Hi-Def Surprise: Widespread Consumer Unhappiness With HDTVs

The dirty little secret of HDTV is that as many as 20% of sets are returned to retail outlets in some areas.

InformationWeek Staff, Contributor

December 21, 2007

6 Min Read

Fueled by rapidly declining average selling prices, an exploding supply of content and a vigorous consumer appetite, growth in high-definition television sales continues to accelerate this holiday season. But beyond the robust growth, glitzy new high-end displays and marketing frenzy lurks the dirty little secret of HDTV: An unsettling number of sets are returned to the retail outlets where they are purchased--as many as two in 10 in some areas during the 2006 holiday season, according to one analyst, James L. McQuivey of Forrester Research Inc. (Cambridge, Mass.).

Industry insiders say there are many factors behind this phenomenon, including still-maturing technology and consumer confusion about HD. Many sets were returned last year by people who wanted to buy a large TV but didn't realize they were buying an HDTV, McQuivey said. They got it home, plugged it into their standard-definition cable service and were dissatisfied.

"This year, returns should be closer to 10 percent as an average because retailers have learned that they have to educate buyers before they leave the store or the unit is just going to come right back to them," he said.

Bryan Burns, vice president of strategic business operations at cable network giant ESPN, said he continues to be "shocked" by the numbers of people who buy an HDTV set and never subscribe to an HD service.

Burns offered data from a recent study commissioned by ESPN and conducted by Knowledge Networks and Statistical Research Inc. that said only 64 percent of homes with an HDTV have HD programming via broadcast or cable, and that 13 percent of people who own an HD set do not know if they receive an HD signal.

HDTV consumers have to wade through highly technical marketing jargon, as companies tout complex technologies such as 1080p and motion estimation and motion compensation (MEMC), he added. "The topics roll off the tongues of engineers and other technologists, but to the consumer, it's a very confusing set of acronyms, terminology and phrases," Burns said.

There is particular confusion in the United States in light of the looming transition from analog to digital broadcast technology, set for February 2009, insiders said. Many people do not understand that HDTV is a subset of digital television.

"There clearly has to be some education that goes on here," said Henry Choy, a senior analyst at Jon Peddie Research (JPR; Tiburon, Calif.).

Tech advancements
While industry insiders agreed that educating consumers would reduce the return rates on HDTVs, they cited the need for technology improvements as well. Many said consumers are often wowed by the performance of HDTVs displaying slow-moving, brightly colored video on the showroom floor, but are disappointed by the performance of the set when they get it home.

"When you get home, you just don't see the same thing," said Choy. He blamed a host of issues, including compression technologies used by cable and satellite providers that are trying to jam as many channels into their bandwidth as possible, as well as the capabilities of the television sets themselves. "Both plasma and LCD still have deficiencies," he said.

Burns said the picture-quality flap reminds him of a revelation he had during the 720p vs. 1080i debate: It can be foolhardy to compare the viewing experiences of two viewers watching the same ball game in two different formats in their homes, given all the variables--such as content compression schemes, distribution modes and even differences in quality among TV models--that figure into the final experience.

Jos Klippert, marketing director of high-end and mainstream TV solutions at NXP Semiconductors (Eindhoven, Netherlands), said the industry has come a long way in recent years in moving to HD, but he added that there is room for improvement in many areas.

There is still too much standard- definition content being upscaled to fit an HDTV screen, Klippert said. Further, there are still limitations on many HD panels in the market, resulting in issues such as motion blurring--the so-called halo effect--where screen refresh rates are insufficient to keep up with the action of fast-paced sporting events and other content.

To combat the halo effect, as well as judder, ghosting and other quality issues, TV manufacturers are rolling out pricey sets with higher refresh rates, of up to 120 Hz. Chip vendors, meanwhile, are pushing MEMC technologies to make the motion look smoother.

According to Shyam Nagrani, a principal analyst at market watcher iSuppli Corp. (El Segundo, Calif.), all HDTV chip vendors offer some form of MEMC, led by NXP and Micronas (Zurich, Switzerland), which he said have been working on MEMC for years. He noted that most companies are offering MEMC technologies in a second chip that complements a video processor, while Trident Microsystems Inc. (Santa Clara, Calif.) is offering a single-chip solution that integrates MEMC into the video processor. (Klippert said NXP plans to field a single-chip solution in 2008 that integrates the functionality of its HDTV chip with its complementary picture-quality improvement chip.)

JPR's Choy said 37-inch-and-above HDTVs built this year use a two-chip solution, with one chip that serves mainly as an MPEG-2 decoder and a second for video processing. Most sets below 30 or 32 inches use a single-chip solution, he said. At 30 or 32 inches, more-expensive sets have generally gone with a two-chip solution, while less-expensive sets have used a single chip, he said.

Set manufacturers and HDTV chip vendors alike have incentive to address picture-quality issues and add features to stem the erosion of average selling prices on flat-panel TVs, Choy said. "We are certainly not at the end of the technology curve yet," he said. "We've got some ways to go. Companies like NXP and Trident are able to add in new features so that next year, instead of having their chips drop [in price] 20 or 25 percent or some huge number, they will only drop something like 10 or 11 percent."

Klippert said product introductions at the IFA consumer electronics trade show in Berlin a few months ago provided evidence of things to come. "There is a big trend within the set maker industry to go to these higher refresh rates to deliver the fast-action movies, but also major sporting events, in the best possible resolution and sharpness," he said.

As set makers work to offer more features at lower price points, consumers stand to benefit, according to Steve Liu, a product marketing manager at Trident.

"The sweet spot and features needed each year are migrating upward," Liu noted. n

Dylan McGrath is a freelance writer based in San Francisco.

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