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."