Prices the Talk of Electronics Show : Hikes Due as Industry Seeks to Recover From Losses in ’85
From the glitzy new McCarran International Airport, decorated with metallic palm trees costing $33,000 each, to the crowded floor of the Convention Center, much of the talk among those attending the winter Consumer Electronics Show is not of new bells and whistles, for those are few and far between this year, but of something much more mundane: prices.
“I would project that this industry lost money in 1985 despite healthy growth,” said Robert O’Neil, executive vice president of Compton-based Hitachi Sales Corp. of America, the U.S. arm of Japan-based Hitachi. “We must stop living on subsidized, low-ball pricing.”
O’Neil, hammering home a point that he has made at past shows, said that 1985 was Hitachi’s best year ever in unit and dollar sales but that the “bad news is we didn’t making any money. And we did better than most.”
Because of the dollar’s shrinking value against the yen and cutthroat pricing by manufacturers and retailers, many large Japanese companies that export to U.S. markets recently have suffered losses, despite the industry’s overall growth. As the dollar declines in value against the yen, Japanese manufacturers’ sales in the United States become worth less when they are reported in yen.
Sticker Shock Among Customers
If Hitachi, Sony and others have their way, consumers will soon be paying more for audio and video equipment. Many companies have already announced price increases ranging from 2% to 12%. Such boosts are likely to produce a bit of sticker shock in customers trained to expect better bargains around the next corner.
Even so, in this bettor’s paradise, many retailers have decided to take a calculated gamble.
Paul Beckstrom, senior buyer of audio and stereo products for Dayton Hudson’s department stores in Michigan and Minnesota, said he doesn’t plan to buy more merchandise than usual at this show despite the threat of higher prices. He expects them to stabilize again by June.
Gary Tobey, senior vice president of Los Angeles-based Federated Group, is counting to some extent on improvements in production efficiency, which in the past have helped to drive prices down. However, “we will obviously go with the industry,” he said.
With an extremely successful Christmas behind it, the $24-billion consumer electronics industry finds itself in the driver’s seat as far as raising prices goes. The product pipeline is thin and retailers are busy making arrangements to stock their stores with new products and models at this four-day show, which opened Thursday.
Attendance is expected to top 103,000, making this the largest convention ever held in Las Vegas. About 1,400 exhibitors have spilled out of the Convention Center into two nearby hotels, the Hilton and the Sahara, and adjoining parking lots. Like its annual summer counterpart in Chicago, the winter CES is sponsored by the Electronic Industries Assn., a Washington-based trade group.
As far as innovations go, this show has no real blockbuster to call its own. Instead, exhibitors are showing improvements in existing technologies, with a decided emphasis on portability.
By far the most excitement has been generated by 8-millimeter camera-recorders (or camcorders), which use videotape about half the width of the standard half-inch format dominated by VHS. The 2-year-old 8-millimeter technology entered the confusing video fray in a meaningful way last Christmas.
Many competitors are now treading on the turf of Sony, leader in the 8-millimeter niche, with camcorders selling for $1,600 to $1,700, a price that makes them luxury items for most consumers, especially those who already have VHS or Beta videocassette recorders.
Moreover, Sony has yet to announce much in the way of 8-millimeter software to support the cameras and decks on the market, although it says discussions are under way with a number of film producers.
At a press briefing Thursday morning, Neil Vander Dussen, president of Sony Corp. of America, reiterated that the company has no plans to abandon its Beta video format, which preceded VHS and is still regarded as technically superior.
He said he expects that it will be three to six years before annual unit sales of 8-millimeter equipment equal or surpass those of VHS and Beta.
Lee Isgur, an analyst with Paine Webber in New York, expects that within five years the price of 8-millimeter hardware will drop to what the low end of VHS and Beta machines is today--about $250.
Among other gizmos garnering attention at CES were tiny pocket televisions; Sony’s DiscJockey, a compact disc changer designed to be stored in a car trunk and operated by remote control, which lists for just under $1,000; a $99 synthesizer that Casio claims can record “any real-life sound,” and a compact disc player from Pioneer Electronics in Long Beach that can be programmed to play selections from any of six discs contained in a magazine.
