Dog bites man, a person dies and taxes to increase: some news stories should not come as much of a surprise.

Actually, there is a surprising part to the story told in this article, but it was last year’s news. It started with a company with an unknown brand name. Through aggressive use of low pricing and high-visibility sales channels, it jumped from the pack and grabbed first place in North American LCD TV sales. The company was Vizio and it led the market for six months. All of us love to see an underdog succeed and the news reaffirmed our belief that doing a "Horatio Alger" was still possible. That was then.

Art Berman
Insight Media Consultant

The fourth quarter of 2007 saw the return of more established brand names to the top sales ranks of LCD TVs. Perhaps a less charitable way to say this is that the fourth quarter saw a return to normalcy or, perhaps, to the proper order of things. Despite the lack of surprise, what happened?

Basically, Samsung and Sony struck back with aggressive pricing and promotional strategies during the critical holiday buying season. Riddhi Patel, Principal Analyst, Television Systems at iSuppli pointed out that last December, Samsung offered a $300 price discount for its 40-inch models and promoted those sets through electronics retailer Best Buy, giving it dominance at that size. Meanwhile, Sony enjoyed increasing sales of its line of more affordable LCD TVs, giving the company the lead in the markets for 46 and 52-inch sets.

Vizio did not offer as many pricing deals as Samsung during the fourth quarter. But it did maintain leadership in the 32-, 37- and 42-inch sizes. The interesting point is, however, that while Vizio’s pricing was still lower than Samsung’s and Sony’s in the fourth quarter, the differential was not great enough to lure many North American consumers away from the established brands.

This last point is instructive. While it may be true that consumers of expensive electronic products are less brand conscious than in previous years, the fact is that, when the price difference between a no-name brand product and an equivalent premium-brand product is within, say, 10%, consumers often chose the premium brand.

So, why did Samsung and Sony prices come down more than Vizio’s? The starting point for the answer to this question is that all the LCD TV brands pay about the same price for LCD displays. In addition, all brands pay about the same price for the LCD TVs to be produced by original design manufacturers. One differentiator is the choice of electronics, which can impact the bill of materials and create noticeable differences in picture quality. But beyond this, the only place to cut cost is to reduce the brand and channel margins. Put simply, since Samsung and Sony had higher prices than Vizio, they also had more room to cut these margins.

With all this as background, what was the sales score card? Well, first of all, sales were strong. North American LCD TV shipments rose to 7.9 million units, up 41% from 5.6 million in the third quarter. For the first time, Sony was the top seller moving from 9.7% to a first place 12.8% market share. Samsung also did well increasing its market share from 10.7% to 12.3%. Samsung’s rise in share would appear to be a reflection of some success following the company’s increased focus on flat TVs. Visio fell to third spot while just about maintaining its’ market share with only a slight decrease from 10.9% to 10.7%.

Where the score goes from here is to be seen but…the trends and current state of affairs are not encouraging to any "small" company without an established brand name that tries to play in the consumer electronics major leagues. Although there is little pleasure in embracing it, the market reality is that Goliath almost always wins. And that is a reality that should be factored into the business plans of any company that wishes to play in this business space. To further support this point, I will remind the reader of another recent example. Recall the Syntax-Brillian roller coaster. This company’s surprising rise to the top of the TV market place was followed a fairly through pounding down by the consumer electronics giants.

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