December 6, 2004 12:24 PM PST

Yahoo puts its mark on consumer electronics

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Do you, uh, want a Yahoo DVD player?

The Web portal giant on Monday unveiled a branded line of consumer electronics products for sale on its Web site, raising the profile on a quiet initiative aimed at bringing its name out of the study and into the living room.

The products, which include DVD players and home theater systems, are manufactured by Diamond Electronics.

Yahoo portable DVD/CD/MP3 players range from $69 to $99. The players can store photos for viewing with a USB port, and can connect to a TV to play videos. The home theater systems include a DVD/CD/MP3 player, four small satellite speakers and a sub-woofer for surround sound and amplifier for $199 at the low-end, and $269 with more amplification.

News.context

What's new:
Yahoo puts its name on home electronics in an effort to expand its presence beyond its Web site.

Bottom line:
The move mirrors similar agreements between consumer electronics makers and IT companies, many of which haven't proven successful.

Although Yahoo has licensed its brand in the past to consumer products, this is the first time it has lent its name to home electronics. The company previously put its name on PC-related products such as eyeglasses for computer users, digital cameras and keyboards.

"It's something that's a consistent part of our marketing strategy to extend our brand name through licensing," said Yahoo spokeswoman Nissa Anklesaria.

The agreement with Diamond highlights another Yahoo effort to piggyback onto devices outside the PC world. Last month, Yahoo extended its agreement with SBC Communications to include its logo in the phone giant's ambitious plan to offer digital video programming to its customers. In addition, the deal will let Yahoo expand its presence onto SBC's home networking product and WiFi offerings.

At the time of the SBC announcement, Yahoo's CEO Terry Semel said in a statement that the deal would allow the company to "further deepen consumer relationships by extending our products and services beyond the desktop."

Anklesaria said the line with Diamond was originally launched with little fanfare this fall on several retail Web sites, including BestBuy.com, Target.com and JCPenny.com.


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It's a CE world after all
Yahoo's licensing agreements follow a trend among IT companies to make their mark in consumer electronics, long dominated by Japanese companies. Standardized components, strong demand for products like LCD TVs and cheap contract manufacturing in China have created a situation in which virtually any company can sell products under its own name.

This trend lets PC companies take steps similar to Yahoo's by plastering their brands onto home entertainment components.

In 2002 and 2003, Dell, Gateway and Hewlett-Packard moved into the market. Then came old-line brands like Westinghouse and Polaroid. More recently, Best Buy and other retailers have started to concentrate more on house brands--Wal-Mart itself has two separate house brands.

Success, though, is not easy. A company needs to have an established brand name, which Yahoo does, but also come up with interesting industrial designs that contract manufacturers may not be able to provide. Samsung, which has bounced back from the Asian financial crisis to become one of the largest tech companies in the world, partly through consumer electronics, now employs around 441 designers, about twice as many as in 1996. Top executives must also sit on design committees.

"Two things matter," said Van Baker, an analyst at Gartner. "Brand and style. Those things let you charge a premium."

The rate at which new products come to market is also decreasing from close to a year to a few months. Some companies put out new cell phones every couple of weeks, for instance. Advertising budgets are also a must.

Additionally, margins remain notoriously tight. A surplus of LCD panels, the glass that goes into LCD TVs, is currently forcing prices on those TVs down. Sony is in the midst of a restructuring plan that will cut 20,000 jobs. Inundated with choices, consumers will likely begin to focus on price rather than trusted brand names.

"This could be the first year where you see people trade off between brand and price," said Stephen Baker, an analyst with the NPD Group.

Even if a company follows the tried and true strategy, there's no guarantee sales will follow. Compaq and Gateway tried, and failed, to sell TVs in the late 90s. Intel, Compaq and others sold music players in 2000, retreating a few months later. Salton, 3Com and others saw Internet appliances go nowhere.

 

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