Kmart’s sales organization “has far better skills than we have” in categories such as commoditized CE goods including personal electronics and DVDs, Sears CEO Alan Levy told Consumer Electronics Daily Wed. at the N.Y.C. news conference announcing the chains’ blockbuster merger into the new Sears Holdings. Conversely, “there are certain categories where we've got more expertise than they've got,” such as flat-panel large-screen TVs and monitors and other big-ticket items, Levy told us: “So we'll figure out the way to get the best of both into the combined company.”
Las Vegas health authorities said this week there has been a steady decline in the number of new norovirus cases reported since late Oct. at the Flamingo Las Vegas, prompting them to declare that deep chemical cleaning of public areas at the hotel had borne fruit. Still, David Tonelli, a spokesman at the Clark County Health Dist. (CCHD), which includes Las Vegas, was reluctant to guarantee that the norovirus outbreak would be completely stamped out by the time CES attendees begin arriving in town soon after the New Year’s holiday.
Rockford Corp. has had some interest from “several financial and strategic buyers” in portions of the Rockford Home Group, which includes the NHT brand and Fosgate Audionics, CEO Gary Suttle told financial analysts Mon. Suttle previously told us Rockford’s stable of home products was being “evaluated” and that their fate would be known by year-end (CED Sept 23 p3).
The CE industry petitioned the FCC to move up the deadline by which all TV sets with 25"-36” screen sizes must have ATSC tuners. CEA and the Consumer Electronics Retailers Coalition (CERC), in a joint petition, asked that the July 2006 date by which all such receivers must have DTV tuners be moved up to March 2006 and that the July 2005 date by which 1/2 the sets must be ATSC-capable be eliminated. They cited unforeseen and “unduly disruptive” consequences of the Commission’s phase-in schedule. Originally, CE had urged the DTV tuner mandate to be phased in. Because of that, CEA and CERC said, the FCC “appropriately took note that manufacturers typically require 18 months to redesign their products to comply with new requirements.” The phase-in also was designed to allow economies of scale to be achieved on higher-priced, larger displays so DTV tuner costs would be lower when required for less expensive smaller sets, the groups said. Except for the 50% requirement, the phase-in has worked as intended to minimize disruption to production and retail cycles and “provides time needed for the economies of scale to begin to be realized as sales of receivers increase,” CEA and CERC said. However, CE’s “recent and ongoing experience” with the first 50% “metric” that took effect in July 2004 on 36” and larger TVs “compels the conclusion that the 50% requirement itself is antithetical to the purpose of the requirement, which is to increase marketplace demand for broadcast TV receivers that incorporate DTV tuners,” the petition said. The 50% requirement “threatens to slow, rather than to speed, consumer migration” to TVs with built-in DTV tuners because “consumers typically choose a lower-priced product with otherwise similar features, except for the DTV tuner,” it said. This “detriment” can only be “magnified” when applied to the “much larger volume” of 25"-36” TVs, “in which the DTV tuner cost represents a much higher proportion of the total product cost,” the CE groups said. “The undesirable results of the 50% requirement would be mitigated by a single 100% deadline,” CEA and CERC said in their petition. As for their proposed new deadline of March 2006, it’s “the earliest feasible for manufacturers to meet,” the groups said. CE makers are “laboring” to reduce the cost of DTV tuners, they said. But despite their best efforts, the cost of each DTV tuner added to 25"-36” TV sets in July 2005 “still will represent a significant cost for consumers,” they said. Analog-only 25” and 27” TVs typically cost less than $200, “so adding a DTV tuner in many or most cases may represent a doubling in price to the consumer,” they said. Regardless of how committed retailers are to the DTV transition, the 50% rule “provides an imperative to over-order the potentially scarce non-DTV tuner products and to under-order the more expensive products with the tuners whose price may be driven down later as a manufacturer seeks to achieve a 50/50 balance,” the petition said. If allowed to “shape” the market for 25"-36” TVs, it said, “this process can produce a result for the DTV transition that is the opposite of the result” all would like to see. Eliminating the 50% July 2005 deadline “will prevent marketplace distortion and help ensure that manufacturers and retailers each will compete on a level playing field conducive to achieving the Commission’s DTV goals,” CEA and CERC said.
It’s “not in the cards right now” for CEA to begin reporting DTV shipment figures weekly, CEA Pres. Gary Shapiro told Consumer Electronics Daily. The association reports direct-view and projection DTV figures weekly, and the data are incorporated into our State of the Industry chart, which customarily appears Mondays. But data on plasma, LCD and other DTV shipments are available only monthly -- and Shapiro said it’s likely to remain that way. CEA is “still actively trying to recruit companies into these reports and issuing weekly-level data makes that much, much harder,” Shapiro told us. “'Why participate when I can get the monthly or quarterly data for free?’ is a tough enough question to combat without going weekly,” he said. Moreover, reporting data weekly “is still problematic for some companies and the DTV reports have been subject to multiple revisions,” he said. “We only just got a major player to start weekly reporting this year and another still isn’t yet in the weekly mix.” Shapiro said CEA also feared that a weekly report on DTV “would devalue what current subscribers are getting.” As for the accuracy of weekly reports, Shapiro said “the current monthly reporting is still more reliable and easier to manage message-wise. Weekly figures go all over the place, especially the first week of a month, which could just as easily be down 100% from last year as up. Weekly variances could be widely misinterpreted and thus would be harmful to the industry.” The bottom line, he said, was “last time we checked, there was unanimous agreement from the companies participating in the DTV reports we should not release weekly stats publicly. As our members own this program, this is the final hurdle, even if the other points change.”
Both the film and music industries are “victims” of P2P file-sharing, but as far as piracy is concerned, “that’s pretty much where the similarities end,” MGM CEO Alex Yemenidjian told Harris Nesbitt’s Playtime 2004 investor conference Mon. in N.Y.C.
Motorola told the FCC leaving in place the July 2006 ban on integrated cable set-tops with embedded security would “substantially increase equipment costs for consumers.” The company was rebutting CE claims that lifting or postponing the ban would be anticompetitive. In an ex parte filing, Motorola said there was evidence in the record that a CableCARD-Host combination would cost a cable operator $71-$93 more than an integrated set-top with the same abilities. Motorola, with Scientific- Atlanta, has been a main supplier of CableCARDs. The 2006 ban would “stymie” development of a low-cost digital-to- analog set-top by adding substantially to the cost of such a device, Motorola said. “Congress and the Commission have recognized the importance of such low-cost devices to the digital transition,” the company told the FCC: “Raising the cost of these devices will undermine their appeal and thereby slow the transition.” Motorola said the ban also would be harmful because: (1) It would force all cable customers to bear additional costs, “even though the enhanced portability of CableCARD-enabled devices provides no added value” for customers who prefer leasing their set-tops because those boxes stay within a cable system. (2) It would remove a “cost-effective choice for consumers” who prefer to lease set-tops, although others may want to buy a CableCARD-enabled TV at retail. “The best public policy is to continue to let consumers make the equipment choice that best fits their needs.” (3) It’s unnecessary for fostering a retail market for CableCARD-enabled products. CE makers are rolling out dozens of such products this year and expect to sell a million in coming months, “even in the absence of a ban on integrated devices.” Motorola said it was “facilitating the development of a competitive marketplace” for integrated set-tops. Having licensed its conditional access technology to Pace, Panasonic and others, Motorola said, there’s “nothing to prevent the emergence of a retail market for such integrated devices.” The company said Shaw, Canada’s leading MSO, has successfully pursued a retail strategy for its integrated set-tops, and “secondary markets for such products have also developed through mechanisms such as eBay.” Claims that there are large-scale technical problems with the CableCARD are “overstated,” Motorola said, apparently in response to recent CE claims of “numerous technical implementation problems” preventing CableCARDs’ proper operation (CED Nov 2 p4). As with any new product such as cable modems, “some glitches can be expected,” Motorola said. “But the cable and CE industries are committed to working to resolve any potential issues as was done, for example, with cable modems,” it said. Motorola said it fully supports ongoing talks to reach an agreement on bidirectional CableCARD devices. But like others, it said the negotiations had become bogged down by the “complexity” of the issues and the large number of participants. “At the very least, the Commission should afford the parties additional time to work through these issues so that an optimal, mutually agreeable 2-way standard is adopted,” Motorola said. But leaving the integration ban in place could cause the negotiations to break down and lead to the development of a “suboptimal” standard on 2-way or competing, mutually incompatible standards,” it argued. “That would be a bad result for consumers and all concerned.”
XM Satellite Radio sought Thurs. to regain the attention that had focused on rival Sirius after its Howard Stern signing, using the announcement of 3rd- quarter results to remind Wall St. that it, not Sirius, was “the satellite radio leader in subscribers, technology and content.” XM’s net loss fell to $118 million from $133.5 million, and revenue doubled to $65.4 million from $26.9 million.
This year has been “pretty traumatic” for Netflix shareholders as the value of Netflix shares are down about 75% from their 52-week high because “we underestimated the likelihood and significance” of competition from Amazon.com and Blockbuster, Netflix CEO Reed Hastings told a Morgan Stanley investors conference Wed. in Scottsdale. He said Blockbuster is pouring huge investment into its online DVD rentals, but is suffering from high churn rates because of significant back orders. As for Amazon’s entry, “we don’t know the exact timing of it,” but it’s likely to occur sometime in 2005, Hastings said. The “good news” for Netflix is “we took very strong and proactive action” in reducing the monthly subscription fee to $17.99 for the standard service, Hastings said: “At $17.99, we're getting a lot of people to sign up who might not have otherwise signed up.” Blockbuster, which launched its online DVD rentals in Aug. at $19.99 per month for the standard service, including 2 free in-store movie rentals per month, since has responded to the Netflix initiative by cutting its fee to $17.47. Moreover, Wal-Mart lowered its standard fee to $17.36 per month from $18.76, effective Nov. 2, the day after the lower Netflix fee took effect. A Wal-Mart spokeswoman said her company continues to “review the changing competitive landscape and maintain our focus on providing a great value to our customers.” The “upside of this price war” for Netflix is that churn is down and subscriber acquisitions are up because consumers perceive a “real value” in the lower price, Hastings said. “What we see going forward is this incredible hypergrowth” for all online DVD rental competitors, he said. To maintain market share leadership in the category, he said, Netflix next year will spend over 20% of its revenue on marketing, with the goal of reaching breakeven. “When we become significantly more profitable is when we take our foot off the marketing” pedal, he said. However, “that won’t happen until the hypergrowth phase of the market peters out,” he said: “That could be one year, it could be 3 years.” Asked how low subscription fees might fall in a heated price war, Hastings said Netflix’s cost was at $11 per month. Responding to a questioner on the specific competitive challenge posed by Blockbuster, Hastings said the fact that Blockbuster’s monthly rental fee is 50 cents lower “is not a material difference to a consumer.” Blockbuster’s offer of 2 free in-store rentals per month “is the real differentiator they have,” he said. For some consumers, “that’s a very compelling thing,” he said. However, “for another set of consumers who'd rather not go into Blockbuster, when you use those 2 free rentals, they've got the normal due dates” and late fees, he said: “That’s OK, but not a mainstream play.”
Macrovision’s DVD copy protection revenue grew 15% in the 3rd quarter from a year earlier, but was well short of the 33% growth rate predicted for the DVD business overall, CEO William Krepick told analysts in a conference call Mon. The reasons included “loss of market penetration as certain studios have moved away” from using Macrovision copy protection on all titles in favor of a title-by-title strategy, Krepick said.