Watch This!
John FahyThe television industry is a really good example of the dynamics of modern marketing strategy. Not that long ago TV manufacturing had become a largely commodity business – the cathode ray tube was the primary technology and intense competition between large retailers had driven down margins to tiny levels. Then along came a disruptive technology – liquid crystal display (LCD) and large size, flat panel TVs hit our shops, tempting us to spend much more and upgrade our home entertainment systems. Good news for everyone you might think but not so fast!!
Yes the demand for flat screen products has been huge. In 2011, the world’s consumers spent $115 billion on flat screen TVs and a further $110 billion worth of screens has gone into smartphones, tablets and so on. But as recent research shows, none of the companies that make LCD panels are actually making any money from the activity (economist.com). Between 2004 and 2010, the industry suffered cumulative losses of $13 billion and that includes top firms like Samsung, LG and Sharp. In fact, Sony is about to lose money on its television business for the 8th consecutive year and currently loses $80 on every TV it sells.
So manufacturers will complain about intense price competition and falling demand but what this case really shows is how difficult it is to win with a performance value proposition in some industries. Companies will sweat about improving picture quality or adding interactive features but the reality is that all TVs are good, cheap and do similar things. As the good people over at Apple have shown, it is not just about how the product performs. Pull the emotional levers and you will find the margins are much juicier.
Reader Comments (2)
That is really an interesting article and surprising facts about Televisoin industry.
I thought companies in this sector are making large amount of money in revenue but it seems the opposite!
Thank you.
Yes it demonstrates again how important value capture is! There is a pattern in many industries where some parts of the supply chain are doing well while others struggle.