Royal Philips Electronics (Amsterdam, the Netherlands; www.philips.com) announced yesterday (4/8/08) it had established a brand licensing agreement with Funai Electric Co Ltd. (Osaka, Japan; www.funaiworld.com). As of September 1, 2008, Funai will have the exclusive right to use the Philips and Magnavox brand names in the United States and Canada on televisions. This licensing agreement will continue for a minimum of 5 years.
Insight Media Analyst
Why am I not surprised by this move? Because it represents an ongoing trend at Philips to disentangle itself from the consumer television business in North America, where profits have been volatile and most often non-existent.
Philips sees the writing on the wall. According to Philips’ President and CEO Gerard Kleisterlee, this and other steps are "addressing the unacceptable profitability levels in our TV business in 2008." The "other steps" were not described, but stay tuned for the other shoe to drop. The reduction of Philips investment in LG.Philips (now LG Display), as discussed in the March issue of Large Display Report, can be considered part of this disentanglement process. The Funai agreement only affects the US and Canada: Philips televisions in the rest of the world including Latin America will remain directly controlled by Philips - for now.
For the Funai deal, governmental regulatory approvals will be needed (unlikely to be denied, in Insight Media’s opinion), and the agreement is subject to Funai’s compliance with Philips requirements on brand use, product quality, product design and provision of consumer care. In addition to its own R&D center in Osaka, a technology center in Tokyo and manufacturing facilities in Hong Kong and China, Funai will have access to Philips’ research and design experts to ensure Philips and Magnavox televisions deliver continuous innovation to consumers in both technology and form. Recent Philips innovations that will be carried on and continued by Funai include the recently launched Philips Design Collection and energy-efficient range of televisions dubbed the ‘Eco TV’.
Philips has worked with Funai for 18 years. According to Todd Richardson, a Philips marketing VP, "Funai will continue to deliver the products that we set out for the 2008 range. In fact we started launching our 2008 range late last month with the full rollout starting this month. That full range of Philips and Magnavox products will absolutely be continued by Funai through the balance of 2008."
To cover the costs associated with the transfer of the company’s North American TV activities to Funai, Philips will take total charges of up to €125 million ($196M) during 2008.
In a similar announcement in January, Funai announced a business alliance with Victor Company of Japan (JVC). This announcement covered primarily the manufacturing and sale of JVC-branded LCD-TVs in Europe and the US. The European TVs will be made in Funai’s factory in Poland and the US ones in JVC’s factory in Mexico.
A year ago, Funai announced an agreement with the Boston Red Sox covering a special media room with the Funai logo on the wall for the media to interview Boston pitchers Daisuke Matsuzaka and Hideki Okajima. Matsuzaka won the 2008 Fenway opening game for Boston yesterday. What would modern baseball be without television? For that matter, what would television and baseball be without Japan?