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Commodity TV: The Nightmare Scenario

Cheaper Is The New Better, But For How Long?


Commodity TV: The Nightmare Scenario

As long as you're here, why not buy some furniture too?

Photo: Ikea
Imagine yourself seated on a cliff, watching a highway full of cars whizzing by below.  Out of every 20 cars you'll see, 14 of them will be economy models by the usual suspects; Toyota, Honda, Hyundai, et al.  The Americans are back in the game, but only scoring well with budget models like the Ford Focus and the Chevy Cruze.  Statistically speaking, not one of the 20 cars will be a "premium" model, unless you want to count hybrids like the Prius as something premium.

What's this got to do with video?  Maybe nothing but possibly everything.  Cars are a commodity product; young or old, well-off or just getting by, 95% of Americans own one, and 85% get to work every day using one.  The numbers for TV are strikingly similar -- 97% of households have one (though this number is actually falling) and nearly 60% have multiple sets.

Both products started off as a luxury, now they're both commodities.  And both industries are faced with a similar challenge.  Call it the economy, call it a megatrend, call it cultural frugality (er, right), but consumers overwhelmingly -- and perhaps permanently -- prefer coach to first class.  Unfortunately, first class is what usually pays the maker/seller's bills and helps subsidize coach tickets.

Not that anyone in the TV business needed the Grey Lady to say so, but the New York Times has written that televisions have become so inexpensive that the profits have largely been squeezed out of them. This has come as a result of a huge increase in manufacturing capacity (guess from where) that has led to oversupply and continued price pressures from low-cost manufacturers and online retailers.

Let's see -- too many products, too much inventory, too many competitors and cut throat price slashing from the Internet.  Sounds like a perfect storm.  Apparently the big TV makers agree, as most of them are now figuring out how to staunch the bleeding.  The average price of a new TV is now down to $460; the same Times article spotlights a huge 60" Sharp TV selling for $799; about half of what it cost the year before.

You want commodity?  How about a TV by Ikea?  Doesn't get more commoditized than that.  For less than a thousand clams, their upcoming Uppleva TV includes a 46" LED screen, an integrated Blu-ray player, a wireless subwoofer and naturally, there's a cabinet.  It will run a host of popular apps like YouTube and Vimeo, and will even come with a web browser. 

Rest assured that despite Conan O'Brien's misgivings, an Ikea TV will be pretty much plug and play, won't require an installer for anything and will likely perform as well as other "value-driven" LED brands made by Chinese manufacturing powerhouse TCL, like Haier.  Also rest assured that Ikea and TCL are taking this seriously; they've formed a partnership that will almost certainly move into broader electronics for the home, like audio, appliances, digital picture frames and the like.

For decades, companies like Sony, Samsung, Sharp, Toshiba and Panasonic spent billions of yen in R&D money to come up with "better" products, which in the case of TVs, means a better picture.  To this day, Sharp is continuing the playbook, touting its premium Quattron technology (a 4-color filter that is said to expand/enhance visible color space).  The premiere set in their lineup listed for $3799; you can now find one online for not much more than half that price. Samsung and LG are flying head first into next-generation OLED TVs, which will look much better than today's LED sets.  The Samsung debut model is expected to list for $9,500.

In a world where you can get a 46-inch flat screen, a Blu-ray player, wireless subwoofer and a not-unstylish cabinet from Ikea for about 10% of that investment, what are the chances for products like these, at least for the next several years ?  More to the point, why would major corporations reeling from these changes keep developing and improving TV technologies if the market will permanently demand cheaper, rather than better?

The commoditization trend has obviously affected more markets than just TV -- cars, appliances, clothing, home goods and many other industries are experiencing the same problems.  But the electronics industry finds itself in a special place.  Key sectors like stereos and cameras are already deep in the doldrums, mortally wounded by iPods and smartphones.  It takes a lot of time and money to come up with new TV technologies, and they often fail anyway; witness the indifference to 3D TV.

The cliche used to be if you build a better mousetrap, the market will beat a path to your door.  For the TV industry, this is no longer wisdom, it's an anachronism.  

A good number of today's best performing TVs still use plasma display technology, which the manufacturers have been abandoning in droves.  These sets claim 100,000 hours of useful lifespan, though if you watched that much you'd see your own lifespan shorten considerably.  Nielsen claims the average American watches about 33 hours of TV per week, so it's a relatively safe bet that if you bought today it would last you a good long time.

Counterintuitive as it may be, wouldn't it be funny if the mainstream TV you bought in 2012 still had a better picture than most any mainstream TV you could buy in 2017? Maybe it's a good time to think about TV shopping.  Before things get too cheap.

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