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Sunday, May 20, 2012
TV: no longer the drug of the people
Last week, Japan's fifth largest discount electronics retailer, Bic Camera, announced it would soon obtain a 50 percent share of Japan's sixth-largest discount electronics retailer, Kojima, thus making the combined companies Japan's second-largest electronics retailer. Bic operates 34 stores in large cities while Kojima has about 200 in the suburbs. The deal would give the combined companies greater leverage to negotiate lower prices with manufacturers.
That sounds like good news for consumers, but it's also a clear indication of how desperate the home-electronics situation is. The record losses recently reported by Sony and Panasonic for fiscal 2011 were worthy of front-page headlines in overseas newspapers. Sharp is also swimming in red ink. The company saw a 30 percent decline in year-on-year sales due to sluggish demand for liquid crystal displays in Japan, thus forcing it to accept investment help from a Taiwanese company, but even with that Sharp has already predicted a deficit of ¥30 billion for fiscal 2012.
What these three companies, whose combined losses total ¥1.6 trillion, have in common is that they still have a lot invested in TV set production. Hitachi, which announced in January that it is abandoning TV sets, made a profit thanks to the sale of its hard disk division. Likewise, Toshiba has closed its TV manufacturing operations in Japan.
The average consumer may be confused. A year ago the airwaves were filled with commercials for TV sets. Every company that made them carried out saturation advertising to attract the cross-section of the public that had yet to buy new equipment for the switchover from analog to digital broadcasts. The industry had already seen sales drop following the end of the government eco point system, which subsidized sales of energy-saving electronics. Even before the changeover was completed in July, the March 11 disaster had postponed digitalization in the Tohoku region so there was still a market for TV sales there, but that window has since closed. 3-D TV, which last summer was being sold as the next must-have device, died as soon as it was born.
According to a May 12 editorial in the Tokyo Shimbun, Japanese consumer-electronics companies were on top of the world at the dawn of the 1990s because of their cutting-edge technology. Hubris blinded them to the necessity of changing their methods with the coming dominance of digital. When they controlled the technology, they controlled the related manufacturing, since skilled workers were needed to produce the vanguard products everyone in the world wanted. That meant factories could remain in Japan, where the skilled workers were.
Digital technology is characterized by cheaper parts and a more schematic assembly process, which means factories can be built anywhere since fewer skilled workers are needed. Japanese manufacturers were slow to adapt, and once digital became the norm, competitors offered merchandise that was comparable in quality to Japanese products. Japan developed plasma and liquid crystal TV displays, but Korean and Taiwanese makers sold them at much lower prices and quickly dominated the world market.
The other problem, and one unique to Japan, is that there are just too many major electronics companies, especially with a shrinking domestic market. Last year ¥320 trillion worth of consumer electronics was sold throughout the world. That market is estimated to expand to ¥450 trillion by 2020. Japan's deteriorating competitiveness overseas is considered a serious problem back home. The only thing these companies can do to survive is tighten their belts even more, and that means buyouts, mergers or partnerships. Sony and Panasonic just announced they'd cooperate on the next generation organic LED display, a move that would have been unheard of five years ago. Korean makers plan to have an affordable OLED on the North American market by the end of the year. Sony developed the first OLED in 2007, but it was too expensive for consumers. If it teams up with Panasonic, it can save time and money and have an affordable one out by 2015.
The obvious question is: Why the obsession with TV sets? According to Tokyo Shimbun, the television is the "face" of consumer electronics, the possession that makes the biggest impression in the home, the one that sits like a Buddha in the living room. It defines the brand; or at least it used to. Everyone knows that the main reason the domestic market is shrinking is that the population is, too. People don't need to buy TVs that often in the first place, but the reasons for owning one are also becoming less compelling. This column occasionally discusses how broadcasters have programmed themselves into irrelevance with shows that are barely distinguishable from one another, but the problem goes deeper.
Browsing the comments related to "TV" on the 2channel message board, you find complaints about how much trouble it is to hook up antennas, make contracts with cable companies and access broadcast satellite signals. And though many commenters conclude that it isn't worth it because, as one person put it, "all you get is boring comedians," the overriding sentiment is that the conventional TV relationship of an overlord provider (stations and producers) and a passive receiver (viewers) is obsolete. Commenters also grouse that it's difficult to use the Internet on regular TVs. They don't even like big screens. Their laptops are big enough; for that matter, so are their phones.
It's a generational issue, which is why so many TV commercials target older people. Even mobile game providers, which have become the biggest net TV ad buyers and would seem to appeal to a younger demographic, have been using those ads to get older consumers on board the gaming bandwagon. That makes it even more essential for domestic TV makers to concentrate on overseas markets. They sure can't count on Japan's.