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For Plasma TVs, Being Better Isn’t Enough

PlasmaIt really doesn’t matter much whether or not plasma HDTVs have better image quality than competing LCD models. It’s a bit like arguing whether LCoS rear-projection high-definition TVs are better than LCD flat panels, or whether HD-DVD is superior to Blu-ray. It doesn’t matter, because the war is over. Just like LCoS rear-projection and HD-DVD, plasma has lost on the field of battle — the retail showroom — and arguing about it isn’t going to change the outcome.

Sure, the plasma market is still more than a dead man walking. The technology holds onto about 7 percent market share, according to DisplaySearch; in order of magnitude, that’s about the same as Apple’s hold on the personal computer market. And the forecast is for plasma to maintain roughly that same share going forward.

The problem is, you don’t survive in the technology world by standing still. Most companies rely on growth and new markets to fund the return on the mind-boggling investments that it takes just to keep a seat at the table in these games. And the LCD HDTV makers are looking at a future in which they will divvy up all the expansion in the marketplace, as well as sales that convert from the disappearing cathode ray tube (CRT) segment.

Compounding the problem is that the LCD makers are in an incredible arms race. Until now, the largest LCD factories — known as the eighth generation, or “Gen 8” — used sheets of glass that are about 7 feet by 8 feet. That’s bigger than a king-size bed, making it more efficient to produce the larger HDTV panels. Sharp’s new Gen 10 LCD plant in Japan will use glass sheets that are about 10 feet per side; it cost in excess of $4 billion to build and is slated to start production in October 2009. (Corning invested about $800 million just to build a glass panel manufacturing plant at the site; the panels are too large to ship so they have to be fabricated at the same location as the LCD panel factory.) Samsung and AUO also have announced plans for Gen 10 or larger LCD plants, but those are not expected to open before 2011 at the earliest.

The result will be continued downward pressure on HDTV set prices. It once was hard to believe that the price for a 42-inch flat-panel HDTV could go below $1,000, but now you can find them for under $600 — both plasma and LCD. These are more or less rock-bottom prices, but there’s reason to expect that the average price for flat-panel sets will continue to decline.

As a result, the plasma set makers will find themselves looking at declining revenues as their market share holds steady while prices drop. And that’s a tough way to grow any business. Some of the plasma companies, such as Samsung and LG, also have big investments in LCD technology, so they’re in a position to win either way. But Panasonic is stuck holding a hand of just plasma cards, limiting its competitive options.

It’s not enough to be better. If that were the case, we’d still have Pioneer Kuro plasma HDTVs as a choice. Instead, Panasonic will have to find some other way to position its products. It revealed part of its strategy this past weekend when it partnered with 20th Century Fox in a promotional campaign for James Cameron’s AVATAR, a much-anticipated movie scheduled to debut in December. Panasonic intends to use the tie-in to promote its 3-D technologies, including plasma HDTVs and new 3-D capable Blu-ray players that are slated to appear early in 2010.

It’s true that plasma has some technological advantages over LCD when it comes to displaying stereoscopic (3-D) images (though it also has some disadvantages as well). The big question is whether or not these advantages can be demonstrated in a compelling way that will make consumers prefer plasma over LCD. As we’ve already seen, being better is not always good enough to win.

Alfred Poor is a display industry expert and a member of the GigaOM Analyst Network. His complete discussion of this topic is available in the latest GigaOM Pro report, “The Death of Plasma” (subscription required).

8 Responses to “For Plasma TVs, Being Better Isn’t Enough”

  1. @ Dave – thanks for follow up. I have the same 42″ Panasonic as you, probably – great TV.

    On 3DTV – it’ll be interesting. I tend to think that 3D could be a big market – but only if CE companies can do good job with autostereoscopic displays. From what I saw at CES, their getting closer. The trick, IMO, will be if the industry reaches a standard across DVD, broadcast and TV. The biggest thing that could kill it is competing technologies.

  2. You talk as if plasma is a company or brand. Most manufacturers of plasmas also offer LCDs as you mentioned, including Panasonic. And it’s pretty easy for any of these guys to slap their brand on someone else’s hardware until they ramped up more themselves. So while the plasma market shrinks and the cheaper (and dropping) LCD tech improves, like other tech that doesn’t reach and sustain quantities of scale, it will be squeezed out. (I love my Panasonic plasma, but I’m resigned to making my next purchase a large screen LCD.) And I doubt 3D TV tech will ever take off.

    • The dwindling fortunes of plasma is still significant to a company like Panasonic. Even if they have LCD TVs, there’s no doubt they made a big strategic bet by sinking significant CAPEX on the technology midway through this decade, and now, they’re stuck – good or bad – with lots of production capacity for a technology that is dying. When I talked to Panasonic @ CES 2007, they thought their bet was a savvy one, and that the technology had a long life of it. Clearly they were wrong, and this post tells that story IMO.

      • Oh, I agree they chose the wrong horse. But I was pointing out they are correcting course with their LCD lineup. Heck, Sony was late to the LCD game not willing to give up their tube and microprojection display stuff and had no problem turning it around in a year. (I also have a Panasonic tube (30″ HDTV, bedroom) – supposedly the same core as the WEGAs but for less money and with a better enclosure. Just wish it’d die already so I can move the 42″ plasma into the bedroom and get a larger LCD for the living room.;)

      • I’m late to the party here, but I want to point out that Panasonic is indeed playing the LCD side as well — they’ve announced that they’re building their own plant — but the party line is that LCD is still for smaller than 40 inches.

        As for slapping your name on a panel, I believe that the flat panel HDTV business will be defined going forward by a company’s control of its supply lines. A company without its own manufacturing is in danger of have supplies cut off when demand grows to meet or exceed production. So while panels have been easy to buy when there’s a glut, it has not always been so and it is dangerous to assume that panels of the desired quality will always be readily available.