The other guys in digital TV

Not long ago, Polaroid, Vizio and Westinghouse were footnotes in television manufacturing. That's no longer the case.

A few years ago at the Consumer Electronics Show, the big topic of discussion was how Dell and the computing giants were going to change the TV market. Instead, much of the action has come from the elves.

Over the past year or so, a group of small companies--Vizio, Syntax-Brillian, Westinghouse Digital and Polaroid--have gained a greater share of the TV market in the U.S. than the name-brand computer companies. Those brands and others will display their latest models at this year's CES, which starts next week in Las Vegas.

Chalk it up to scrappiness. The small companies have succeeded by undercutting established manufacturers on price while simultaneously building alliances with retailers, contract manufacturers and component suppliers, according to executives and analysts. And costs are kept to a minimum.

"We don't have highly paid executives or fly around on corporate jets. The efficiency of the company is not hiding any kind of latency," said William Wang, CEO of Vizio. "This is how Sony got its start in the TV business several years ago."

In the third quarter, Polaroid was the ninth largest seller in the LCD/plasma TV market in North America, according to DisplaySearch, while Westinghouse was number 11. held the No. 10 spot overall and was No. 1 in sales of 42-inch LCD TVs, according to the firm.

Syntax-Brillian, not exactly a household name, ranks 13th in the U.S., according to DisplaySearch. But Syntax CEO Vincent Sollitto points out that it's a top three seller in Hong Kong, and a top 10 brand in China. The company recently bought Vivitar, the camera company, and may use Vivitar's brand and channel relationships to break into the European TV market.

"We sell (TVs) at about 20 percent below the tier ones and 20 percent above the tier threes," Sollitto said. In the quarter that ended in September, Syntax garnered $87 million in revenue.

Tuning in
Market share for plasma and LCD TVs in North America, Q3 2006.
Source: DisplaySearch

Meanwhile, Dell ranked number 20 in digital TVs in the U.S., and Hewlett-Packard followed up at number 21. Gateway and Motorola, two other big-name companies that got into the TV business earlier in the decade, have bowed out. (Dell, HP and Gateway, though, sell large numbers of LCD monitors for PCs.)

In the worldwide LCD and plasma market, Vizio ranks 10th with a 1.53 percent market share, while Syntax and Westinghouse clock in at 12 and 13. Dell ranks 24th with 0.32 percent of the global market while HP is buried below number 36 in the "other" category, according to iSuppli.

Companies like Samsung, Sony and Panasonic remain the largest TV makers in the world and often command premium prices because of cutting-edge features that haven't trickled down to smaller makers.

Still, the new, small entrants have managed to establish themselves fairly quickly. Vizio started selling TVs under its own brand in 2003. This year, the company will likely pull in $800 million in revenue and ship 800,000 TVs. Just on Black Friday--the traditional blockbuster sales day just after Thanksgiving--Vizio sold between 35,000 and 37,000 TVs, according to the company.

"In a way, they (Vizio) are the poster child of the new TV manufacturer generation," said Bob O'Donnell, an analyst at IDC. "They have done an amazing job of coming from nowhere to play a big role."

The success of the "silver box" manufacturers, as the smaller makers are known, is beginning to rub off on name-brand players, he added. HP for one has begun to price its products more aggressively and add novel features.

How did we get here?
Syntax versus Samsung, of course, wasn't exactly the matchup many expected. Back in 2003 and 2004, PC makers said that they would exploit their brand recognition, expertise in digital electronics and relationships with component suppliers and contract manufacturers to get into TVs. These companies already accounted for a huge chunk of LCD monitors sold worldwide.

Gateway launched an early salvo in 2002 when it came out with a 42-inch plasma TV for $3,000, about half the price of similar TVs from other manufacturers at the time. Sales climbed rapidly.

Executives from consumer electronics companies such as Sony talked about how the PC makers might stumble because of their lack of experience in consumer marketing.

The newly formed entrants were seen as longshots. Like the PC makers, the smaller TV makers planned to rely mostly on contract manufacturers in Taiwan, but most were relatively tiny operations without the buying power or brand cachet of the multinationals. Analysts wondered how these companies could differentiate themselves.

"There's no reason to think the world needs more brands," Barry Young, a senior vice president of DisplaySearch, said in early 2004.

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