HDTV Makers Pile On the Extras

In a bid to stave off commoditization and win over the wider market, they're making the sets easier to use and adding nifty new features

A decade after high-definition television technology was first introduced in the U.S., a whopping 89% of consumers say they lack a complete understanding of its benefits and downsides. Patrick Dunn, director of display technology at THX, thinks he knows why: "Watching TV these days can be terribly complicated," he says.

Tucked away in a basement lab at THX's San Rafael (Calif.) headquarters, Dunn and his team are working on a potential solution to the problem. Using technology code-named Blackbird, THX is working with Hollywood and other providers to embed information tags in their content that could be recognized by high-definition televisions to make on-the-fly automatic adjustments to things like picture modes, audio levels, and contrast ratios. In other words, the TV does the work for you, adjusting picture quality and sound levels to match it to the optimal mode sent in the picture stream. The changes would be invisible to the user.

Such a system could prove a welcome relief for consumers. Thanks to prices that are expected to be at least 33% lower this holiday shopping season than a year ago, more consumers will flock to stores to pick up the latest in big-screen televisions, and HDTV sales will experience healthy growth. But despite higher unit sales, continued cutthroat competition among set manufacturers has squeezed profit margins, forcing them to pile on new features that consumers barely understand, according to an August survey of 1,012 Americans by retailer Best Buy (BBY).

Indeed, the banners affixed to displays at retailers get longer each year as companies try to trumpet that their set is capable of showing "full HD" offered by HD DVD and Blu-ray players (no broadcast channels broadcast at full 1080p HD). The banners also highlight a company's proprietary color-processing technologies, number of connectors for hooking up set-top boxes, screen-response time that turns a colored pixel to white and back again, and contrast ratios that show the whitest whites and darkest blacks—most of which consumers are hard-pressed to understand without an engineering degree.

Bells & Whistles

Take the latest technologies being added to marketing literature at retailers: LED backlighting and 120-hertz screen-refresh rates. Both are aimed at improving LCD sales over plasma. Light-emitting diodes, or LEDs, replace the traditional fluorescent tubes that light liquid crystal display TVs, giving sets wider leeway in adjusting colors in an individual area on the screen. That can lead to richer colors and more of the color palette than LCDs previously have been capable of.

Major set manufacturers such as Sony (SNE), Samsung (SSGFY), and Sharp are promoting 120-hertz refresh rates as another new must-have for the high-tech TV. Earlier models typically display images at 60 hertz, which can lead to motion blurring during sports games and other fast-moving action scenes. By doubling the number of times an image is flashed on the screen, set manufacturers say, motion blur essentially disappears for most watchers.

Then there's the push to make televisions even thinner. Sony announced at the CEATEC consumer electronics trade show in Japan that in December it will start selling an 11-inch HDTV using carbon-based organic electroluminescent, or OLED, displays. Because OLED simply requires electricity to create color, you don't need a lighting engine, and the display can be made a mere 3 millimeters thick. "A few years ago people were saying we had the technology but lacked must-have products," Sony President Ryoji Chubachi told reporters on Oct. 1. "OLED TVs are a symbol of the revival of a technology-focused Sony."

While Sony will be first to market, Sharp, Toshiba (6502.T), JVC, and Hitachi (HIT) also previewed prototype thin-televisions they aim to commercialize by 2009.

Fighting to Stand Out from the Pack

The reason for the increasing technology creep is not altogether altruistic. Manufacturers are battling rapid commoditization in the industry as dozens of brands compete for shelf space and manufacturers like Vizio steal share from rivals with low-cost models that consumers are flocking to. "Adding features to the television will reduce the commoditization of the product," says Sweta Dash, director of LCD and projection research for industry tracker iSuppli.

New technologies can add anywhere from $100 to $300 to a TV's price and can be key in determining whether a manufacturer turns a profit in the business. Shipments of televisions are expected to more than double, to 144 million by 2011, according to iSuppli. But pricing pressures will take their toll and keep a lid on revenue growth to just $5.7 billion above the $71 billion in sales tallied last year.

Other manufacturers are trying find a way around the commodity trap by outdoing rivals with a smart TV. Hewlett-Packard (HPQ) this year began selling televisions with "MediaSmart" software that lets consumers hook the setup to a home network and pull content off a PC or browse, select, and buy movies from third-party Internet providers.

Meanwhile, Philips Electronics (PHG) in September unveiled its Aurea brand television in Europe, with ambient lighting built directly into the bezel surrounding the TV screen, delivering a sort of mood lighting to match what's displayed on the set. The company also is working on a set that might one day replace TiVo (TIVO) and other set-top box, digital, video-recorder makers by adding software to the set that analyzes what you watch over a couple of weeks, then begins building virtual channels based on your preferences. Philips says it could begin selling such sets as early as next year.

Plasma's Counterattack

Most of the newest improvements are coming to LCD sets, the manufacturers of which aim to drive plasma to niche-player status in the 50-inch-and-above screen size. iSuppli predicts that plasma revenue will peak by 2008. That hasn't been lost on plasma maker Pioneer Electronics, which recently struck a cross-development deal with LCD titan Sharp Electronics to deliver its own LCD TV.

That's not to say plasma makers are sitting still. Pioneer's new Kuro line of sets introduced technology to offer the deepest black levels in the industry as well as improved sound processing. Hitachi created a technique to determine whether you're watching a movie or regular broadcast and matches the frame rate to those different standards, improving picture quality by delivering the video the way it was meant to be watched without extra processing.

No doubt the constant tweaks are enough to make all but those most dedicated HDTV shopper's head spin. Add the fact that customers typically must buy new cables and audio equipment at an additional cost of $30 to $1,000, while upgrading to high-definition boxes from cable or satellite providers, and it's no wonder many people have delayed diving into HDTV.

But with prices continuing to tumble, robust sales have yet to show any sign of slacking off—even if many of those new technologies never get used once they're in the home.

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