Despite price cuts, Americans are spending more on TVs

Although manufacturers are slashing prices, Americans are spending about the same, or more, on digital TVs than they did in the past.

From early August to mid-September, the average amount spent in North America on a digital TV--which includes liquid-crystal display (LCD) and plasma sets--rose from $909 to $975, according to Stephen Baker, an analyst at NPD Techworld. From September 2005 to September this year, the average amount laid out on an LCD TV went from $965 to $1,020.

By contrast, Riddhi Patel, an analyst at iSuppli, found a decline in the average amount spent on digital TVs. However, the drop is slight: according to iSuppli's data, which includes LCD and plasma sets, the average went from $1,319 in the third quarter last year to $1,309 in the same period this year--a decline of less than 1 percent. That's less than other products; consumer desktops roughly shrink 5 percent or so every year.

The buoyancy in TVs is the result of increasing screen sizes and consumer demand. Manufacturers such as Sharp, Panasonic and Samsung have invested heavily in factories that can produce larger-screen TVs for less cost.

Thus, a digital TV in the 30-inch to 34-inch range sold for $1,639 on average in the third quarter last year, while the same size TV sold for $1,278 in the same period this year--a 22 percent decline, Patel said. TVs with screens measuring in the range of 40 to 44 inches dropped from $3,935 to $2,438, a 38 percent decrease.

Prices have dropped particularly fast in the 40- to 44-inch category because LCD manufacturers are trying to horn into a market traditionally dominated by plasma. Sharp has indicated it will aggressively cut prices to regain some lost market share.

But when Americans are getting to electronic superstores, they aren't hunting for bargains in terms of price. Instead, they are maximizing how much TV they can get for their money. They recall seeing 42-inch screens for $4,000 a few years ago; now, when they see the same TV for $2,000, they can't resist.

According to Riddhi, 551,000 TVs that were 30 inches and larger went out the door in the third quarter last year. In the same period this year, it was 1.6 million.

"As the prices decline, the (product) mix gets moved up to bigger and bigger sizes," Baker said.

Both Baker and Patel said that they expect TVs to sell strongly during the holiday season. When it comes to choosing between plasma and LCD, Patel said that either works.

"The overall viewing experience is very comparable," she said. "Plasma has good dark levels, while LCDs have good brightness."

If you invest now, don't forget that something better will come out to replace it. Several manufacturers are already showing off prototype TVs that provide even better resolution than today's high-definition TVs.