Tis the Season for LCD TVs

LCD

Against the backdrop of an economy that grows more precarious by the day, the outlook for holiday gift spending is bleak. Even so, consumers will be buying gifts, and consumer electronics will be high on their shopping lists, even if spending will be lower this year.

Amid the diminished expectations, some product categories will hold their own this season, industry and retail analysts say. An early November survey of consumer intentions by the Consumer Electronics Assn. found that U.S. shoppers expect to spend an average of $1,437 on gifts this year, less than the $1,671 they spent in 2007. Still, consumers say they'll allocate a larger percentage of their spending—28% vs. 22% last year—to consumer electronics. The idea is that families will opt for at-home entertainment rather than travel and dining out.

And despite what you may have heard about video entertainment migrating to the Web, the TV set is still the king of the home entertainment universe. Prices are coming down quickly. In September, the average price on a 32-inch LCD TV was $858, a drop of about $100 from the same period in 2007. Now, it's possible to buy a 32-inch LCD set for as little as $399.

No Competition for Blu-ray

One reason, says iSuppli analyst Riddy Patel, is that there is an oversupply of LCD panels, so manufacturers like Sony (SNE), Samsung, and Sharp can pass favorable component pricing on to consumers. "The prices are suddenly very attractive on these sets," Patel says. "The only question is how consumers will react." Her firm recently slashed its 2008 forecast for LCD TVs by 5 million units, to 94 million. It also trimmed its 2009 forecast to 112.5 million units, from 124 million units, meaning the market is growing, though more slowly than before.

Consumers may also be looking for stuff to watch on that new LCD TV. This will be the first holiday season that Blu-ray disc players have had the market to themselves without their onetime competitor HD-DVD. Consumers have so far been slow to embrace the format; even without the competition, sales have been slow. The Consumer Electronics Assn. expects Blu-ray sales of 2 million units in the U.S. this year, vs. 20 million conventional DVD players in the same time frame.

But fast-falling prices may get consumers interested, says iSuppli's Sheri Greenspan. "Blu-ray will gain some attention this year because the prices are coming down so fast, and because retailers are offering package deals that include players with TVs," Greenspan says. Some players, including Samsung, are also upping the ante by adding the ability to play streaming movies from Netflix (NFLX) and music from Pandora to their products.

Ashton Kutcher Connects

The market for digital cameras, a product group that has suffered slowing sales in recent years, is showing life in higher price ranges, and high-end digital single-lens reflex (DSLR) cameras are expected to sell well. "It comes down to the fact that the person buying a DSLR is different from the one who wants a point-and-shoot," says Ed Lee, director of consumer imaging at market research firm InfoTrends. "Despite the economy, people are still buying them, and the prices are coming down." The sweet spot of the DSLR market he says is in the $500 to $800 range.