Whim of a Format. “Delovie lyudi”, June 2005.

Whim of a Format.
It’s hard to define what is the mightiest catalyst of a TV producing process – competitive advantage struggle or the customer’s caprice. He wants not only to sit in front of a flat-screen television set with a large monitor, high level Scan, with the PIP (Picture in the picture) function and stereo sound. In the agenda of market demand – multimedia models combined with computer and karaoke.
If flat-screen wardrobe-size TV models are actively bought up in Moscow and St Petersburg, then in regions it is rapidly selling out cheep Chinese television equipment, previous (and even with tube receiver) “Record”, “Rubin” and “Horizont”.

Expensive ambitions.
Russian customer on average absorbs 7-8 million of TV products per year, increasing his needs on 5-7 per cent annually. And the market is far from its satiation. This fact offers great opportunities for domestic and foreign producers of television equipment.
Last year against the background of the fast development of TV sector there appeared a tendency of profit shrinkage of the stable leaders – Samsung, LG companies and some Russian brands. It’s worth mentioning also the other important thing: the number of sales of expensive home theater models increased almost on 500 per cent and came to 520 thousand items.
The third important tendency – orientation on Russian screwdriver assemblage: producers save money on customs fees. More complicated LCD TVs and plasma panels are imported meanwhile. But more then 80 % of CRT TV promoted in Russia is assembled there.
Domestic producers deliver on the Russian market famous trade marks such as: “Horisont”, “Vityaz”, “Rubin”, “Sokol”, “Sitroniks”, “Polar” and other. But they are ready to work for somebody’s, not for their own sake. “Sokol” company is ready to enlarge license agreement production of TV of Akai trademark. In 2004 the company has produced 70 thousands of this TV type, and this year it plans to produce 230 thousands, that is not less then under it’s own trademark.
Other trend of development of Russian market – rough competition with Chinese-Asian and Belarusian producers in low price segment. The competitors push out Russian producers of television furnishing into the high price market segment (that is occupied by important players – Sony, LG, Samsung). Import of TV components in Belarus not VAT taxed that is why with other things being equal goods of Russian neighbor are cheaper. Television equipment tradesmen dream to get rid of middlemen and turn to direct supplies from foreign producers. Association of trading companies and manufacturers of consumer electronic and computer equipment is already negotiating with Sony and Philips on the theme of direct deliveries. Major TV producers (Philips, Sony, Panasonic) sale directly: bring wares on the country market, get customs clearance and produce the goods retail chains by themselves. However in Russia it is the private affair of retail chains and also of middlemen that generally work through “gray scheme”. Direct contacts with the important producers form merely 10% from the whole amount of the domestic electric appliances.

Sit and watch.
Nowadays in Russia CRT TVs are the most in demand. However, according to Rolsen company specialists, this TV market sector is decreasing. In 2004 it was amounting to 6,5 million items, and this year this number can possibly decline to 6,3 millions. This tendency can be changed only by launching new flat-board CRT TV in which the thickness of image tube is shorten on 20-30 per cent in comparison with a simple CRT TV. Market share for brands of low, middle and high price segment is correspondingly 8, 50 and 42 per cent – the share of middle and low price segment is still large. Trademarks of “premium” sector noticeably reduced their market share in the category of TVs with diagonal size 14-21 inches. This sector was not able to stand the competition with South Korea producers. This place was taken by furnishing of Rolsen trademark that proposed more advantageous product regarding price and quality ratio. Most likely that retail prizes will stay at the same level in spite of the competition intensification. The position of TVs with diagonal size 30-34 inches is more vulnerable: their main buyers – wealthy people – little by little reoriented on LCD and plasma TV.
As before this year a large sales share will belong to Korean brands (LG and Samsung). The share of other well-known Korean brand – Rolsen – will enlarge as well. Last year in Russia nearly 300 thousands of LCD TV were sold, for the actual year specialists forecast the extension of this number on 50-100 thousands items.
There has been also started power regrouping among plasma TV suppliers. There are two main reasons of rearrangement and alliances: profit reducing of suppliers and the market fight between Korean and Japanese companies. Last year NES has turned down plasma TV producing. After buying this trademark factories Pioneer has decided to continue prize competition in this sector.
In television furnishings industry it is rumored that Sony also plans to get rid from plasma TV. “Plasma” market consolidation could be explained by the existing pressing of LCD TV market. Owing to innovation technologies and elaborations, mighty marketing support and well-balanced ratio of price and quality the leader position in this sector is taken by Korean companies (LG, Samsung, Rolsen). Their production costs are much more lower then the same in Japanese and European companies.
Despite the dynamic development of LCD and plasma TV market, Russia is not going to loose it’s interest for CRT TV. And the producers themselves soon are going to introduce a new item to potential customers – TV set with a shorten image tube. This type of TV comparable with LCD but costs twice low.
Still Toshiba specialists for their part believe that future market will choose “panel” TV sets anyway. According to the company’s estimations in several years CRT TV will be found only in small and cheap model segment.

It was said so
Takashi Itagaki, vice-president of Sony Television Europe Company:
“Future is given to flat-screen TV. Even by now we are the witnesses of the fact that expansion of LCD and plasma TV contribute to market growth in a whole. According to our research there is the overgrowing demand for compact TV models with a large screen that give a high quality of image and supply the possibility of integration with other equipment. Thanks to Wega Engine system that provides a new quality standard, we are expecting that LCD will occupy almost 60 per cent of all TV market in Europe by 2007”.