Reading the Tea Leaves

As Costello might say, “I’ve got a baaaad feelin’ about this, Abbot.” We’ve started the second half of 2008, and the HDTV market forecast is clear as mud.

Data point: Sony Electronics president Stan Glasgow is quoted as being upbeat about consumer electronics sales for the rest of 2008. At the CEA Executive Summit he said “I think the transition in February of next year is a very critical factor in moving people to HD and getting people to buy more high-definition TVs and products.”

Data point: DisplayBank reports that major Taiwanese LCD manufacturer is dialing down production by 10% for July, as orders are down and prices are so low as to affect profitability. AUO is not yet decreasing production, but hasn’t ruled it out.

Data point: HDTV Org reports that there’s a price war going on among United Kingdom HDTV retailers, with big price cuts being made across the board on flat panel TVs. Sales are down 3% over last year.

Who do you believe? Are the rosy predictions of the manufacturers for a great fall and holiday sales season for HDTVs reasonable? Are people going to have enough of their economic stimulus checks available to buy a big flat panel this year?

Or is the tanking stock market, tight credit market, unsettled job market, and soaring costs for food and fuel likely to put a damper on consumer spending for big ticket items? Is the apparent oversupply of LCD panels on the market going to lead to a pile-up in the supply channel of Los Angeles rush-hour freeway proportions? Are the retailers on the bubble like Tweeter and Circuit City going to make moves of desperation in order to generate some cash flow?

Frankly, I don’t think that the transition to digital TV broadcasts is going to have much impact on HDTV sales. I expect that a lot of the people who remain unprepared for the changeover are seniors and low-income families who are not prime candidates for an expensive flat panel in the first place. People are deciding to cancel summer vacation trips because it will cost them an extra $50 for gas; how are they going to justify spending $1,000 for a flat panel (plus the extra monthly cost for HDTV cable service)?

I believe that cash will be king this fall, and that price cuts will show up early and often. If you’ve got the money saved up for a new TV, you’ll find some great prices in time for the first regular season NFL game. And if you can wait until December, I think you’ll see some astounding deals. It will take an economic miracle to produce a big growth in flat panel sales this year, and I don’t think that’s going to happen.