Mitsubishi drops direct view

Television Digest with Consumer Electronics, Jan 12, 1998

Decision represents sharp reversal for MCEA, which launched 35[inches] and 40[inches] direct-view TV categories and in 1994 announced plans to pour money into expanding production at Braselton plants and building parts and distribution facilities (TVD Aug 22/94 p10). MCEA had about $200 million annually in direct-view sales in U.S. in recent years as it narrowed retail distribution, including bitter parting with Circuit City in 1993. In reporting plans to close Santa Ana, Cal., projection TV assembly plant and move production to Mexicali, Mexico, MCEA reported that sales revenues from TV products fell 10% in 1996.

"Direct-view analog color TV is in its 3rd year of deeline," MCEA Chmn. Suketaka Tachibana said. "Flat-panel plasma technology is the future of larger screen direct-view television products, and Mitsubishi's skills in this area will enable us to field this technology quickly in the new digital area." Mitsubishi told dealer's it expects to sell through existing direct-view inventory by June.

MCEA's direct-view departure appeared to stem at learnt in part from fact that it didn't build tubes in U.S., forcing it either to import product - 40[inches] - or source other sizes largely from Thomson Consumer Electronics (TCE). As direct-view prices tumbled in recent years, costs made it less competitive. Mitsubishi also will have to try to maintain projection-TV business without direct-view sets that provide leverage in retail negotiations, CE executives said. Only other manufacturer using similar strategy is Pioneer, which has less than 5% market share.

"Everybody is losing money on TV and when you sit clown with a dealer you're saying that if I meet this price objective in direct-view TVs, I will need more support in projection," CE executive said. "You leverage any of your diret-view strength to get more projection, so this could hurt them."

Mitsubishi's decision to leave business came so quickly - it was announced internally just days before winter Consumer Electronics Show last week - that dealers and Thomson had yet to decide on strategy for recovering lost revenues. Thomson had invested in designing some production lines to meet Mitsubishi TV specs. "We were surprised and we have to study our options because most of our sales strategies and projections for the year were set in Dec.," said TCE N. American Tube Div. Vp Robert Lorch. Several years remain ill multiyear agreement under which Thomson has supplied virtually 100% of Mitsubishi's direct-view tubes, Lorch said. TCE's ties to MCEA date to 1978.

Retailers expected to be hardest hit are those who rely heavily on Mitsubishi TVs as profit line. For some dealers, MCEA direct-view TVs represent half of their overall MCEA revenues. Others including Paul's TV and Anderson's, both in Cal., had designed Mitsubishi-only stores. And Good Guys (GG) and NATM Buying Corp. relied heavily on Mitsubishi in their markets as only product that rival Circuit City didn't carry. GG Pres. Robert Gunst declined comment on move.

"It's going to cause us to refocus on selling more projection TVs," Fla. retailer said. "We'll try not to romp the volume in tubes and expect the downturn there and just try to drive more projection business." MCEA's departure will leave Hitachi's Ultravision, Matsushita Super Flat, Sony's XBR, Thomson's ProScan and Toshiba's Cinema Series battling for high-end niche, although no dealers we spoke with had finalized replacement: strategy.

Unclear is whether MCEA's decision is precursor to dropping analog projection TV as well. Retailers suffered long delays in delivery of projection sets during holiday selling season (TVD Dee 22 p17), although some remained optimistic that MCEA's digital strategy could help reinvigorate line. MCEA has said it will have 73W[inches] rear-projection set that will display HD output (TVD Dec 29 p8).