Wholesale TV Revenue to Fall Amid Retail Price Wars, Workman Says

U.S. wholesale TV revenue will fall to $22.5 billion this year from $26 billion in 2008, despite a rise in unit sales to 37 million from 31 million, as retailers continue a price war, PRO Group Executive Director David Workman told Citigroup investors Monday in a conference call.

Workman attributed part of the revenue decline to the battle between Best Buy and Wal-Mart for TV market share. And while prices have stabilized some this year, Wal-Mart has gained the upper hand in the commodity TV business, forcing Best Buy and others to focus on selling better-featured sets paired with services, Workman said. “Wal-Mart market share gains generally lead to overall dollar declines in a category over time, replaced by new growth in emerging technologies,” Workman said. “Wal-Mart is looking to change its historical position and acquire a greater share of product categories earlier in their lifecycle."

Wal-Mart has gained distribution of Sony Bravia LCD TVs, including 46- ($989), 55- ($1,709) and 60-inch ($2,249) models with 120 Hz panels. And it has picked up LG’s 32-55-inch CCFL- and LED-backlit LCD TVs with the Vudu download service. Wal-Mart recently bought Vudu.

Wal-Mart will likely struggle in selling 3D TV technology, Workman said. Retailers face “a lot of technology issues” in selling 3D TVs including the lack of a common standard for the glasses needed to view programming. Dealers have had a “tough time” ensuring consistent demos and have struggled with the theft of glasses. “For all those reasons, I think Wal-Mart is getting a little ahead of itself” in selling 3D TVs, Workman said. A Wal-Mart spokeswoman wasn’t available for comment. Wal-Mart will have an advantage in being able to offer Vudu with the TVs it sells in an effort to offset declining prices, Workman said. Wal-Mart also is said to be seeking a CE manufacturer to supply it with a 720p 3D TV for the fall. Samsung has no plans for such a model, said Jonas Tanenbaum, vice president of LCD TV marketing.

To offset inroads that Wal-Mart has made in upgrading its CE assortment, Best Buy is emphasizing private-label products more, Workman said. It also is “leveraging its position” with CE manufacturers to provide “meaningful differentiation” from Wal-Mart. Best Buy also is pushing the Geek Squad and other value-added services, including the expansion of its Best Buy Mobile stores, to separate itself from Wal-Mart, Workman said. Where Wal-Mart will struggle is positioning itself “as a place to go to answer questions and make recommendations,” Workman said. And Wal-Mart has had a hard time selling value-added “solutions” like installation and extended warranties, he said.

Best Buy also has struggled to keep the price difference between its private label gear and branded products “where they would like it to be,” Workman said.