It can be tough for television manufacturers like Sony Corp. (NYSE: SNE) to keep consumers' attention. Many different devices vie with flat-screen TVs these days. Thanks in no small part to streaming video services, viewers can watch movies and television shows on tablets, smartphones, media players, laptops, and desktop computers. Even with such pricey features as 3D technology built into high-end televisions, the competition to attract consumers has devolved from a race to a demolition derby that leaves rivals dented and sputtering.
Sony announced drastic measures last week to stop leaking money from its TV manufacturing division with a plan to cut its production volume in half and split that business into three segments.
Stephen Baker, vice president of industry analysis with market research firm The NPD Group, said in an interview that the industry's television sales volume has been up "a little bit" in 2011, although revenue is down. "We've been seeing prices down, overall, in the 60% range this year," he told us. "The average price for a flat-panel TV is a little under $600."
Sony reported in its earnings statement for the fiscal second quarter ended Sept. 30 that its year-on-year sales declined because of unfavorable foreign exchange rates and lower sales of its LCD televisions. The company reported a net loss of $350 million on nearly $20.5 billion in sales for its second quarter, compared with net income of nearly $404 million on $22.5 billion in sales for same period last year. Sony's shares plummeted from a close of $36.84 on Feb. 28 to close at $18.31 on Nov. 3.
The company plans to slash annual production from 40 million units to 20 million units to cut costs. Sony cited slow growth in the industry, stemming, in part, from the shaky economy. This is a retreat from the company's plan in November 2009, when it set out to claim 20% of the market by selling 40 million units annually through 2013.
These days, Sony sells only half of that hoped-for volume. Sony revised its projected global sales of televisions to 20 million units for the fiscal year ended March 31, 2012. With demand down, Sony plans to make fewer models at production levels that more closely align to actual sales.
The company also said it will bring down the cost of making LCD panels for televisions. Sony split its television manufacturing division into three units effective Nov. 1: LCD TVs, third-party manufacturing for lower cost products, and development of next generation televisions.
Baker says a broader mix of television sizes is available across the industry, with bigger screens gaining more market share. However, he says some consumers are rethinking their television purchases for the home. "Unlike 10 years ago, there's a lot of ways to consume video," he says.
Baker says the now rapid evolution of televisions resembles another part of the consumer electronics sector. "The TV market starts to look more and more like the PC market. You're future-proofing. You're buying this product for the technology for the next few years."
Sony is an icon in television sales where Trinitron, their patented type of picture tube, is their own invention. It is saddening to know the recession has pushed everyone into hard times, which has also forced Sony to reduce its TV manufacturing, which was hoping to become market leader in retail TV sales.
It’s been a long time since Sony had to invent anything on its own in this sector. For years it has sold the same products in increasingly powerful variations or with lowered price points. Despite real advantages in some areas and a global network of consumer electronics companies that rely on its OEM portion (the iPhone 4S’s new camera is a Sony, for instance), it has had precious few original ideas.
Sony is many things, but surprising isn’t one of them. Their forces are too widely distributed, and are vulnerable to a blitzkrieg by someone like Apple who, having no commodity business to look after, can afford to go all out on a single device, price, interface, and platform. Sony’s CEO is at least treating the issue with the respect it deserves, but that probably won’t be enough.
But I've lost my ardor over the years as the company's innovative spirit seemed to drift.
@AskAsa, I feel company is still doing some innovative stuff, but most of these innovations don't get highlighted. These days people like to talk to more about tablets and smartphones because that is the device they use to see live videos/shows online.
The bandwidth will get cheap on per Megabyte base, but not on per month subscription base. Comcast, AT&T all tried to charge the internet access based on usuage, instead of flat monthly fee, as they did on the mobile phone plan.
For my ISP date speed, it went through 56K, 1M, 6M, now 12M, and my monthly payment went like, $20, $30, $40, and now $60. I did not see a drop in price at all. Due to the limited choices of carriers, the situation is less likely to be improved in near future
I was a huge Sony fan back in the 80s and early 90s. But I've lost my ardor over the years as the company's innovative spirit seemed to drift. Sad to see the brand decline like this -- for largely what I perceive as its own inability to keep ahead of the competition.
It is hard to imagine any of the major consumer electronics makers completely exiting the TV market. The dynamics of this industry have changed however and they have to adjust their expectations.
Other devices such as tablets will gain more audience for video watching. However, when you want to view major sporting events such as the Super Bowl or the World Series, I can't see people saying they prefer smaller screens regardless of how portable they are.
In regards to Apple and Google pursuing the TV market, they have dabbled with delivering interactive content with lukewarm results. I am not sure how making the leap into manufacturing TVs would serve their goals.
TV makers are trying very hard to make these appliances more exciting, hence the 3D push and thinner LED screens that use less power than LCD units.
These days many TVs promote the apps they work with. I wonder if there is too much effort going toward making TVs behave like oversized tablet devices. Perhaps the manufacturers need to think about what TVs can do better than tablets with their larger screens and dedicated connections in the home.
How about Korean TV manufacturers, like Samsung and LG, and even some Chinese brands.
@mInvestor, I don't know about all the Korean TV manufacturers but Samsung Electronics is doing pretty well. Recently it announced new range of high-definition ‘smart televisions' the hub of compatible gadgets that can link via wi-fi and allow content to be viewed across different screens. This clearly shows that Samsung is adopting to the technology very fast.
Bandwidth is getting cheaper, as fiber optic technology improves more bits can be pushed down the pipe. The offset with regards to it is the quality of the video and the amounts of bandwidth it uses, as the quality goes up so does the bandwidth required to move it.
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