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Top-tier TV vendors to go small as budgets tighten

As the flat-panel market matures and consumers have less discretionary income, industry observers say to expect an influx of smaller TVs.

The flat-panel TV industry is coming of age in the U.S. at a less-than-desirable time.

As energy costs, food prices, and mortgage defaults are on the rise, the first things to go for many consumers are luxury buys. Tightening one's budget can mean ruling out the purchase of a larger TV.

Vizio will face stiffer competition this year.

So what's an industry to do?

Give consumers more lower-priced options, according to Paul Gagnon, who monitors the television industry for DisplaySearch. He expects the top-tier TV brands (Samsung, Sony, Sharp, Panasonic, et al) to move in this direction, since TVs in smaller sizes and ones with fewer bells and whistles are going to be a lot more attractive during tougher economic times.

The current economic environment "puts pressure on brands to occupy that middle ground," Gagnon said. "It makes the focal point in the second half of the year on more aggressive price point products, like 32-inch LCD and plasma." LG put out the first 32-inch plasma last year.

Basically, if you shop for a television at Wal-Mart Stores, Circuit City, or Best Buy, your best bet is going to be on newer, smaller sizes because that's where much of the price competition between brands will be. And when TV vendors fight, we all win.

And though the top TV guys are going to be squabbling with each other over consumer dollars and jostling for position on store shelves in the next couple months, they'll at least be united in one purpose: attempting to take down Vizio. The upstart TV maker experienced unbridled success last year selling mainly through club stores and significantly undercutting the top-tier brands on price.

Everyone is gunning for Vizio--it's apparent in both the price competition, and in the snide remarks and left-handed compliments the marketing execs of the traditional top brands make at TV industry conferences. But Vizio isn't alone. Syntax-Brillian (under the Olevia brand) and Westinghouse are also making inroads into territory occupied by the top names in electronics.

"As flat panel transitions to a mainstream, mature category, big brands are looking at more entry-level markets," said Gagnon. "Sony, Samsung are certainly going to try to play head to head with Vizio on their turf. Price points will get pretty aggressive."

Sony actually started this a year ago, when it launched a specific line of TVs for Target and Wal-Mart. The experiment has gone well, as Sony has already said it's expanding the number of models it will sell through those channels this year.

The average price difference on similar models and screen size between Vizio and the mainstream brands was $200 last year, according to DisplaySearch. Competitors will try to narrow that price advantage to $100 this year, and cross their fingers that having a brand name will help them recapture market share.