Retail Observer

RETAILOBSERVER.COM AUGUST 2015 50 E conomic indicators aside (unemployment, housing market, wage growth, etc.), total TV revenue grew 2% in the domestic U.S. market from the previous year. With this, we've seen personal disposable income recover, and in some cases, exceed expectations and aid in the shortening of the TV upgrade cycle coupled with UHD to make for positive results to what has been a challenging business for many years. While we're far from out of the woods and one year does not make a trend, there's optimism and growth in the forecast ahead. TV FORECAST BY TECHNOLOGY – UNITS Despite total domestic shipments forecasted to be down from previous year (-3%) as shown below in chart A, it's UHD shipments that we expect to see continued growth and will likely more than triple in 2015 to just over 5.4 million units (chart B). Even with lack of 4K content, consumer demand remains high for this technology on the faith of future proofing for the best possible picture. The majority of this demand and adoption is taking place in 50" and larger sets, while screen sizes 49" and below remain conservative with little upside. PDP is EOL in 2015, so it is left to LCD and OLED to generate the category volume. OLED will slowly ramp up volume based solely on LG at this time, but, we are expecting some limited shipments from other brands purchasing panels from LG perhaps later in the year or in 2016. TV FORECAST BY TECHNOLOGY – REVENUE Unlike TV unit shipments, revenue is forecasted to grow in 2015 in both total TV (LCD/OLED) as well as the 4K segment alone 2% and 120%, respectively. Three key trends are attributed to helping TV revenues stabilize and are expected to keep a slight growth for the balance of the year and into 2016. 1. LCD TV average size growth has helped to offset price erosion. 2. LCD TV panel prices increased starting in mid-2014 at sub-55" screen sizes. 3. The growth in 4K and premiums, will increasingly support revenue stabilization for a period of time. The steady introduction of OLED into the marketplace will also play a role in growing revenues. Given the forecasted unit growth (600k) and the investments LG has made in this category, revenue could attain $2.4 billion dollars by years end. OLED today carries a higher average sell price due to the premium it can collect as a new technology and is forecasted to have an ASP of $3,124 for the year. AREAS OF OPPORTUNITY Though the TV market remains a challenging category, a few segments offer profitability and growth for retailers. 1. UHD (4K TV) – Although we expect commoditization to occur in this category, production costs are expected to fall faster than retail prices yielding an opportunity to profit. This coupled with improved price policies in place for both MAP and UPP help to protect a disruptive market and hold retails. 2. Curved TVs – Opinions aside on whether you agree or disagree with the benefits to curved technology, its gaining interest and traction among select consumers. The overall potential this category will have remains to be seen but, with Samsung's aggressive marketing and investment they've made and will continue to make here, shouldn't discount the opportunity to collect for this technology story. 3. Premium TVs – After years of price erosion and value TV offer- ings, a trend is emerging around performance. WCG (Wide Color Gamut) via better LED chips, thicker color filters and quantum dots are on the rise and are a technology storyline for multiple brands. The first generation of HDR-enabled TVs is expected soon and discussions around higher frame rates for next generation broadcast standards are gaining interest. Doug Wrede Consumer Electronics Trends RO TV – FORECAST & TRENDS A B C D Chart A – source IHS A B C D Chart B – source IHS Doug Wrede Consumer Electronics – Nationwide Marketing Group www.nationwidegroup.org

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