Monday, April 18, 2011

Opinion: Television Is Dead; Long Live Television

From Kit Eaton, Fast Company:
Philips is selling its TV business to a Chinese volume manufacturer, trading dwindling profits for a licensing fee. It's a sign that flatscreen TVs have become a commodity--and the industry could be primed for a digital make-over led by firms like Apple.

Philips has been producing TVs since 1928, but it's now disposing of 70% of its TV business into a partnership with TPV Technology limited, a Hong-Kong-based manufacturer. The Dutch company will retain the last 30% of the business, and stands to receive over €50 million in royalties from the deal, starting in 2013.

That's quite a turn-around from the current situation, which saw Philips' finances take a €87 million loss in the first quarter of this year alone from its TV division. It's not the first time Philips has done a deal with TPV--in 2004 it sold a similar majority stake in its computer monitors business for the equivalent of $358 million. As part of this latest deal, all 4,000 employees of Philips TV division will move to TPV, which will also have a positive impact on the company's bottom line as those staff costs are now borne elsewhere.

As Bloomberg notes, Philips was the last remaining mass manufacturer of TVs in Europe. So what can we conclude from this deal? It's pretty simple at heart: The LCD/plasma flat screen revolution in the TV industry is over. The bulky cathode-ray tube TV of old is now consigned to history, and the rush make millions by getting every consumer in the developed world hooked up to an "HD-ready" 1080p television is completed--to the extent that the TV business isn't about pushing revolutionary changes anymore.

Instead it's a commodity business dominated by narrowing margins and dropping prices that has no room for Philips high-end TVs like the Aurea line which illuminates the wall behind the screen with LED colors that match the TV picture. Philips' new Chinese partner will run the business on a mass-sales, low profit-per-unit basis.
Read More.

No comments:

Post a Comment