announced losses. Samsung, on the other hand, came out ahead, but mostly due to their cell phone business.

The problem is that TVs haven’t been profitable for a long time. Neither manufacturers nor dealers are making much off them, but consumers have gotten accustomed to dirt-cheap prices for good quality products.

That isn’t the case for all products. Apple strictly controls the pricing of iPads, iPods and iEverything else it manufactures. A few other specialty electronics brands (such as video game consoles) do the same thing, ensuring that the playing field is level across all dealers and that the company gets a livable profit.

So what would happen if all the major TV makers got together and formed a cabal to face up to price declines together? What would happen if they all instituted unilateral pricing policies? First, there’d probably be a Federal Trade Commission investigation, but after that, what?

Remember that it wasn’t all that long ago that Gateway computers introduced a 480p 42-inch pretty-crappy plasma TV for $3,999. That was considered a disruptive price and was partially responsible for the resulting price and profit erosion that now lets you get a 1080p 50-inch Panasonic plasma for $500.

Another result of that disruption is that Gateway is no longer selling plasma TVs or anything else. Hitachi also was eventually priced out of the US TV business. Mitsubishi couldn’t break through with flat panel TVs. RCA is nothing more than a brand label. Same with Philips and Fujitsu and Marantz. Even widely respected Pioneer threw in the towel on its own TVs a few years ago, only to have its Elite label resurrected by Sharp last year.

So did the manufacturers bring this situation upon themselves or are consumers, and their insistence on the lowest price, responsible for this? Of course, there’s that recession thing too.

Will a policy like this make dealers, both online and off, compete in other ways such as service or bundling?

Let’s also not forget that Apple is probably going to release its own TV this year, which means that it will definitely be under a UPP and probably priced more than many of the competing smart TVs.

If HD Guru’s report is true, despite all the negative comments I’m sure this post will generate, I’m not yet convinced the move is a bad thing. Will it make Samsung sets more expensive than LG, Sharp, Panasonic and Sony? Maybe. If that’s the case, Samsung better damn well make sure the products are worth the price premium. If Apple is a good example, then people are willing to pay more for something, as long as it’s worth it.



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