Saturday, January 20, 2007
Most of the time when it comes to new electronics technologies, consumer demand encourages prices to decrease. Typically, when a new type of electronic technology is introduced into the marketplace, its price is extremely high. High to the point of being cost prohibitive for the typical consumer to buy it. Fortunately there are a few people or businesses who have to have this new device. They buy these devices and fuel the development of more efficient ways to produce the electronic device. When a product can be manufactured and distributed more efficiently the price comes down more and more people can buy it, which fuels the development process further. It's a self reinforcing process where the cheaper the technology gets, the more people buy the technology, and more people buying the technology results in more money being invested in the further development of the technology. It's a process that creates a downward spiral in price and an upward spiral in technological sophistication.
The same thing happened with personal computers. One of the first desk top computers cost thirty five thousand dollars back in the nineteen seventies. You could buy a house for thirty five thousand dollars back in the nineteen seventies! This was obviously extremely cost prohibitive for most people, but fortunately the federal government stepped in and bought a lot of computers for national defense, keeping track of income tax information, processing census data, and probably a lot of things we'll never know about. The government's enormous investment in the computer industry fueled its growth and now we have computers with thousands of times the speed and storage capacity available for less than five hundred dollars.
Now the prices of flat screen TVs are falling, but for a completely different reason. While prices in the computer industry fell because of increasing interest in the products and extremely intense pressure to improve the products, the prices of flat screen TVs- LCD displays in particular- are falling for a completely different reason: lack of interest in the products.
The fact is that there has been a wide spread positive response to flat screen TVs. They take up less space, provide a better picture, and many models consume less power than the old fashioned cathode ray tube televisions. They're also easier to manufacture in the larger dimensions and with the 16:9 aspect ratio that many consumers want these days. They can also be hung on walls which makes them useful for small rooms and fashionable in any room. Consumers like all of these features of flat screen TVs, and have told the electronics manufacturers as much.
The problem is that the manufacturers placed too much faith in what consumers said that they liked in this case, and decided to make way more LCD TV screens than the public wants. Even Gateway, Polaroid, and Dell, three names that aren't usually associated with televisions, got swept up in the flat screen craze and decided to get into the LCD TV market.
As a result of this folly, there's now a glut of flat screen LCD TVs on the market. The glut is expected to cause LCD TVs to drop thirty percent in price, instead of the twenty five percent anticipated, between March of 2006 and March of 2007. Which is great news for people who were planning to buy an LCD TV for the holidays. The bad news for the manufacturers and retailers is that there aren't as many people like that as they had expected.