2012: The Year Web-Connected TVs Take Over

2012: The Year Web-Connected TVs Take Over
2012: The Year Web-Connected TVs Take Over

By Anthony John Agnello, InvestorPlace Consumer and Technology Writer

The holiday quarter wasn't everything it could have been for the consumer electronics industry. Apple (NASDAQ:AAPL) sold a lot of iPhones and Amazon (NASDAQ:AMZN) sold plenty of Kindle Fires, but even those popular gadgets didn't prevent overall electronics sales falling to $9.5 billion, 5.9% year-on-year. It was all a mixed bag. Smartphones and tablets did big business, according to industry tracker NPD, but low sales of once-popular items like DVDs and camcorders dragged down the industry.

No segment of the electronics industry better highlights the challenges of these middling times than televisions. On the one hand, sales revenue from big-screen TVs (50-inches and bigger) grew 32% year-on-year this holiday. Cheaper sets with 32-inch screens, traditionally the best-selling range of TVs, saw revenue drop 9%. 3DTVs, the struggling models pumped out by flagging industry giants like Sony (NYSE:SNE), saw sales jump 100%, accounting for $1 in every $5 made on televisions this holiday. With more and more models from Korean manufacturers like Samsung (PINK:SSNLF) including 3D as a basic function, though, the boost may not reflect any broad change in consumer tastes. Overall, television sales fell 4%.

One step forward, another step back

This is precisely the dilemma that forced the aforementioned Sony and competitor Panasonic (NYSE:PC) to announce in November the downscaling of television production. Sony halved its LCD TV sales projections, from 40 million per year to 20 million. Panasonic decided to cut its TV screen production to just 7.2 million per year, a restructuring move that will ultimately cost the company around $3.45 billion. Korean manufacturers like LG and Samsung are faring better in the market, but as demonstrated by holiday sales, there's simply less money to be made from televisions across the board.

What's the way forward?

How will the television market actually start growing again? Consider this statistic from the NPD Group's report on holiday electronics sales: Standalone streaming devices, meaning set-top boxes like those made by Roku, Apple, Logitech (NASDAQ:LOGI) and others, saw revenue from sales grow 65% over the holiday. These devices, which give access to Internet-based television options like Netflix (NASDAQ:NFLX), tend to be cheap, between $50 and $300, so troubled TV manufacturers won't exactly find safe haven in making new standalone streaming devices. What that boost demonstrates, though, is a willingness by consumers to spend on streaming products.

The industry responds

It looks like the television industry is already paying attention, considering what's on display at this year's Consumer Electronics Show. Google (NASDAQ:GOOG) is pushing its revamped Google TV platform hard, growing its stable of device partners from two to six. Samsung, Vizio, and Sony are all showing off new television sets with Google TV streaming services built in. In fact, all of Sony's new Bravia television models (relatively few compared to past years) emphasize access to streaming services - not just Google TV but the company's own Sony Entertainment Network media stores. Samsung is pushing its line of ES8000 Smart TVs, with streaming content and game apps like Rovio's Angry Birds. Sharp (PINK:SHCAY), meanwhile, announced 20 new HDTVs at CES on Monday, all of which feature built in WiFi and SmartCentral streaming services.

Consumers didn't spend more on TVs during the 2011 holiday season, but they spent significantly more on streaming devices. The industry is banking heavily on consumers spending more on TVs when those streaming devices are built right in. Time will tell if that means new growth opportunities for longtime players in the market.

Of course, there will be new players as well. And time will tell if Samsung, Sony, and all the rest can compete with Apple when it delivers its Apple HDTV later this year.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

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