http://www.nytimes.com/2008/11/29/technology/29televisions.html?th=&emc=th&pagewanted=all TV Sales Becoming Litmus Test for U.S. Economy By MATT RICHTEL Published: November 28, 2008SAN FRANCISCO - In a volatile year that has turned many Americans into armchair economists, here's an important indicator to watch this holiday shopping season: how many people are lugging home big, flat-screen televisions?
The answer matters to more than just TV makers. Just as high-definition sets have become the hearth of the digital home, they are increasingly central to the fortunes of the consumer electronics industry and plenty of retailers.
And there's reason for serious concern. While retailers are trying to use discounted TVs as a lure for shoppers, many would-be buyers continue to wait, and wait, for a magical price that is low enough to inspire a purchase. Others just have more pressing needs.
"The question is whether I buy a TV or something more important," said David Lunsford, 62, who visited a Circuit City near here last week to shop for big-screen TVs. He would love to replace his aging rear-projection set, but he worried he needed to save money in case family members hit tough times.
"I'm a stable provider. They may turn to me," said Mr. Lunsford, who works for the federal government.
Americans are expected to spend $28 billion this year on TVs, making them the largest segment of the $173 billion electronics industry. So far about half of American households have made the jump to flat-panel screens, which started out as status symbols but are on their way to becoming standard household appliances.
More people may choose to upgrade this year because of the national switchover to digital broadcast signals coming Feb. 17. The change, which will mostly affect people who watch over-the-air signals on older sets, has generated a good amount of consumer confusion - which could be good for sales of new sets.
TVs are also a gateway to a host of other products, like Blu-ray discs and their players, surround-sound audio systems, digital video recorders and cables.
All of these factors have led electronics stores like Circuit City and Best Buy, and even less specialized chains like Sears, Wal-Mart and Office Depot, to put TVs front and center in their advertising recently, promoting them on the cover of Sunday circulars and on the home pages of Web sites. They are offering discounts - like 42-inch TVs for less than $700 and 32-inch sets for $450 - that come on top of recent steep price declines for the sets.
For the industry, the feeling is that if retailers cannot get TVs to move, the holiday season could be a bleak one indeed. In that sense, the TV market offers a glimpse of the broader tensions this year between wary consumers on the one hand and retailers and manufacturers desperate to spur sales on the other.
"The television becomes a litmus test of the robustness of the American economy," said Richard Doherty, an electronics industry analyst with the research firm Envisioneering. In Mr. Doherty's consumer surveys, the early word is mixed; many consumers want a new TV, but they think that if they wait to buy, retailers will drop prices further.
There were signs on Friday that more cuts might be necessary. At two malls outside Portland, Ore., the electronics stores were the only ones that were full of shoppers. But people seemed to be gravitating toward lower-priced items like video games instead of televisions.
Mr. Doherty's firm tracked stores in New York and California and found that for some retailers it was the slowest Black Friday of the decade. "There are lots of big-screen TVs still standing on the show floor," he said. "This is not what was expected by retailers or manufacturers."
Store owners may cut TV prices even further with revamped sales starting on Sunday, Mr. Doherty said.
Steven Caldero, chief operating officer of Ken Cranes, a 10-store consumer electronics chain in the Los Angeles area, painted a rosier picture.
"Our traffic has been very good," Mr. Caldero said. "Our sales have been good. I think people went out and decided to buy something to make themselves feel better."
In just the first two hours of operation on Friday, Ken Cranes matched about one-third of the business it did for all of Black Friday last year. But while consumers bought plenty of TVs, they shied away from purchasing complementary products like audio systems, Mr. Caldero said. "I am not seeing as much of that as I would like to see," he said. Consumers eyeing televisions have historically been rewarded for their patience: flat-panel prices have fallen nearly in half in the last two years.
A year ago, for example, Sony sold a 40-inch model for $1,600 that now costs $1,000, and a 32-inch model for $1,100 that now goes for $749. And Sony is one of the costlier brands. Several manufacturers are selling 32-inch TVs for $450 to $500. Mammoth TVs, those more than 50 inches, have come down too; Best Buy is offering a 52-inch Sharp for $1,299.
Beyond price drops, manufacturers and retailers are trying to spur demand with other incentives. At Circuit City, for instance, televisions get a 60-day price guarantee, whereas other products have a 30-day guarantee. Reflecting the special place held by TVs, Circuit City offers 36 months of interest-free payments on some larger sets, compared with 24 months for other products.
Many major retailers are sweetening the pot by bundling TVs with high-definition DVD players, or offering discount bundles on cables. They announced Black Friday deals weeks in advance, and some - like Best Buy - began sales events in the days before Thanksgiving, with heavy promotions on TVs.
And yet consumers remain cautious, and manufacturers are nervous.Mr. Caldero of Ken Cranes said he had been in constant contact with electronics manufacturers, including TV makers, that were trying to gauge demand.
"I've had more calls from vendors in the last few weeks than I've had in the last three years," he said. "They want to know what's going on, how's business, what's working and what's not." Just to be safe, TV makers have been shipping fewer sets - but they may not have pulled back fast enough. In the third quarter of this year, shipments to North American retailers of LCD TVs rose 21 percent from a year ago, and those of plasma TVs rose 20 percent, according to DisplaySearch, a market research firm. That is down from growth rates in the last two years that at times hit triple digits.
Paul Semenza, an analyst with DisplaySearch, said that the downturn in sales of TVs did not hit until mid-October, so despite the slowdown in shipments the retailers and manufacturers were still facing a glut of sets.
"Oversupply has just cascaded," Mr. Semenza said.As in other industries, that oversupply, and the uncertainty of consumer demand, has caused problems further back in the manufacturing and supply chain. In Taiwan and Korea where the LCD screens for the sets are made, prices are falling 5 to 9 percent a month, a "tremendous drop," said Andrew Abrams, an analyst with Avian Securities, which tracks the electronics industry. Such drops, he said, suggest that retailers have far too much inventory, and he expects another round of price cuts.
The question is, who will blink first, manufacturers and retailers, or consumers?
Bruce Tripido, vice president for marketing at the TV maker Sharp, said adequate discounts were already in place.
"We're not looking to shift gears from the offers we've planned," Mr. Tripido said. "The pricing is so compelling for this holiday selling season that it's to the point of irresistible."
Yet resistance remains for many consumers, like Bayani Deluna Jr., 35, who stood last week at a San Francisco-area Best Buy looking longingly at a 32-inch Sony television. Mr. Deluna, who worked as a parking valet until a few weeks ago when he went on disability, is waiting for the $600 price to drop.
"If it comes down to $450, I'd buy it," he said. "And I'm sure the price is going to come down."
Ashlee Vance and Claire Cain Miller contributed reporting. ---------------------------------------------------------------------- You can UNSUBSCRIBE from the OpenDTV list in two ways:- Using the UNSUBSCRIBE command in your user configuration settings at FreeLists.org
- By sending a message to: opendtv-request@xxxxxxxxxxxxx with the word unsubscribe in the subject line.