Name a company not getting into the TV business...

Remember 5 years ago when buying a TV involved looking at maybe 3 or 4 brands... you had your usual suspect such as: Sony, JVC, Panasonic, etc. Well in the very near future a better question appears to be "What consumer technology company isn't in the TV business?" All of the following companies have announced their intentions to enter, or are already in, the digital TV business: Gateway, Dell, HP, Motorola, and now Cannon. Why is there a rush into the television market? It is simple economics... think of it in the following way: (Note, most of the data below is just an educated guess on my part)

There are approximately 100 Million homes in the US. Let us assume that on average there are 2 TVs per home. That gives us around 200 Million television sets in the US. Most (as in like 99%) of these tv sets are not HDTV compatible. In a normal year around 10 Million TV sets are sold. Think of people buying a new TV set every 10 years and moving the old set down to the basement. So in the past, the US television market was about a 10 million unit business with companies like Sony having great brand recognition, distribution, manufacturing capabilities, etc. Not exactly an attractive market. So what has changed? HDTV.

The move from today's NTSC format to HDTV is expected to greatly accelerate the replacement cycle of TVs. Broadcasters are supposed to give up their analog frequencies at the end of 2006 or when 85% of consumers are capable of receiving digital broadcasts, which ever comes first. So now the entire consumer buying cycle for televisions is thrown off. As early adopters buy HDTV sets and the amount of HDTV content grows, a virtuous cycle is created because more people are exposed to HDTV consumers see the value proposition of the better picture and word of mouth starts to grow. I am certain that analysts across the country have done this analysis already, but lets assume that the replacement rate for TVs double over the next 5 - 7 years. That means that the market is now double in size! 20 Million units per year, and since these products are considered high end, the margins will be attractive to players like Gateway, Dell, and HP who are used to PC style margins. Also, given the projected dominance of LCD in the marketplace moving forward and that these traditional computer companies have an understanding of LCDs due to the 15 - 17" screens they have been selling with desktop units the opportunity is too large to pass up.

Summary: The switch to HDTV will greatly increase the unit market size in the short term (next 5 - 7 years). This increased market size, high margins, and familiar technologies are very attractive to companies like Dell. Additionally, the switch to HDTV will open up what I call the "entire entertainment stack" to new producers. (entertainment stack = DVD / DVD-R, DVR, VCR, Home theater, etc.) With all these new entrants expect there to be a shake out period and expect a small number of these new entrants to be long term players in the TV market.