HDTV: Who profits?

At the height of the personal computer price wars, I often said that the only company making money in the PC market was United Parcel Service. Manufacturer and dealer margins were razor thin — if not actually negative — and only the freight companies were profiting from the sales.

Well, it’s deja vue all over again (with a tip of the cap to Yogi). Flat panel HDTV manufacturers continue to expand their production capacity, and they have to keep running forward as fast as they can to avoid doing a financial face plant. Retailers are struggling with shrinking margins and more competition. Wal-Mart is wading into the fray like the heavyweight that it is, and traditional consumer electronics outlets are trying to find solid ground to stand on. This means looking for other sources of profit, but they are hard to find. As reported in a New York Times article last week, “retailers complain about the lack of high-profit accessories for the new flat-panel TV buyer. ”

This problem is caused by two factors; the consumers are growng more price sensitive, and they often are more knowledgeable. Best Buy has its Geek Squad and Circuit City its Firedog services, both of which are being bundled at fire sale prices to help increase demand for their HDTV installation and setup offerings, but it’s not clear that these have sold well. Consumers are declining the expensive after-market warranties, especially as prices drop and they gain more confidence in the reliability of the HDTV products. Even the accessories market is difficult; most items are low priced and don’t contribute much to the bottom line. The new high-definition DVD players could help, but consumers hesitate to pick one of the competing formats, especially since the prices are so high compared to standard DVD players. (And standard definition DVDs do look great on an HDTV.)

Some stores push expensive cables, but even this is a tough sell. If you have an analog connection, then a more expensive cable may have less signal loss than a cheap one, though this probably won’t be noticeable unless you have a long cable run. With digital connections, however, it’s more or less pass/fail. Either the cable will work, or it won’t. As a result, I recommend that you buy the cheapest cable you can buy for digital connections such as HDMI. If it works, you’re done. If not, then you can look into buying a more expensive cable to see if that helps.

The bottom line here is that it is far better to be an HDTV buyer these days than a seller.