Samsung Launches One Company Price War in 3-D TVs
By its own estimate, Samsung has grabbed an 88 percent share of the 3-D TV market in the U.S. The business is still in its early days so you would think there would be time for others to give Samsung a run for its money, but not so, according to one of the South Korean’s main contributors.
“No one can keep up,” Yoshiiku Miyata, head of Panasonic’s TV business, told Bloomberg Businessweek. The reason, according to Mr. Miyata, is Samsung is selling a 50-inch 3-D set for under $1,000 while his company and Sony are selling comparable sets at $2,499.99 and $2,299.99 respectively.
Samsung, which is the largest supplier of televisions in the world, claims to have sold over one million 3-D models in its first six months on the market.
One area where the company has hoped to take an early lead is the development of 3-D sets not requiring viewing glasses. John Revie, vice president of home entertainment at Samsung Electronics, told IDG News that the technology was a ways off.
According to Mr. Revie, watching 3-D TV without glasses can only be done at a lower resolution and the sets are more expensive to manufacture. There is one other issue, he said. “You have to watch it virtually motionless” or the viewing image becomes distorted.
Discussion Questions: Will Samsung’s pricing strategy dramatically move up the timetable for adoption of 3-D technology in American households? Do you expect other 3-D TV makers to drop prices to compete with Samsung or has the bar been set too low for anyone to follow?
Lower prices on 3-D televisions will only mean lower prices for regular hi-definition televisions. This holiday season will be a good barometer on how fast consumers are adopting 3-D television technology. I suspect the majority of televisions sold this year will be Hi-Definition. Best Buy and Costco will be the two best locations to watch the adoption rate.
This seems to be the consumer electronics pricing model of the future: get out early with something, even if it’s at a ridiculously high price. See how quickly you can ramp up volume and drop prices, with the aim of making most of your money in the early days of a product, so that you can give up margin down the road–and lock out other manufacturers that are early on the production/price curve. If a competitor can’t ramp its production without the support of high-margin selling, then they’ll never catch up.
It seems like Apple has done this quite well, and even the eReader price wars smell of this strategy–Amazon had a long time to sell the Kindle at, basically, full price, before having to deal with real competition. Now that the competition is out, Amazon is sucking all the margin out of the reader by drastically dropping their price.
I guess it really does pay to be bleeding edge when it comes to rolling out CE products….
Samsung’s pricing strategy will certainly increase adoption rate for 3-D among those that are interested in 3-D TV. Its price is less than half what Panasonic and Sony are selling comparable sized sets for. Unless its competitors are making very large margins, it would seem to be an insurmountable advantage.
One of the many questions is what is the real size of this market? 3-D is currently the differentiator for some movies but broadcast TV in 3-D is still to quote one article “there’s more loose ends than a spaghetti tornado, from industry standards right down to the terms used to describe video quality or lack thereof.”
This isn’t rocket science. Of course aggressive pricing by Samsung will accelerate the adaption of 3-D. Technology, no matter whether it’s smart phones, e-readers, or computers has been accelerated by two parameters: lower prices and better features. TVs are the same. 3-D is not a unique category. It is just a better TV. Despite the ultimate drop in HD flat screens, as the price compresses, the difference in the features becomes less.
That is exactly what Samsung is doing. Instead of making a 3-D choice a $1,000+ decision, they are making it a couple of hundred dollar decision. If we could buy a new 50 inch flat screen for $699, would we not consider a 3-D at $899? I think so.
Samsung’s competitors can’t afford not to drop prices. Why would 3-D technology operate any differently than any other? Also, Sony and Panasonic have already made the investment in developing and delivering 3-D technology and they are going to want to increase their market share. Major retailers have told me that they actually don’t plan on selling that many 3-D televisions as they see new technology coming right behind. Retailers also get it that consumers are aware that the technology is “not there yet.” As such, I don’t see a lot of room for brand depth presentations which heightens the promotional pricing pressure. Wait and see on 3-D.
Samsung saw an opportunity to grab this ring on the TV merry-go-round and will not let go. Others have to follow; and will find a way to manufacture and sell competitively. Then the marketing wars begin. This will mean the price of traditional TVs will drop accordingly during the holiday season. This could be an interesting war to follow. Maybe the consumer will be the winner. You think?
No. 3-D is not HD. They are 2 entirely different market segments, and 3-D is clearly not ready for the mass market, without or with glasses. This is just a spin on TV technology that is without merit. The 3-D technology is a solution looking for a market niche to fill….
Once the price comes down, customers will buy. (Think Blu-Ray.) And if customers are buying units, the content will follow. Will this be under your tree this year?
Yes, as another commenter noted, 3-D TV is not quite the same as HDTV. It has many issues associated with it. As well, there are two other sub-segments in TV to follow, those being LED lit and Internet connected sets. While there is overlap among all three features, what is really clear is that LED and Internet connected TVs are selling very well and will continue to gain share of the overall market.
That said, there is really a wide range of strategy in effect here by makers. A truism of CE is that there are no bad products, only bad prices, and so it is certain others will not only meet the Samsung price, but beat it as well. Meanwhile, Samsung has sets with these features and more for $6000+ as well so these markets are also segmented in price bands and by the demos.
In reality, early studies for HDTV predicted that it would need an average price of around $600 for a 40-42″ class set in order to achieve complete replacement of the old cathode tube sets. All manufacturers know this study and so, in fact, the industry is still trying to drive prices down, not up. Therefore, we will continue to see price erosion overlapped with some of the technical and performance upgrades, but the question of price matching is more likely to nonplus those in the CE channels as they know this from every day experience on the ground.
Yes, it will increase their market presence but I don’t see it becoming dominant.