Advertisement

The Big Picture : Television: Consumers are buying sets with screens 27 inches and larger at a record pace, despite the recession and an overall soft market.

Share
SAN DIEGO COUNTY BUSINESS EDITOR

Shoppers buying televisions these days are finding that bigger is better--and a whole lot cheaper than in years past.

Spurred by lower prices and increased features, consumers are snapping up large TV sets--those with screens 27 inches or larger--at a record pace, even though the U.S. TV market as a whole continues to be soft because of the recession. In fact, overall unit sales of televisions in the United States are headed down for the second straight year.

First-quarter 1991 sales of TV sets with screens 27 inches and larger increased 13% over the same three-month period the previous year, while overall television sales in the United States were down 8.3%, said David Lachenbruch, editorial director of Television Digest, an industry newsletter published in Washington.

Advertisement

The growth in big-screen TV sales is the latest evidence of a long-term consumer trend toward larger models. According to a recent Television Digest survey, televisions with screens 27 inches or larger now represent 17% of the U.S. market in unit sales, up from a 12.2% share last year.

Sony, the Japanese manufacturer whose U.S. television operation is based in Rancho Bernardo, has been placing increased marketing emphasis on its larger models in recent years, according to Brian Klosterman, vice president of marketing at Sony Corp. of America Consumer Television Products.

Those efforts seem to have paid off: Sony claims to sell 25% of all sets whose screens measure 30 inches or more, but only 6% of U.S. televisions overall.

Sony says demand for its 32--inch model is particularly strong, with year-to-date sales up 53% from last year. Unit sales of Sony’s 27-inch models are up 13.1%. Sony spent $100 million last year to completely automate its 32-inch model manufacturing line at the sprawling Rancho Bernardo plant, Sony Executive Vice President Clint Michaelis said.

Demand for Sony “rear-projection” models, with screens as wide as 53 inches, is up more than 20%, the company said. Rear-projection televisions, which project an image onto a console mirror that magnifies and reflects the image onto a giant screen, are enjoying particularly strong growth and have gained “yuppie toy” status, industry observers said.

A number of factors are driving consumer preferences toward larger sets, Lachenbruch said. Prices have fallen dramatically while technology and features have improved, making larger televisions more attractive.

Advertisement

Also, the “home theater” concept, in which large-screen TV monitors play an essential part, is increasingly popular among American consumers. The ultimate “home theater” includes a TV monitor and a variety of accessories, from videocassette recorders and optical disk players to compact disk and audiocassette components.

The increasing compactness of large televisions also makes them more appealing aesthetically, said Tom Campbell, spokesman for Dow Stereo Audio, an electronics retail chain with seven stores in San Diego County. “The sets are getting thinner and smaller. The rectangular dimension of the cabinets has gone down,” he said.

But perhaps the most important reason for increased sales of large-format TVs is that they are less expensive, said Craig Jones, general manager at Dow Stereo Video. The price of one popular 27-inch model sold at Dow is $150 less than the price three years ago, he said. The price of one 35-inch model has dropped by $1,000 over that time, he said.

“Ours has to be the only industry that has seen products improve on a regular basis while prices have come down on an annual basis,” Jones said.

Despite the softness of the U.S. market, Sony continues to invest heavily in its TV-making operation in Rancho Bernardo, which it opened in 1969. Sony has also expanded its Tijuana plant, which opened in 1987.

Together, the San Diego and Tijuana operations have become increasingly important to Sony, not only to supply the company’s U.S. market but for Sony’s worldwide sales as well. More than 20% of all televisions made in San Diego and Tijuana are exported, Michaelis said.

Advertisement

In fact, every 32-inch television Sony sells in the world is made on the Rancho Bernardo assembly line, which is capable of turning out 1,200 of the models a day.

Except for the 32-inch line, most of Sony’s televisions are assembled in Tijuana from components, including picture tubes, that are made in Rancho Bernardo and in the Orient. Between 55% and 80% of the components in a typical Sony television are U.S.-made.

Despite increased mechanization, Sony employment continues to grow in the San Diego-Tijuana area, in part because the company has moved production of some of its other products here in recent years. Those products include computer display monitors and disk drives, a kind of data storage device.

Sony is also producing high-resolution monitors as part of a $250-million subcontract with IBM to supply the Federal Aviation Administration with a new air traffic control system.

Over the past two years, for example, Sony has expanded its Tijuana plant from 280,000 square feet to 500,000 square feet and increased its payroll from 800 to about 1,500, Michaelis said. Over the same period, the Rancho Bernardo plant has increased in size from 700,000 square feet to 870,000 square feet, while the payroll has gone from 1,700 to 2,200.

Sony last year acquired a shuttered Volkswagen plant in New Stanton, Pa., and is spending $300 million to convert it to a manufacturing site for televisions and other consumer products. Michaelis said Sony’s plan is to eventually shift much of the television production from Rancho Bernardo to the 2.8-million-square-foot Pennsylvania plant, which is set to open in 1994.

Advertisement

But there are no job losses planned here, because the Rancho Bernardo plant will be increasingly used to make “higher technology” products, including high-resolution computer monitors and graphics display terminals, Michaelis said.

San Diego could also become a major manufacturing site for high-resolution TV sets once those products reach the market, he said.

Advertisement