Colleague Nancy Klosek has an interesting new interview at Dealerscope with Frank Kendzora, executive vice president of Seiki Digital/TongFang Global, about the strategy behind its $699 39-inch and $1,499 50-inch 4K “Ultra HD” TVs. You should definitely read the entire interview, but one passage in particular stood out to me:
Kendzora: As many as we can. We’re still working on the budget for the balance of the year, and it has to do with what the timing is when we get the newer product. We’re juggling all that, based on the shipping schedule. Our expectation is not huge on the 4K panel, because our customer base is in that lower price tier. There’s no secret that we’re a Tier Three brand when it comes to most of the product. But this is a little higher-priced, and a little different target market.
In the HD industry launch several years ago, the market was still pretty small for that product. It was expensive and there wasn’t a lot of content out there. It’s basically the same story all over again with 4K. By offering just a simple TV with a little lower price, I think, we’ve actually brought it to a broader market of people who are probably the early adopter, or those who want to be future-proof; it’s the perfect product for them, and maybe they’ll want to step up and spend $1,500. We’re looking to expand the initial base of people interested in 4K, so that six and 12 months from now they don’t say, ‘Gosh, I wish I would have bought this technology because content is all over the place now.’ So they can do that now at a much more affordable price with us.
DEALERSCOPE: How are you able to hit such low prices on your UHD sets?
Kendzora: We own our own factory in China. We do all our own electronics and bezels. We’re pretty much self-sufficient. When we control the manufacturing side of it, we don’t include a lot of bells and whistles; it’s a very simple menu system in there. It’s not smart TV, not 3D, and a very basic bezel design. It does upconvert, so if you have a signal going in it will upconvert to a 4K display.
A lot of people understand what we’re doing, and I think this lower-priced model is actually going to do a lot of good for the category and the technology, because if you’re an average consumer looking to upgrade your TV, chances are you aren’t even going to look at a $5,000 or $6,000 TV. They understand it, it may be a great brand and they get it, and they may be interested in the technology but they’re just not ready to jump up to a $5,000 TV. With us, there’s another option there. They’ll purchase our panel and who knows? It may lead to a purchase of a bigger higher-end panel down the road. The goal is to introduce this technology to a broader audience.
There is, I think, a lot of truth in that, and in fact, although we’ve been pretty hard on the Seiki TVs here at HomeTechTell, at least from a performance standpoint, I think they’ve done wonders for 4K as a whole, merely by stoking the conversational fires surrounding the new format.
But there’s another dimension to this that I hadn’t quite considered before reading Nancy’s story. Recently, on National Geographic’s amazing Brain Games series, the show’s hosts performed an interesting experiment at a movie theater. They started by offering popcorn in two sizes: Small for $3.00, and Large for $7.00. Virtually no one bought the Large, although a few customers were obviously on the fence. They then introduced a Medium popcorn, priced at $6.50, and sales of the $7.00 Large suddenly skyrocketed.
Take the Seiki 4K TVs out of the market, and consumers are basically faced with that original decision: Small popcorn, that is to say 50-ish inch 1080p TVs starting at around $600-$700; and Large popcorn: 55-inch 4K displays selling at around the $5,000 mark. That’s quite the gap. Throw the $1,499 50-inch Seiki into the mix, and you have — well, perhaps not a full-blown Medium popcorn, but maybe a Medium-Small. At the very least, I think it gets more consumers at least looking into the 4K realm.
Now, whether those consumers will actually benefit from 4K is another matter altogether. But I’m not talking about practicality here; I’m talking about market psychology. Purely in terms of its impact on the 4K “Ultra HD” market, I think Seiki’s cheap offerings have lit a fire that I thought would still be a pile of smoldering kindle at this point.