Will Apple Capitalize on the Television Industry?
Although consumer confidence levels are at their highest levels since April, consumers continue to spend cautiously on television sets.
DisplaySearch, which tracks television data, explained that around 32 million television sets were sold in North America in 2004, at an average price of $400. Currently, 44 million television sets are sold a year in North America, at an average price of $460. However, the average size of televisions in North America increased from 27 inches to 38 inches during the time period. Televisions have become more inexpensive, and it has been showing up in bottom lines across the industry. Earlier this month, Best Buy (NYSE:BBY) reported a 29 percent decline in third quarter net earnings due to heavy discounting to attract consumers. Television manufacturers like Panasonic (NYSE:PC) and Sony (NYSE:SNE) are also feeling the effects of a cash strapped consumer.
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On Monday, Sony agreed to sell its nearly 50 percent stake in an LCD joint venture with Samsung Electronics. Sony is planning to switch to cheaper outsourcing for flat screens. In November, Sony announced its TV unit was expected to lose $2.2 billion for the year. “People used to pay additional to get a Sony Trinitron,” said Riddhi Patel, director of television systems at IHS iSuppli, a market research firm. “But the industry has trained the consumer that any time there is a new technology, if they wait six months the price will come down.”
The weakness in the television industry may offer an opportunity for Apple (NASDAQ:AAPL). Speculation has been building for months about an Apple television set hitting the market sometime in 2012. On Tuesday, Digitimes claimed that Apple plans on releasing television sets in the third quarter of 2012. The first sets are expected to feature 32 inch and 37 inch screens. Digitimes explained, “The supply chain of Apple will start preparing materials for iTV sets in the first quarter of 2012 in order to meet Apple’s schedule to launch the new display products in the second or the third quarter of 2012, according to industry sources. Instead of a form of set-top box like the Apple TV launched in 2006, Apple’s new products will be full TV sets, the sources added.”
Even though other tech giants such as Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) have not been able to revolutionize the television market, Apple may have success as the company already has a massive devoted fan base in its iCloud ecosystem. However, Apple will need to offer customers a strong incentive to move away from cheaper models. At a price of $499, the iPad 2 is already more expensive than the average television unit in North America.