HDTV Set Sales to Soar

Demand fuels discounts, choices

Acouple of weeks ago, Steve Rosen stood in front of a mammoth wall as a range of startling images beamed out over the Norwalk, Conn., Best Buy store where he's a supervisor. There above Rosen, the world's best soccer player, Ronaldinho, scored on an impossibly green field. Next to him was a hair-raising closeup of Johnny Depp in the Pirates of the Caribbean series.

The action unfolded simultaneously on 42 large-screen, flat-panel HDTVs—each seemingly more impressive than the next. Stretching from a 32-inch LCD for as low as $600 to a 58-inch plasma for north of $4,000, the sprawling display is at the core of Best Buy's strategy to wow customers this holiday season.

The display was in anticipation of Nov. 23—retail's “Black Friday,” the day after Thanksgiving. Results won't be known for weeks, but with customers flooding stores starting at dawn on that day where great expectations are at a premium, sales look to be off to a healthy start. (See related story, page 14.)

The wall is indication of just how high HDTVs rank among this season's consumer electronics pop stars. The sets are no longer extreme luxuries meant exclusively for cutting-edge early adopters. Nearly a decade after they were introduced in the U.S., prices have dropped so much—some 20%-30% since last year—that they've entered the mass market with a bang. And the reverberations should continue for months.

“It's really now in the realm of the average consumer, where everyone can afford some level of HDTV depending on size and type,” Rosen says.

At a Circuit City an hour away, halfway across the store from its own flat-panel wall is a tiny, seemingly neglected aisle with only a handful of traditional HD TVs. But clearly, that's not what the customers want.

“We see flat-panel television being one of the really hot gifts this holiday season,” says Mike Mohan, vice president of consumer electronics at Best Buy.

Falling prices may be the principal reason, but increasing HD content, helped by DirecTV's big HD push is also making customers think about HD.

“It's the intersection of desirability and affordability right now,” says Ross Rubin, an analyst at NPD Group, a market research firm. Analysts don't expect the recent economic downturn to affect customer behavior.

“The quintupling of HD offerings over last year, especially over the last couple of months, is going to help drive the majority of the sales,” says Mark Meza, an analyst at IMS Research.

The Leichtman Research Group estimates the number of homes with at least one HD-capable set will hit 34 million after the holidays, an increase of 42% compared to the end of 2006. The figures are more robust than Nielsen's current estimate that about 15.5 million U.S. homes have an HD-capable set.

Figures from NPD Group show the number of HD sets sold have soared from some 2.7 million in 2004 to about 8 million last year. Sales so far this year are nearly the same as all of 2006. But sets are cheaper so revenue increases have begun to taper off.

Also propelling the surge is something Forrester Research analyst J.P. Gownder calls “the multi-HDTV household opportunity.” In a recent report, Gownder writes that 81% of homes with an HD set have only one unit, while 57% of U.S. homes have three or more TVs.

And as HD sets begin to proliferate, he says those non-HD sets in other rooms will begin to “look as dull as dishrags.”