High Volume, Fuzzy Picture - consumer electronics sales continue to grow - Brief Article - Statistical Data Included

Brandweek, June 4, 2001 by Dale Buss

Consumer electronics has so far appeared relatively immune to the economic downturn. As unemployment and energy prices rise, consumers are still willing to load up on the latest gadgets and gear.

Industry-wide sales rose 3% during an otherwise glum first quarter for big-ticket purchases after posting a 10% gain for all of last year. Will this continue until the make-or-break fourth quarter? Who knows?

Though PC makers like Hewlett-Packard and Compaq have made overtures, the category is an oasis of stability, controlled by about a half-dozen firms. The largest players, like Sony Panasonic, Samsung and Philips, tend to launch multi-media umbrella campaigns featuring star products, emphasizing the "gee-whiz" factor of new devices like digital audio players and high-definition TVs.

Sony's latest campaign, for instance, is broken into three parts--digital imaging, digital audio and information-based products. Sony broke the first portion in March and is planning the second phase for June. Samsung, retrenching after hiring FCB, New York last year, broke the first part of its $400 million branding effort last month. Expect similar efforts from Philips, Thomason/RCA and Panasonic. Though there's some variation--Panasonic's ads are folksier, for instance--the campaigns have much in common. All pitch a digital lifestyle, cast their advertising with young, often multi-cultural actors and tend not to be too edgy.

These days, ads rarely mention CE's biggest star product of all, DVD, which has become the category locomotive. DVD sales this year alone are expected to exceed 12 million units, on top of an installed base of 14.5 million players as prices hit a low of $120.

Building on this foundation, consumer electronics marketers are already touting new uses for DVDs. The V, after all, stands for "versatile" (as in Digital Versatile Disc).Although most people think of DVDs as VCRs with better picture quality, that versatility is coming into play as more manufacturers sell DVD as an audio format as well, with its richer sound and much longer per-disc play time than CDs. DVD-recording systems are trickling out and will flood the market this fall at prices of around $2,000. Philips says it is alone in the category in planning to make DVD recordings "backward-compatible" so they can be spun on older players. Panasonic is trying to extend the appeal of DVD even further by introducing a camcorder that uses a DVD RAM disc as well as a DVD device with MP3 playback.

The persistent clumsiness of MP3 downloading--it can take 30 minutes or more to download a single song--isn't helping the fledgling format. Nor is the possibility of having to (gasp!) pay for files. But manufacturers are hoping that new products will make MP3 mainstream soon All of Thompson/RCA's DVD products will play MP3-recorded CDs by later this year, for example.

As high-definition TVs hit the $2,000 price point, they are also becoming more mainstream. HDTV's heyday is probably years away however, since there are only a few hours per week of content now available.

The TV is the target for another fledgling category--personal video recorders. Introduced last year to the horror of ad execs, devices like TiVo and Microsoft's Ultimate TV record 30 hours or so of programming onto a hard drive, leaving viewers free to program their own TV and zap commercials. TiVo and Microsoft have found that explaining the devices in advertising is tricky Nevertheless, the two will battle this fall as category sales rise--that is, unless more PC makers follow Sony's lead and include TV taping as a feature.

Eyeing another Internet portal in the home, Microsoft (hey, wasn't the government going to break up this company or something?) will open another front in the living room this fall, pledging to put $500 million behind Xbox, its gaming console. Xbox will vie with Sony's PlayStation 2 and its $250 million budget, as well as with Nintendo's GameCube, which has not yet been given a budget, at least publicly.

Despite the spend, Microsoft's success with Xbox is far from assured. It has had its share of misses in hardware (like WebTV and its Barney doll), it faces competitors with a combined install base of around 200 million, and it must contend with the fact that many households already have both Nintendo and PlayStation.

                          CONSUMER ELECTRONICS
  Brand         Company Name, Location
1. Hitachi      Hitachi, Brisbane, CA
2. Panasonic    Panasonic, Secaucus, NJ
3. Sony         Sony, Park Ridge, NJ
4. Philips      Philips, Atlanta
5. Samsung      Samsung, Ridgefield Park, NJ
6. Thomson/RCA  Thomson, Indianapolis
  Brand         Lead Agency, Location                   Total Sales
                                                        (billions)
1. Hitachi      Hakuhodo, New York                        $67.8
2. Panasonic    Grey, New York                             61.5
3. Sony         Young & Rubicam, New York & Irvine, CA     59.0
4. Philips      DDB, New York                              34.9
5. Samsung      FCB, New York                              22.8 [*]
6. Thomson/RCA  Lowe Lintas, New York                       8.4
  Brand         Media Spending  Quality  Salience  Equity
                  (millions)
1. Hitachi           $8.4        6.24       54      33.7
2. Panasonic         35.1        6.89       83      57.2
3. Sony             653.4        7.53       91      68.5
4. Philips          112.5        6.61       62      41.0
5. Samsung           71.0        6.05       64      38.7
6. Thomson/RCA       20.1        5.89       17      10.0
(*.)1999 sales
Sources: Company reports (sales);
Competitive Media Reporting (media);
Total Research: QxS=E