Business Tech

Updated 2/12/09 at 9:35 a.m. PST with Pioneer's confirmation.

Pioneer will no longer manufacture televisions and plans to spin off its DVD player business into a joint venture with Sharp, according to a report in Japan's Nikkei newspaper.

The company is reportedly exiting the TV business rather than continue to incur losses in that division. This latest report comes a few months after Pioneer announced it anticipated huge losses at the end of its fiscal year in March and plans to lay off 2,000 workers.

Pioneer had built itself into a widely respected maker of plasma televisions, but last March said it would not make the plasma panels anymore because of skyrocketing costs and mounting losses in its TV division. It tapped Panasonic to provide the panels instead, but that deal appears now short-lived. Another clue this was coming: Pioneer showed no specific models of TVs at CES last month.

Pioneer is not alone among TV makers losing money. Everyone from Panasonic to Samsung to Sony is facing layoffs and large quarterly losses.

Update: Pioneer confirmed it will stop producing televisions by March 2010 and cut 16 percent of its employees.

Japanese electronics maker Pioneer is set to report wider financial losses, and has named Susumu Kotani as the company's new president.

Company board member Kotani will replace Tamihiko Sudo as president. On March 31, Pioneer will report a net loss of 78 billion yen, or $783 million, the company revealed. It will be the company's fifth straight quarter without a profit.

To cut costs, the company will lay off 2,000 workers, according to a Bloomberg report. Pioneer had already planned to stop making plasma panels for its flat-screen TVs by February 2009 (Panasonic will supply the panels instead).

Fellow Japanese electronics maker Sony also reported less-than-stellar quarterly results, and pointed to the same problems as Pioneer: a stronger yen-to-dollar conversion rate and the global economic slowdown.

LOS ANGELES--There are a lot of bad economic winds swirling, but the high-definition television industry doesn't appear to be moved.

Here at DisplaySearch's HDTV Conference, there is far less handwringing than in past years, when manufacturers complained about rapidly falling prices, the sudden appearance of too many brands, and consumer confusion.

Instead, far more confident industry leaders led a discussion Tuesday that revolved around how to make gentle adjustments to keep the HDTV sales machine in top condition. In North America, shipments are still increasing 17 percent year over year, according to DisplaySearch data. And this is despite the decline of home values, and the rising gas and food prices over the same time period.

"It indicates demand is there, (and) if pricing is right, TV sales will remain strong," said Paul Gagnon, who monitors the TV industry for DisplaySearch. "It's a positive indicator for this industry."

A year ago manufacturers were beginning to worry as prices dropped precipitously how they'd extract a profit out of this fast-maturing flat-panel market.

Turns out, their worries were a bit premature, as prices mellowed and the market sorted itself out. Discount brands have lost momentum (some entirely came to a halt, like Syntax-Brillian, which filed for bankruptcy earlier this year), more HD TV content is available than ever, and consumers generally understand the difference and value of an HD picture now.

Plus, there are still many things for HDTV manufacturers to take advantage of to keep consumers buying new products. New designs, the analog-to-digital switchover, and the continuing move from standard-definition channels to HD channels and services are ways TV makers hope to convince consumers to buy their bigger, fancier TVs.

Big is the key right now. As picture technologies get better, and TV panels are made larger, it's yet another opportunity for the TV makers to charge a premium.

"The ASP (average selling price) peak is coming in 2008. We can't count on shift in technology to prop up ASPs anymore," said Gagnon. That's why manufacturers will continue to pump out larger, and more expensive TVs.

The 40- to 44-inch size TVs' average selling price will peak next year, according Bob Scaglione, senior vice president of marketing for Sharp. Therefore, he notes, 60-inch TVs and larger are a good opportunity for manufacturers to grow their businesses because though prices are dropping, they're doing so more slowly in that range than 40- to 44-inch sets. So expect to see much more activity in terms of promotions around 60-inch and larger televisions in the next few months.

One reason the big manufacturers are starting to feel comfortable again is that they've retaken their places atop the LCD sales figures. The surprising story last year was Vizio's stunning leap to the top of LCD TV sales in North America. It came from severely undercutting the big guys on pricing and selling through club stores.

It's a different story this year. The big guys in TV figured out what Vizio was doing and responded by creating specific models of TVs for mass market stores like Wal-Mart and Target. By associating their brand names with the prices Vizio and others like Westinghouse and Olevia (made by Syntax-Brillian) were offering, the result has been that Samsung, Sharp, and Sony have leaped back into the lead, and Vizio has fallen behind.

Key to that change has been manufacturers like Sony and Samsung working with retailers to tailor their products to specific sets of customers. HDTV makers don't need their products to be a luxury anymore. They want everyone to have a high-def set in their home. The industry has reached buyers that were wowed by the technology first, and now it's on to the people who need to upgrade to a digital TV, or have been waiting for prices to drop.

"It's a new phase of HDTV adoption," said Gagnon of DisplaySearch. "Half of U.S. households have an HDTV, but the next wave of consumers is going to come through mass merchants who focus on a lower price point."

It appears the TV industry's self-prescribed medicine of pushing smaller flat-panel sets is working.

The second-quarter check-up is in, and the industry is in far better health than a year ago. DisplaySearch's Quarterly Global TV Shipment and Forecast Report was released Thursday, and worldwide TV shipments increased 11 percent from the same period in 2007, but just 3 percent from first quarter of 2008.

(Credit: LG Electronics)

Still, the news is encouraging to an industry that was wringing its hands back in March over running out of places to sell its rapidly maturing, but still-pricey sets.

Around that same time, some of the bigger tier-one manufacturers began pushing smaller screens in an attempt to attract buyers who might be tightening their budgets as gas and food prices rose.

Vizio made a splash with its 32-inch plasma, a size that hasn't been available in that technology in the U.S. for a while. Even the big guys like Panasonic, LG, and Sony and Samsung were going small: 32, 40, 46 inches.

"Sony and Samsung launched what we termed 'fighter models,' because they were designed to reach new pricing lows," said Paul Gagnon, who monitors the TV industry for DisplaySearch. Vizio's smaller plasma was specifically launched "to blunt the impact" of Samsung's and Sony's moves into smaller-and-cheaper sets, he added.

Vizio's 32-inch plasma sells in club stores for about $550, while Samsung and Sony's 32-inch LCDs each retail for $699, the lowest price each has ever offered for that size TV.

The result has been a resurgent plasma TV business. DisplaySearch is reporting that shipments of plasma worldwide increased 52 percent from the same quarter a year ago, or 3.4 million units. That's way behind LCD TV shipments, but it's encouraging for a technology that many of the biggest vendors had basically left for dead.

Plasma shipments are on the rise everywhere, but they are particularly healthy in China, where they rose 285 percent in the last year.

To be sure, LCD TVs are still the new television of choice for most. LCD shipments jumped 47 percent in the last year to reach 23.7 million units (compared to plasma's 3.4 million units) in the second quarter worldwide, DisplaySearch says.

Despite LCD's established presence in many North American living rooms, it appears that the introduction of smaller sizes and lower prices are helping retailers to move plenty of product. Last year, LCD shipments to the region were dropping. But second-quarter shipments increased almost 30 percent from a year ago.

And LCD prices have still been dropping more quickly than plasma. With major shopping opportunities like Labor Day, the beginning of football season, and Black Friday fast approaching, plasma's recovery could be brief.

Sony and Samsung tend to set the pace on price reductions, and Gagnon of DisplaySearch says the other brands will all react in order to maintain their brand position in the market. If Samsung drops its 42-inch LCD $100 in the coming weeks, expect Panasonic to do the same on its 42-inch plasma.

But it doesn't appear there are going to be bold moves on the part of plasma to steal some more share and get ahead. For all the brands, said Gagnon, "it's all about maintaining price differential."