LG ELECTRONICS SEES SLOWER RAMP-UP FOR BLU-RAY
Zenith parent LG Electronics will deliver the first of its Blu-ray hardware by late 2004, beating Sony and others to the international market. But compared with Sony, LG is forecasting a much slower pace for Blu-ray sales owing to an expected $2,000- $3,000 price for recorders and a lack of prerecorded software, Video Americas Group Gen. Mgr. H.S. Paik told reporters in a briefing at the company’s Seoul hq.
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As a result of the high price and lack of content, U.S. sales of Blu-ray recorders are expected to hit only 1 million decks by late 2007, Paik said. That’s considerably less than Sony’s projection that the format would have a “big bang” rollout reminiscent of the high-profile introduction of the PlayStation 2 platform, when a million or more consoles were shipped within the first 90 days (CED Sept. 9 p2).
LG’s timing of its first shipments of Blu-ray recorders also contrasts with Sony’s expected worldwide rollout in late 2005 -- the company has been selling Blu-ray in Japan since April, albeit in limited-appeal recorder model geared to DBS programming there. Sony has said the timing of the Blu-ray debut depends on completing the standard for the format’s prerecorded packaged media by late this year and an 18-month run-up to its introduction that would be required for key component development and production as well as replication. LG’s plans for Blu-ray hardware haven’t been finalized, but it’s likely to field 2 models, one combining DVD recording and a 120 GB or more hard drive and Gemstar-TV Guide International’s electronic program guide, Paik said.
While LG is confident that Blu-ray, with its wide base of manufacturer support, will emerge the winner in the high stakes race to set the standard for next DVD recording, the high price and lack of titles will result in a gradual, rather than rapid, adoption of the technology, the company said. “I don’t know that if at the time this technology is introduced, the market will be sufficient enough to really embrace it,” Paik said. “There’s no real HD media as of yet and the question will be ‘are consumers ready for this technology by next year?'” Also competing to establish the next generation HD-DVD recording standard is the NEC-Toshiba alliance and a format backed by Warner Bros.
But while LG is adopting a conservative stance on its projections for the Blu-ray market, it’s plunging into the current generation of DVD recorders by fielding a cadre of combination products. It plans to start selling a DVD-RW/4-head VCR under the Zenith brand in the U.S. by the first quarter next year and will market a DVD-RW recorder with a 120 GB hard drive by the 2nd half. LG also is readying an all-in-one dual-format DVD recorder with an HD tuner, 250 GB hard drive and Gemstar electronic program guide for introduction in S. Korea, but with no immediate plans for the U.S. market, Jong-Seok Park, vp-dir. of LG’s Digital TV Lab, said.
The introduction of a spate of DVD combo products, Paik said, will be key to LG’s goal of doubling its DVD-related sales to $4 billion by 2005 to emerge among the Top 3 DVD hardware suppliers worldwide. LG also forecast worldwide sales of DVD- related consumer products, including retail and OEM, of 9 million units this year.
The emergence of Blu-ray recorders and DVD combo products also will coincide with the ascension of LG as a high-end brand that targets CE specialty dealers, while the Zenith brand is aimed at the national chains. As an example, the Blu-ray recorders will be sold only under the LG brand, while a DVD-RW recorder/4-head hi-fi VCR may be marketed under both banners with the LG model adding progressive scan and other step-up features, Nam Woo said. Many of the set-top box products such as the combo ATSC tuner/PVR/hard drive will also feature the LG brand, he said. And the LG and Zenith brands may be sold through different divisions of the same retailer. Zenith brand products are currently sold through Best Buy, while LG gear could be merchandised at its Magnolia Hi-Fi subsidiary, Woo said.
“To the average American, the Zenith brand is much more familiar than LG, so we need to leverage that,” an executive said. And while LG poured about $30 million in 2002 into a high- profile ad campaign to promote the Zenith brand for display technologies, it will now shift that emphasis to its own brand, he said. But the Zenith brand isn’t likely to disappear any time soon, the company said. LG purchased a majority of Zenith in 1995 and bought the rest of the company 4 years later as part of its bankruptcy reorganization plan.
“If I didn’t have the Zenith brand to compete on price, I would have to worry about brand positioning and preserving the value of the LG brand,” the executive said. “We will use it to complement the positioning of the LG brand.”