Well-Heeled Custom Clients Not Clamoring for OLED, 4K, Say Azione Dealers

NEW ORLEANS -- Custom integrators are looking forward to getting a close look at newly minted OLED and Ultra HD TVs at the upcoming CEDIA Expo in Denver, but they're taking a cautious approach when it comes to designing those TVs into custom projects, they told us at the fall Azione Unlimited conference. The dealer base known for having the deep-pocketed clients who clamored to be first to install five-figure plasma TVs when that technology debuted is less sanguine about the buzz and profit margins that OLED and Ultra HD can generate in a more commoditized TV market, several integrators told us.

Integration company DES, Rogers, Ark., hasn’t spec'd in either new TV type, nor have customers asked for them, said Matt Lien, sales and marketing manager. “It hasn’t come up,” Lien told us. So far, “there’s not much awareness about them by the consumer,” he said. “Most of us haven’t had a chance to see them,” Lien said of Azione members, saying he'll assess, after he’s seen new models at CEDIA Expo, whether the benefits and higher price points make sense for his clients and business.

Margin will largely determine whether DES will take on OLED or 4K TVs, Lien said. More UHD availability at this point makes that technology a more likely addition to the product portfolio, he said. “If it were to bring in more margin, we'd probably start spec'ing it into systems,” he said. But, he said, the technology is “unproven” and pricing patterns in TVs today put dealers at risk when spec'ing in TVs for long-term projects. “If we spec one in now, it'll cost half of what it costs now in a year,” he said.

A few “tech savvy” customers of HD Media Systems, Cape Girardeau, Mo., have asked about 4K TVs, said co-owner Drew Balsman. The company is cautious about the new technology because of lack of content, which Balsman called a “big deal.” Co-owner Scott Starzinger said most of the company’s clients will want to wait until the price comes down as well, which he predicts will happen over the next seven to 10 months. Despite the hit TV as a category has taken as a giveaway item with a furniture purchase in some big box stores, it “still draws a certain element of customer,” Starzinger said. TV is a “loss leader” but still an important category, he said.

At Future Home in Los Angeles, owner Murray Kunis said 4K is a “big question.” Kunis doesn’t envision designing 4K TVs into projects for any installation less than 85 inches, he said. He compared UHD to 3D, asking: “Will it be like 3D, or will it have a real impact?” The likely scenario he sees is that 4K will become a feature of high-end TVs in the same way 3D has become a feature rather than a driving force behind consumer demand.

On OLED, Kunis has been waiting 10 years for the technology and believes it will “obliterate all other technologies” once production yield issues have been solved. Picture quality of OLED is “breathtaking,” Kunis said, predicting OLED in volume production will mark “the end of plasma."

But pricing for either new TV technology will have to fall before Kunis’s clients demand them, he said. He cited a client who recently requested that Future Home rip out his home’s three-year-old TVs and replace them with Samsung LED TVs, identifying the brand as “the LED of choice.” He compared Samsung TVs to Sony TVs of 10 years ago and called them the “Kleenex” of TVs that clients choose almost as a generic brand. Ten years from now, he said, customers may demand Chinese TV brands because “Chinese TV makers today are asking the questions the Korean manufacturers asked us 10 years ago."

Plasma TVs were once a starting point for a host of add-on sales, in addition to offering substantial margin, but most consumers don’t put a lot of value in TVs today, Kunis said. “TVs change too much and there’s no margin,” he said, saying many of his clients assume they can get a better price by shopping themselves for a TV because of price-driven advertising for low-end TVs. In fact, Kunis said, he makes more profit on selling a bathroom speaker than he does on selling a 55-inch TV. Because the individual price of a TV is high, clients think they have large margins built in “when they don’t,” Kunis said. It’s a tough attitude to counter, and many dealers have chosen to let their clients buy their own TVs rather than eat the cost of a TV. That can work to a customer’s disadvantage. One of Kunis’s clients who insisted on buying his own TVs because of price ended up with the previous year’s TV models. “He had a $20 million home and ended up with one-year-old TVs because he thought he was getting a better price,” Kunis said.

The commodity viewpoint makes luxury TVs a tough pitch, said Marc Leidig, owner of Ambiance Systems, Clifton Park, N.Y. Where a plasma TV offered something radically different to consumers 15 years ago because “it looked physically different,” UHD and OLED don’t turn heads in the same way, and consumers aren’t asking about them, Leidig said. “Yes, OLED is thin,” he said, “but it doesn’t have much of an impact.” TVs have gotten so good, and thin, that consumers don’t see a compelling need to upgrade, he said. “Consumers aren’t looking for the next-generation TV,” Leidig said. “They're looking for a flat TV they can hang on the wall,” and that’s what they can get for a very reasonable price, he said.

That presents an issue for the first generation of OLED TVs hitting U.S. shores. Curved OLED TVs can’t practically be hung on the wall, Kunis of Future Home said. He admires the technology statement LG and Samsung have made with curved OLED to “show they can do it,” he said, but as an AV installation company, “you can’t do anything with it,” he said.

At the same time, with OLED, “you're looking at the future of video displays,” Kunis said. OLED will “open up the world” for TV possibilities, he said, citing wearable video clothing and digital signage applications versus “just putting another TV over the fireplace.” Just as flat-panel plasma TV made installers creative when it came to finding new applications for TVs, so too will OLED, he said. Imagining a TV on a ceiling or fabric, he said, “OLED will make us creative again."

Azione Conference Notebook

Azione’s ad agency, 23K Studios, will provide logo development, email support, landing pages, direct mail and “stylish” websites as part of a marketing program for dealer members launched Wednesday, Richard Glikes, Azione president, told us. Maintaining sound marketing programs and business operations are the two biggest challenges Azione dealers face, Glikes said, and the group is addressing both with member programs. Glikes described most of members’ websites as “dreadful” and said the 23K marketing program will provide dealers with well-written advertising copy using correct technical terms, a polished look and professional photos. One-time cost of the program is $3,995, which dealers can remit in three payments, he said. Although Azione’s dealer count at 77 is half of what Glikes expected to have by the end of its first year, Glikes is pleased with progress so far, he said. He predicts membership of 100 companies by the end of January, when the group hopes to begin offering its own branded SKUs, which would bolster profitability for dealers. Three vendors have shown interest in the program when the buying group reaches critical mass of 100 members, he said. Glikes said 99 percent of Azione dealer members are installers only. Originally, he had expected a quarter of members to be custom retailers with showrooms, he said. But he called the group a growing segment with $250 million in annual buying power, including installation fees. Azione hopes to add two or three vendors to its mix, including an electronics manufacturer and a speaker maker, he said.