Robin: Today we are on the line once again with Alfred: Poor who is the master of display technology – in fact, he has a doctorate, well not in that, but in something. So it is Dr. Poor to you people. And today we are asking Dr. Alfred Poor: Why is this a good time to buy a new TV?
Alfred: Well this is a whole lot better time to be buying a TV than selling one – I will tell you that. We’ve had maybe four or five years in a row where TV prices have dropped anywhere from 15, 20, 25% year to year, and so the revenues for the manufacturers have been dropping. But the real problem though is in the past two years the actual unit volume has also been dropping. So not only are they making less money on each set that they are selling, but they are selling fewer of them.
And the forecast for this holiday season is no different. They are going to be expected to sell far fewer televisions this year than they did even last year. And that is with the economic recovery coming. So there are televisions that are stacked up in the pipeline, retailers have them sitting in their warehouse and come Black Friday and the weeks after that, it is a shorter Christmas shopping season this year, we are going to see some anxious retailers who are going to be looking to move a lot of product and we will probably see some very aggressive price cuts in order to get them out of the warehouses and into consumers’ homes in time to get the sales on the books for this year.
Robin: Okay. So good time to buy, because they are going to be, in fact I noticed one of my local TV stations in the Tampa Florida region is giving away 3D TVs as a promo with a retailer, a national chain retailer, so 3D, will there ever be a good time to buy 3D TV?
Alfred: Well actually now is a perfectly good time to buy. One of the things about 3D is that the consumers have shown that they are not particularly interested in spending a whole lot more money in order to get 3D. And the installed base is growing but it is not growing fast enough to support the development projects by the broadcasters and the content producers. ESPN was singular for being way out in front on developing 3D content especially for live sports coverage. And they have actually pulled the plug on a lot of that activity now because I think, in part, they are just not getting the viewership for it. The fact is though, they still have that technology, that skill and experience already in the hand.
And it is just a matter of time in my opinion for the installed base to get to the point where people are going to be able to take advantage of it and will want to take advantage of it, just like they do every weekend at the cinemas throughout the country. So I don’t think 3D is dead, I think it just hasn’t had the overnight success that the manufacturers were hoping for, and the higher profit margins that they were hoping to get. So what’s happening now is just like the TV promotion, the extra cost of adding 3D is so low that a lot of consumers are going to end up with it, whether they are shopping for a 3D TV or not - it is just going to be baked in to the price much like the anti-motion blur or some of the other features that LCD TVs have now.
Robin: Okay, here is an unfair question: How much extra is 3D worth in a 50” TV?
Alfred: Well, for me, I wouldn’t spend more than a hundred bucks, I wouldn’t even spend a hundred bucks more for it probably, maybe fifty. But I think that a lot of people probably feel much the same way. They are spending a lot more than that for a ticket in the movie theaters to get 3D. But we just don’t have that much content available yet through broadcast or over the internet. More and more is becoming available on Blu-ray high definition video discs, but again the consumers aren’t flocking to those in quite the numbers that they do for the movies on the weekends.
Robin: I want to tell you something about the way I do market research: I loiter, and I ask people questions. So I hang around at Redbox kiosks, outdoor ones and I ask people: What are you doing? And I watch them. Not many of them seem to be getting Blu-rays.
Alfred: Almost none. Blu-ray, well the problem is this is a perfect example of good enough technology being the enemy of better. A lot of people don’t realize this. Most of the people watching this video probably do, but your average consumer doesn’t know that your standard DVD is just standard resolution, the same old resolution we had before HDTV came along. It is just that the digital image of it on a big screen look so sharp and clear that it is good enough. People are perfectly happy watching DVDs on their big HD TVs, even though the image doesn’t have the resolution that a Blu-ray movie would have. So I don’t think that the added resolution of a Blu-ray disc is compelling enough for your average consumer to want to buy it or even wanting in the case of Redbox.
Robin: So you are saying it is only a quarter or something 20 cents or something and most of us I think have Blu-ray players because you can go down to Wal Mart and you can watch the people, they are picking them off the shelf and buying them. But you are telling me that I don’t need to trade in my standard definition doggie and get a Blu-ray dog.
Alfred: The average American consumer isn’t going to bother doing that. Because they are happy with the image quality that they get.
Robin: Okay, how does this bode for another thing that we were all going to buy now to really improve the TV and producers bottom line – 4K.
Alfred: 4K to me is going to follow the exact same trajectory as 3D and the 120 Hz motion blur reduction features and a bunch of other technologies the smart TV, the kinds of things that they have added to televisions to try to increase the profit margin for them. I just don’t see 4K as being a money maker for the manufacturers – I do believe it is coming. I do believe that it is going to happen. But it is only going to happen because it doesn’t cost any more than regular HDTV. People will figure well, what the heck, for fifty bucks or a hundred bucks more I will get the higher resolution. Because as Americans we all know that bigger numbers are better whether we can see the difference or not.
So as the prices come down, we are definitely going to see 4K take off. There is some question as to how we are going to get the content – they are already working on the next version of the broadcast standard which will support 4K transmission. Now keep in mind it took them 20 or 30 years to get the ATSC standard that we use now for broadcasting HDTV signals for digital broadcast of TV. So it could be quite a while before we have a standard in place. Already though, Sony and others are providing over the internet support for 4K, but the content is limited and it takes a lot of bandwidth. So it is going to be a while before that comes along. But the installed base is going to grow simply because the sets will have it, and it is not going to cost any more than buying a set with just standard HDTV 1080 p resolution. So I don’t see it as being a big money maker for the manufacturers.
Robin: But what you are telling me is that it is tail fins,it is enhanced built-in obsolescence.
Alfred: Well, part of the problem is that Americans tend not to buy a big enough television to see the full 1080p resolution from the distance that they sit from it. If you are going to watch a 1080p set, that is 47” diagonal you need to sit about six or seven feet away from it. If you are much further than that, you won’t be able to tell the difference between that image and a lower resolution. So if you are going to be sitting six feet away, you probably won’t be able to tell the difference between a 1080p and a 4K display.
Robin: Here is the _____9:31 on that. The way our living rooms are set up – we place furniture, you can go to a furniture store, Rooms to Vent and go look at them, and look at their display living rooms, they have the TV ten feet away from the sofa.
Alfred: Right. And so if it is going to be ten feet away, you need to 50” to 60” screen for a HDTV just for a standard 1080p; if you are going to be ten feet away, and you want to see the extra detail on a 4K, it is going to have to be, I don’t know what the numbers are but it is going to have to be 80” or 90” diagonal before you will be able to tell the difference at that distance. And that’s with good eyesight.
Robin: And those are some expensive monsters too.
Alfred: Well they are. They are. So the point is people will be buying a 50” LCD now it costs you around $1000 or less.
Robin: You can buy them from I see them here in Dead Beat, I live in a non-fancy part of Florida and I see them running $500 to $600.
Alfred: Yeah, especially some of the offerings, I should say not first class, first level brand but the Insignia brand which is the Best Buy house brand, which incidentally they have some very excellent quality televisions in the Insignia line. But it blows hot and cold. You can’t count on all of them being great but some of them can be very very good. Best Buy now is running a 50” LCD for $550. Which isn’t bad. But the point is when the 4K gets down to $600, $700, or $800 for a 50” people will buy them but they are still going to sit too far away from them to be able to see the extra detail.
Robin: So basically we buy what we buy, we watch the sales, and with the house brands, Insignias and even the Vizios, I do Vizio, I like it, but still we watch the little stars and we read the ratings, consumer ratings on Best Buy and on Amazon and all before we buy. And this is a good time to buy, but is this a better time to buy than next year will be, or do we know?
Alfred: Again we’ve been in a steady years and years of steady price decline for televisions. And now that we are in also a period of declining sales volumes which is significant which is worldwide the volumes dropping not just US but they are dropping in the US especially for the larger sizes, manufacturers are going to be fighting harder and harder to get the sales because they’ve got billions and billions dollars invested in these manufacturing plants. And they’ve got to pay the debt surplus on that. So they’ve got to get some way to cash out of these factories before the price of a big television drops to zero. So we are going to see them fighting each other fairly aggressively in order to get the sales.
Robin: So this is a good time to buy if you need one, if you are buying a gift, if your old TV is starting to look stupid, but otherwise what I think you are telling me is let’s wait till after Christmas to next year.
Alfred: I don’t think there will be a whole lot to gain waiting till January, I don’t think we are going to see prices come down a lot between the end of December and say the Super Bowl which is the next big marketing event for televisions. I think that if you are in the market I would recommend planning on buying before New Year, or if not, you’ll probably be waiting until next summer when they start announcing the new lines and they will start dropping the prices on the current lines to move them out of the inventory.