At InfoComm last month Pioneer was showing its spectacular high-contrast plasma TV in a secure room. Unlike the situation at CES, the room was generally empty. You just had to know it was there so you could ask for admittance.

Ken Werner
Senior Analyst and Editor

Without worrying about why Pioneer was pushing consumer television at a ProAV show, we can observe that Pioneer had a lot to talk about. The new high-contrast line - the result of what Pioneer calls Project KURO - delivers black levels with only 20% of the luminance of the previous generation. The depth of these blacks is impressive, and it makes possible a color palette with deep, saturated colors and very high contrast. The results are due to a broad re-engineering of the plasma panel and electronics, including a new pixel structure, new phosphors and new video processor, said Pioneer’s Todd Runkle.

High-definition (768-line) KURO versions in 42 and 50 inches were scheduled to be available in Best Buy by the end of June, with Elite versions following in July and Full-HD (1080-line) versions in 50 and 60 inches coming in September. The 1080 versions will be sold through Best Buy’s premium Magnolia selling areas, said Runkle.

Pioneer’s plasma TV business has been losing money steadily, despite the company being generally acknowledged as having the best plasma image quality in the industry. The problem is price, with Pioneer’s costly manufacturing process and questionable marketing strategy, requiring price premiums that chase away all but those well-heeled customers most committed to high image quality.

With Pioneer girding its loins for a final push to plasma profitability, you would think that somebody would have done a hard-nosed analysis of market elasticity. Specifically, if Pioneer needs to sell a particular number of TVs to reach break-even, how much of a premium can it charge and still make its numbers. Apparently, no such analysis has been done. Or if it was done, perhaps it uses "fuzzy math." The point it, we don’t get it. Instead, the company seems to be taking its own PR positioning as if it were a marketing strategy. This is from a recent Pioneer press release: "These new flat panel televisions developed as part of Pioneer’s Project KURO bring game-changing performance to consumers who demand only the best. With this introduction, Pioneer breaks away from the commoditization model, placing focus on its premium position in the market. The company will maintain its focus on quality, performance and design."

That’s nice. Except that without careful marketing analysis, the "people will pay for quality" mantra forces you into a low-volume niche that won’t keep your factories running at a reasonable utilization rate.

Pioneer’s price premium is huge. The 42-inch HD PDP-TV that has just been delivered to Best Buy carries an MSRP of $2700, and the the 50-inch version is $3500. That is easily a $1000 premium over the ever-improving offerings from Panasonic, Samsung, and LG. A certain number of people will pay that premium, and we think that number will not be enough. When Best Buy starts cutting prices on these beautiful sets, get yourself a bargain.

And what does Pioneer do then? Pioneer is in a death spiral of making beautiful, high-cost plasma panels that a captive TV division builds into over-priced TV sets that are sold by a captive North American marketing group. Nowhere in this chain is there anyone who can speak truth to power and back it up by refusing to buy the product.

There may be a solution in the FHP (Fujitsu Hitachi Plasma) model, where a company was formed to make plasma panels only, which it then sold to independent TV makers. If the panels do not offer customers the combination of quality and cost they need to make marketable TV sets, the customers won’t buy. Perhaps that kind of market discipline would allow Pioneer to be a successful maker of plasma panels. It certainly isn’t a financially successful maker of TVs.

But those sets sure are beautiful.