Thomson, Hitachi: HDTV partners.....................................
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Thomson, Hitachi In Joint HDTV Development Effort
- -December 22, 1997
By Bob Gerson
Thomson Consumer Electronics and Hitachi will combine efforts on the development of high-definition color TVs and digital TV set-top decoders. The announcement came in the wake of a Thomson meeting with the media, where the new ProScan video line was unveiled and Thomson's view of the market and plans for change were discussed.
Under the two-company agreement, Thomson and Hitachi will divide product development responsibility, with Hitachi initially producing the display for a 61" widescreen projection TV both will introduce late next year, while Thomson supplies digital TV reception and decoding technology and develops the set-top decoder.
According to Thomson sales and marketing executive VP James Meyer, the 16:9 aspect ratio projection set is expected to retail in the $6,000-$8,000 range, while decoders will sell for $600-$700.
Meyer stressed that any HDTV product Thomson offers will be capable of handling all of the 18 authorized broadcast formats, and he added that the company was adopting 1 million pixels as the minimum standard needed for a display to be considered HDTV.
That standard, Meyer pointed out, could not be met by the 480-line progressive scan format being urged on the industry by computer manufacturers.
In his presentation at the ProScan meeting, Meyer stressed that as 1998 progresses, the industry "must be very clear to consumers what is and what is not HDTV." He acknowledged that the high costs will restrict actual HDTV sales and probably get many to consider deferring a new set purchase.
To help counter that, Meyer said, "we will have a solid line of digital-ready products in the second half of 1998" -- which is essential because "it will not be good for any of us if the consumer buys nothing. We believe the right strategy is to provide a bridge to help them feel comfortable moving forward with this new technology."
The heart of the new ProScan line are the as-yet unpriced 36" and 32" 800 series models with SVGA-grade picture tubes, multiple video inputs for a variety of components as well as PCs, twin-tuner P-I-P, enhanced audio, and the new TV Guide Plus+ free onscreen program display.
Similarly featured are the new 50", 56" and 61" projection models with a 10-jack A/V panel and consumer-adjustable temperature control. ProScan also is getting a new line of VCRs, a new DVD player, and an improved DSS receiver. (Full details will be included in the next issue of TWICE.)
Meyer said Thomson took $150 million in charges so far this year to cover a restructuring that included costs related to the closing of its Bloomington, Ind., plant, construction of new manufacturing and distribution facilities in Juarez, Mexico and El Paso, Texas, and a voluntary retirement program.
Now, Thomson will take a major restructuring charge "to re-engineer our business processes," he said. This will involve realigning the cost structure in Thomson's headquarters and support groups, overhauling logistics and the related distribution and management systems, and a revamp of "our sales force aimed clearly at matching what has happened to retail."
The last will involve cutting back on personal contacts with and services provided for smaller retailers. "We all love the little dealer, but there is a point where supporting the little dealer at the level that we have becomes cost-prohibitive," Meyer said. As a result, additional dealers will be served by telemarketing.
The point of all the changes, Meyer said, is cost reduction, and when it comes to core products, "shortening the distance between the cash register and the factory."
In offering his overview of the industry, Meyer said that in color TV, the core business (27"-&-under) is "in about as good a shape as its been in many years," thanks to a rational attitude toward inventory. The market didn't die as expected, and inventory is low all through the pipeline.
Meyer looks for even more stability in 1998, and if the Christmas sell-through is strong, he said, the industry may be short of product in the first quarter.
Picture tubes are in short supply because of exports to Brazil and China, said Meyer, and tube price increases have been instituted. Those hikes may be selectively passed along next year.
In 31"-32", "business is good but prices are low," he added, and while the 35"-36" market is up 15%-18%, "the console business is dying, and when you put table-console together, the growth is not as big" as was expected.
In projection, growth was slow for the industry but great for Thomson. Here too, Meyer said, a strong holiday season could result in first-quarter shortages.
In DSS, the industry has recovered from the excess inventory situation it faced at the start of the year, and supplies are tight, Meyer said. "I think December sell-through will be the biggest in the history of DSS and will probably exceed 200,000." Thomson has a better than 50% share of the DSS market, he claimed.
In video, Meyer said VCR sales continue to be strong, but "the business is compressed. There's virtually no business over $200, and in fact, most of the business is done between $100 and $149." In camcorders, business is good overall, and "digital is coming fast."
The big news in 1998 will be pricing, and that will depend on the value of the yen, Meyer stated. He claimed Thomson hold 20% of the VCR market and a slightly smaller percentage of the camcorder business.
He reported that, for Thomson at least, the audio business, particularly in stereo systems and portable CD, has been very good; communication product sales have slowed from a strong first eight months; and demand for the Net Channel Internet adapter box for color TV "exceeds anything we had projected."
Although the Net Channel is not a mass-market item, "at a $99-to-$299 price point there certainly appears to be a market," Meyer said.
Cited by Meyer as disappointing performers in 1997 were DVD and the PC/TV: While "some companies seem to be having strong sales, for the rest, business has been disappointing."
However, "that has not diminished our enthusiasm going forward," and while there hasn't been strong selling action at retail, "DVD is coming and will be a very exciting product going forward."
As for Divx, Meyer said Thomson will join with its major customer, Circuit City, in the promotion of the play-controlling disc system. But he stressed, "we seen Divx as a feature not a format," and Thomson will have both Divx and non-Divx DVD players in its line.
The PC/TV experiment is over, Meyer indicated, but stressed Thomson will continue to be very active in the multimedia display area, and it is seeking to line up additional strategic partners in that and other digital TV-related products.
Peering into 1998, Meyer said the industry is again going to have to look to operating efficiencies, rather than sales growth to achieve earnings improvement. "I don't see anything that is going to change things in the next six to eight months and drive business forward at a rate that is different from the last four to six months," he concluded. "So as a result, while we certainly will look for slight revenue growth, success for 1988 will be built on cost-reduction efforts." |
