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Innovation the antidote to TV commoditization?

Even as flat-panels become ubiquitous, consumers are willing to spend more for higher-quality sets, Sony says at conference.

SAN JOSE, Calif.--Sony might have some concerns going into this holiday selling season (Blu-ray shortages, battery recalls and the success of the PlayStation 3), but the commoditization of flat-panel televisions is not one of them.

"Frankly, we don't see that as a fear. We really see it more as an opportunity," Phil Abram, Sony's vice president of TV marketing, told the crowd gathered here Thursday for iSuppli's Flat Information Displays Conference 2006.

"We have to drive the message that you've got to look at the picture before you look at the price."
--Phil Abram, vice president of TV marketing, Sony

"TV manufacturers have faced the threat of commoditization before in the CRT industry," he said, and innovation is the key to avoiding it.

"All flat panels are not alike," said Abram. "The threat of commoditization shows a lack of imagination" on the part of television manufacturers.

Though innovation could mean making a TV with improved contrast ratio or faster response time, a majority of consumers do not buy a specific television because they know the difference between 1080p and 1080i. As Abram put it: "Consumers don't buy flat panels. They buy televisions."

Whatever you want to call the gadgets, they're coming off the shelves at a rapid clip. Flat-panel televisions, specifically liquid crystal displays (LCDs), will outsell traditional cathode ray tube (CRT) sets for the first time in 2009, according to Riddhi Patel of iSuppli.

This can be attributed to a greater consumer understanding of the benefit of flat-panel TVs, but also to rapidly declining prices. During the 2005 holidays, the average price of a 40- to 44-inch LCD TV was $3,473, according to iSuppli. By the third quarter of this year, the average price dropped to $2,304, a 34 percent decline.

Still, Abram said, commoditization is not yet a factor for Sony because the company believes consumers will be able to perceive a quality difference between its Bravia brand of LCDs and competing brands and technologies, such as plasma.

Sony also did an experiment to stem the tide of commoditization that it says has worked well. A test program gave consumers different colored bezels to customize their Sony TV. The program "far exceeded expectations," said Abram, due to the shift in attitude toward the TV as a part of a home's decor, and not just a functional piece of electronic equipment. Consumers "want it to look good when it's off and when it's on."

It ought to be a concern to a traditional market leader when one of the biggest players in the flat-panel business these days isn't a recognizable brand name, but a group of no-names. Value LCD brands climbed to a 30 percent market share as of the second quarter of 2006, while the traditional LCD leader, Sharp, had its share eroded to less than 20 percent, down from 50 percent three years prior.

"You're going to see a lot of inexpensive TVs out there," Abram said later in an interview. "We have to drive the message that you've got to look at the picture before you look at the price."

That approach might be working. Over the last few years, the average selling price of a TV has gone up--highly unusual in the consumer electronics business. From September 2005 to September this year, the average price paid for an LCD TV rose from $965 to $1,020, according to The NPD Group.