Why Ultra HD 4K TV Is Important to the Specialty Channel

PRO Group’s Workman gives his take on pricing, margin, positioning  

As part of Dealerscope’s annual buying group roundtable, we asked executives to share their views on the potential profits and overall importance Ultra HD 4K TV will have on the independent CE retailer channel. Follow Dealerscope.com for more outtakes from the interviews. Here’s what Dave Workman, executive director and COO of the PRO Group and executive vice president of ProSource, had to say about the emerging technology.

“A category like this is important because the type of dealer we represent does its best work acquiring a large share of an emerging technology. So while Ultra HD is expected to be a very small part of the TV business overall this year – depending on how manufacturers position it, and I have reason to be very optimistic about that based upon some preliminary price-point estimates – it could offer a considerable amount of upside in the television category for 2013.

“Margins are always going to be better than what we would see as normal flat-panel pricing. Even today, in the step-up portion of the market, you’re lucky to get maybe 30 or 31 points out of the very best product currently available. I would expect Ultra HD margins would be a small premium to that, but not 40 points. I just think, because of the cost of manufacturing, even though it’s a premium price point that we are not going to see the types of margins we saw when the original high-definition products were introduced.

“Will margins hold up as long as HD ones did? I think the fact that the industry has adopted all of these UPP policies is probably the only reason for us to believe that the margins will hold upbetter with this. Without UPP, I think we would have seen new technology introduced and quickly become the same margin as the commodities out there.Without some guidance from the vendor community in their policies, the prospect of this new technology would have become very quickly what we are currentlyfighting against.

“Now, I will say that’s the positive. The negative that I see, and the concern I have right now, is that, with the influence of the Chinese manufacturers, I think the market is going to see, at inception with Ultra HD, some very low-priced commodity-type product. And it’s always dangerous when you have products intended for mass-market appeal when the product is not yet mass market, because I think it will confuse the consumer with very low entry-level pricing where the market hasn’t yet developed an appetite for the product.

I see that as being one of the bigger risks. I’ve seen some products, Tier Three-type guys, who are planning for introduction of 4K Ultra HD product – even before the market has developed – with pricing that is ludicrous. I think it will undercut or confuse the consumer. There will be dealers who will carry that type of product and promote a 70-inch 4K television set for $2,000, but it most likely won’t have a scaler or video processing circuitry.

“This is the sad part of this industry – that some are willing to put junk in customers’ homes. And there are some retailers that will support that ‘let the buyer beware’ type of product. At the very beginning of a new technology we don’t even have any content. And this is largely the way the industry has changed, because of the influence of the Chinese brands. Were it not for them, I think we’d see a very orderly introduction of the technology around the price points that made sense for what the market size was.

“That’s why our position is going to be to heavily support the Tier One brands in this technology. While there may be others who decided that at $2,000 70-inch 4K- or Ultra HD-labeled TV is acceptable, that’s not our position. We have to educate the consumer that all Ultra HD is not created equal. Even though it may all share the same moniker, there is going to be a vast difference in the quality of the picture performances that are available. It’s going to be a real selling job, and we’re talking about a very tiny market in unit volume expected this year.”

Related story: ProSource/PRO Group Form New-Audio Committee

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Comments
  • http://jacobdanial jacob danial

    there just butt hurt that skyworth, hisense and the Korean brands are going to come out with cheap 4k TV’s that are going to be good enough or better for the general public and mess with there company margins in the uk and Americas just because we won’t pay an absurd amount of money for a bump in resolution they term a premium when in fact it doesn’t even cost that much to manufacturer compared to todays HD TV technology so they inflate prices and force a high premium by making Big 4k TV’s instead of normal size 40-55″ TV’s.

    not surprised the emerging market is driven by greed till they are practically forced by market demand and other competitors to bring prices to a more sane level!

    I give prices to settle to a normal premium in about a year!