# OUTSIDE THE BOX: A Clearer Picture for HD



## Nick (Apr 23, 2002)

OUTSIDE THE BOX: A Clearer Picture for HD

By Bruce Leichtman, Leichtman Research Group

At the Academy Awards in 2003 host Steve Martin mentioned
that for the first time the show would be available in high
definition, but went on to qualify this accomplishment by
joking that the only people who would able to see it in HD
would be the salesmen at Circuit City. HDTV has made great
strides since that show. Just two and a half years later, at
the beginning of the fourth quarter of 2005, about one out of
every eight households in the U.S. had at least one HDTV set.

Among of the greatest changes that have spurred the growth of
HD since Steve Martin's apt observations in 2003, are the
decreasing prices of HD-capable television sets. Consumer
research from LRG conducted in September-October 2005 found
that the reported average price of HDTV sets purchased in the
past year was about $1,600 - one-third less than sets
purchased over a year ago.

The lower price points have certainly opened the door to many
shopping for a new TV set yet, even at these lower price
points, the cost of an HDTV sets generally remain outside of
the "mainstream" U.S. household. Even at reduced prices, HDTV
sets are still somewhat of a luxury item, rather than a
replacement for the average TV set.

While a firm cut-off date for analog transmission may provide
further impetus for consumers to purchase HDTV sets, price
remains the greatest motivator (or lack thereof) for HD
purchasing. At the current price points, however, this
decision is not yet a "gimme" for most TV purchasers.

A view of recently advertised sales prices for TV sets
demonstrates retailers' enthusiasm for marketing HDTV sets
during the high-traffic holiday season. But it also highlights
the vast disparity remaining in prices between digital set and
non-digital TV sets.

In LRG's recent study, 50 percent of HDTV owners said that
they purchased their HDTV from major retailers Best Buy,
Circuit City, Sears or Wal Mart. An examination of Sunday
Newspaper advertising inserts for these stores finds that:

*Two-thirds of TV sets advertised were digital sets (including
some enhanced definition TVs, as well as a couple 4x3 HD sets)

*The average advertised digital TV sales price was $1,695

*The average price of non-digital sets was $250 (with several
including DVD players)

While the non-HD sets are generally smaller and inferior to
the digital sets, with this huge pricing difference, is it
any wonder why two-thirds of TV sets purchased in the US thus
far this year have been non-HD sets?

About a year ago the Consumer Electronics Association
ambitiously projected that 20 million digital TV sets would be
sold in the U.S. in 2005, later dramatically reducing the
estimate while placing the blame for the missed forecast on
the cable and broadcast industries. ("CEA is revising its
full-year 2005 projection for DTV product sales to 15
million ... based in part on what proved to be false
assumptions that the cable and broadcast industries would
support specific actions necessary to achieve aggressive sales
growth in 2005.") Yet even the 15 million figure will prove
to be an unreachable goal this year.

Unrealistic expectations should not taint the success that HD
has achieved to this point, or the reasonable near-term
opportunities. LRG's recent consumer study found that:

*18 percent of current HDTV owners say that they are likely
to get another HDTV set in the next year

*11 percent of non-HDTV owners express some likelihood to
purchase an HDTV set in the next year if it cost $1,000 - a
percentage virtually unchanged from a year ago

These findings demonstrate that there is a healthy market
opportunity for HDTV in 2006 among new purchasers as well as
existing HD owners. Yet, given the current price points, those
involved in the industry should be cautious about assuming
blockbuster growth to take place overnight.

_Bruce Leichtman is president and principal analyst for
Leichtman Research Group, which can be found on the Web at:
http://www.Leichtmanresearch.com. His e-mail is:
[email protected]. (Please note, the opinions
expressed in "Outside the Box" are that of the author and not
necessarily of the editorial staff.)_


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## Jeff McClellan (Apr 22, 2002)

Great post Nick. thanks. I use to think that 3 grand was stupid on a tv set, then I got one in a moment of, BUD. Never regretted it. Funny thing is, the wife killed me the first night, then we decided to have more kids, the next night after she watched it. What HDTV can do.


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## boylehome (Jul 16, 2004)

Now if the cable companies and the like just get on the band wagon with OTA HD in conjunction to the lower HD monitor prices, I can see the percentage increasing more rapidly than predicted.


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## Cholly (Mar 22, 2004)

Another example of flawed research. By going with the average price of HD receivers, he discourages people from even looking. 50 inch widescreen CRT projection HD receivers can be had for under $1,000 as can 32 inch direct view LCD sets. 32 inch CRT HD receivers can be had for under $700. 
Most people aren't going to pop for a 60 inch JVC DILA receiver or a Sony or Samsung 50 inch RP LCD. They'll settle for a lot less and be very happy indeed.


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