It's been an exciting year for HDTV. We saw price fluctuations and demand fluctuations create a changing HDTV landscape throughout the year partly due, we suspect, to an unstable economic environment. All in all, it looked like a very good year for HDTV with the TV category topping the list of most popular consumer electronics product categories throughout the year. We saw innovations like higher refresh rates and LED backlighting help move LCD TVs well ahead of Plasma TVs. We saw the DTV transition postponed and then come and go on June 12th driving up sales of medium sized TVs in the process.
An Up and Down Year for TVs
The Demand Index graph for this year shows a steep climb during last year's holiday season where, despite a troubled economy, lower prices stimulated demand for TVs. After inventory cleared in January, rock-bottom prices faded and consumer demand fell off dramatically. February and March were difficult months for pretty much the whole consumer electronics market including TVs. In response, manufacturers may have intentionally lowered inventories of LCD and Plasma TVs anticipating a rough road ahead while restoring supply levels cautiously to meet a lower anticipated demand in second half of 2009.

At the same time, the prices for HDTVs kept going up with much lower production volumes and a desire among manufacturers and retailers to fetch higher profit margins in the first half of 2009. The second half of the year paints a rosier picture for HDTV demand partly due, we think, to the DTV transition and homebound consumers spending money on home entertainment products.

DTV Transition to the Rescue
The original deadline for the DTV transition was delayed until June 12th due partly to the government running out of coupons for DTV converter boxes. While most TV owners were not affected due mostly to the fact that cable and satellite boxes continued to provide analog signals to old TVs, many consumers used the transition as an opportunity to replace their old CRT TVs with new flat panel TVs. We suspect this and possibly more stay at home summer vacationers created a rising demand, more so, for medium-sized (37" and smaller) TVs starting around June and carrying right through the end of the year.
Plasma vs. LCD

Retrevo Pulse data shows that Plasma TVs although way down in market share are by no means out of the picture. This year we saw demand for LCD TV fluctuate between 70% and 80% of the total TV demand. With rear projection and front projection TVs representing a very small percentage that leaves Plasma with most of the remaining 20% to 30% of the market. It is also interesting to note that while we saw minor fluctuations throughout the year, the percentage of demand started and finished the year at 80%.

This data is consistent with a recent Retrevo HDTV buying study where 80% of the respondents indicated they were planning on buying an LCD TV. The 17% preferring Plasma are part of a shrinking group of TV buyers who may still feel that Plasmas offer warmer colors, deeper blacks and better immunity to blurring fast action programming.

Retrevo’s data shows Plasma TVs hanging on to market share yet at the same time we see a drop in the number of Plasma TVs for sale. In other words, consumers still want plasma TVs but they’re going to find they have fewer to choose from.

Energy Star and Other LCD TV Features

It looks like the marketing efforts for HDTVs this year, have been successful at creating savvy buyers. In a Retrevo study on HDTV buying behavior, only a small percentage (29%) of TV buyers indicated they didn’t know or didn’t care about TV features like refresh rate and LED back lighting. We were gratified to see that 43% of the TV buyers think Energy Star is important compared to another 46% who value 120 or 240Hz refresh rate, and 30% looking for LED backlighting.

Size Matters
This year we saw an interesting shift in the demand for various screen sizes. We now see that HDTV buyers are thinking that small is beautiful, or at least more affordable. Last year the ratio of small (up to 37 inch) to larger sized TVs (37+ to 50 inch) was approximately 1:1. This year that ratio has shifted to 3:2. What could be causing a surge in demand for smaller screen TVs? In addition to the DTV transition and home entertainment products substituting for vacations, we may be witnessing the day of the one HDTV family coming to an end. In the recent Retrevo study on HDTV buying behavior 54% of TV buyers said this year's TV would be an additional HDTV in their home.
Good Year for HDTV Add-Ons
It also looks like a good market for HDTV add-on providers. In the HDTV buying study 26% of TV buyers said they were going to buy a wall mount when they bought their new HDTV. Another 19% indicated they were going to buy speakers and 20% said a cabinet or enclosure. Retrevo also found 20% of TV buyers plan on buying an extended warranty.

Future for HDTV Looks Bright
We project a positive outlook for HDTV demand this year. Not only does the picture look very rosy for HDTV this holiday season with large numbers of savvy consumers looking for, and finding good deals on TVs, with more consumers upgrading their old CRT TVs and more HD programming offered by cable and satellite providers, we predict a healthy market for all sizes of high definition TVs. Whether it’s watching high definition sports, escaping into a Blu-ray movie, playing 1080p games or just watching their favorite TV shows it’s clear that despite a shaky economy, consumers want their HDTV.

TVs Get Connected in 2010
We'll be looking for more "connected" TVs this year as more consumers look to view everything from YouTube videos to streaming movies on their big screen high definition TVs. We also expect to see activity in 3DTV although it remains to be seen if marketing claims will be able to match availability and actual performance of 3DTV in the home at least for the coming year.
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Jennifer Jacobson
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