Plasma pricing precipice, part II

Last year I wrote an article talking about the rapid decline of plasma flat panel prices as we entered the second half of the year and started approaching the Christmas shopping season. At that time, I noted that name-brand 50-inch plasma panels had broken the $3,000 barrier and that we might see non-name-brand sub-$1,000 42-inch plasmas around Black Friday.

Well, a similar situation is brewing this year. As I write this, I note that as I look at best flat panel prices, I'm starting to see 50-inch panels such as the Panasonic TH-50PX60U approaching the $2,000 mark before shipping (current best price with shipping is about $2,300 -- these are big boxes we're talking about). 42-inch plasmas such as the popular Panasonic TH-42PX60U are now sub $1,500.

Now we could simply chalk this up to normal 30% per year price declines in flat panels, but I think there is more going on here. Overall, most video aficionados believe that the best plasmas today are pretty convinced that plasmas still generate the best HDTV pictures in home theater environments. And most of the new capacity being added nowadays is LCD, not plasma, so plasma pricing should be holding up better than it is.

But there's also an interesting marketing war going on between plasma and LCD technologies. The LCD guys, especially Sony and Westinghouse, are touting the theater-definition 1080P resolution as their big differentiator, despite the fact that there really aren't any 1080p content sources readily available yet. In the process, they are painting plasma technology as "old and staid". In fact, there was even an Opus Sunday cartoon a few weeks ago where a conservative character Steve notes that he is "staying the course" in upgrading to plasma, implying that that was the choice of people who really didn't want change.

This is a race to the bottom on product margins, which eventually will drive some companies out of business. The winners in this war will be not only those who make the best technology, but those who do the best job of marketing real consumer benefits that will command better margin products. Pioneer has done a pretty good job of doing that in the current plasma war, and Sony is similarly pushing premium consumer value with details like color-coordinated bezels with their XBR2 and XBR3 series LCDs. But this war is going to create a lot of casualties in the second and third tier manufacturers trying to break into the market.

All that said, the high ticket prices for flat panels promise to keep the holidays bright for companies like Best Buy and Circuit City. Amazingly, flat panels and iPods have actually been raising average revenues for consumer electronics purchases the last few years, despite the ever-declining prices of most categories. But there's still a lot of room for innovation toward iPod-like excitement around HDTV with consumers by marketing style, simplicity, and quality. Meanwhile, we predict that $1,000 to $3,000 flat-panels will be the Tickle-Me-Elmo product hits for adults this holiday season.

Technorati Tags: 1080p, Consumer Electronics, Flat panels, Flat-screen TV, HDTV, LCD, Marketing, Panasonic, Pioneer, Plasma, Product design, Sony