June 12, 2024


Sapiens Digital

Lockdown is making people buy smaller, cheaper TVs. That’s bad

5 min read

The opening ceremony of the Tokyo 2020 Olympic Games was originally slated for this Friday, July 24. That date was decided upon years ago – but by March 24 of this year the International Olympic Committee had bowed to the inevitable. The Tokyo 2020 Olympic Games will now take place in 2021.

As is now all too apparent, a global pandemic has knock-on effects at every level of every society. The Japanese government is already over ¥1 trillion (£7.5 billion) in the hole due to the Olympic postponement – and that number is only going one way between now and July 2021.

Every TV manufacturer, and every electronics retailer, knows there’s nothing like a big summer of sport to showcase emergent technologies and drive sales of televisions. The Olympic Games, or football tournaments like Euro 2020 (which was due to be contested across the entire continent between June and July this year – an almost comical notion in light of developments), are all the excuse many consumers need to bite the bullet, take the plunge and shell out for that nice new TV they’ve been promising themselves.

The Rio 2016 Olympics Games caused a TV sales uptick, and in addition was a big driver of 4K ultra high-definition – both in sales to early-adopters and in upping the mainstream profile of the technology.

No one was seriously suggesting Tokyo 2020 might do the same for 8K, despite there already being some remarkable 8K TVs on the market. But NHK (Japan’s equivalent of the BBC) was planning on broadcasting a big chunk of the event (including the opening and closing ceremonies) in 8K.

But coronavirus has turned the market for new TVs inside out. The first few weeks of lockdown in the UK saw an extraordinary year-on-year spike in the sales of new televisions – several data analysts suggest the increase in volume during March 2020 was anywhere between 24 per cent and 39 per cent compared to March 2019. April and May followed a similar pattern, and by June the volume of sales was roughly 40 per cent greater than in June 2019.

It’s understandable, of course. We were all instructed to stay at home – and watching lots of TV is a way to pass the time. So much so that Netflix all-but combusted under the weight of the increased demand on its services. But at the same time as sales were, relatively speaking, going through the roof, the average price per transaction fell through the floor.

Before the start of the coronavirus pandemic, the size of the average TV in the UK’s front rooms was inexorably on the rise. From 32-inches at the dawn of the plasma/LCD flatscreen era, our televisions were up beyond the 40in mark by 2010 and were fast approaching something like 50in by 2019. But the frenzy of coronavirus-related TV purchases have almost all been of screens of 42in or less.

And while March, April, May and June of this year saw year-on-year increases in the volume of sales, the price per unit figure dipped even more dramatically than the average screen size. In those four months, the average amount paid for a new TV shrunk by between ten per cent and 16 per cent compared to the same period in 2019. Smaller, more basic TVs are, of course, less profitable than big ‘statement’ screens – and the recent sales patterns are naturally a cause for concern. Rob Lawley, managing director of Sevenoaks Sound & Vision, describes his company’s current trade patterns as “very odd”.

This drop in revenue for TV manufacturers has significant ramifications. The biggest brands, like LG, Samsung and Sony, have all maintained their market share during the course of this year, but the market isn’t worth what it was a year ago. Profit margins on televisions were uncomfortably small to begin with – hence the relentless cycle of new model ranges every 12 months. This was designed to keep those slim profits rolling in – but if the shift to smaller, more affordable TVs proves long-lived, then the incentive for manufacturers to innovate and to pile on the cutting-edge features pretty much disappears, along with their profits.

The market for consumer electronics seldom goes into reverse. Manufacturers innovate, consumers realise they love this new innovation, and the market forges forwards. If customers become indifferent to advances in TV technology, then expensive TVs will cease to be relevant – let alone a meaningful source of revenue. The sector will stagnate, and there’s every chance we’ll see a return to the buying habits of decades ago: at the turn of the century, the average consumer replaced their TV every six or seven years. That could spell disaster for any number of well-known manufacturers.

Amongst many other more important things, 2020 will also be the year televisions stopped being fetishised as status symbols and technological marvels. Instead, they have reverted to being utterly functional items in precisely the same way a microwave oven or a vacuum cleaner is. It’s a solution to a problem. Consumption of video content on mobile devices may be on the increase, but TV remains by far and away the most popular way of getting a hit of broadcast or on-demand entertainment.

There isn’t a TV manufacturer on the planet that isn’t hoping we go back to loving flagship televisions for all their new-tech bells and whistles. But, for now, we appear to have settled for something that’s good for “watching a bit of TV”.

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