Michigan firm finds Sony is a demanding customer – but a loyal business partner.

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Sometimes you have to trust your instincts – and never mind the numbers. That, in a nutshell, was the situation that Center Manufacturing Inc. found itself in six years ago as it negotiated with Sony Corp. of America on a bid to supply welded frames for the Trinitron TV sets made in Sony’s San Diego manufacturing facility.

Sony had decided that Center, a precision metal fabricator based in Byron Center, Mich., had the makings of a good business partner. But the two companies were at loggerheads over price. Sony was pretty firm about what it was willing to pay for the frames. But Center executives weren’t convinced they could live with Sony’s target price.

“We were scared, actually,” confides Dick Nielsen, who became Center Manufacturing’s president and CEO in mid-June following a management/employee buyout of the 25-year-old firm. “At that time, we were a much smaller company than we are today.”

Tooling up for the Sony business meant a capital investment of nearly $1 million and installation of new process technologies, including shot blasting and heat treating, which it had little or no experience with. Moreover, the company – founded as a metal-stamping outfit – would be working with a very specialized grade of steel, formulated to Japanese specifications. And the aperture grill (AG) frames would have to be stamped, precision welded, and milled to very tight tolerances – to avoid problems with expansion and contraction when the frames are exposed to intense heat inside a TV set.

“We were looking at having to hold tolerances of plus or minus a quarter of a millimeter on components coming off the presses,” Mr. Nielsen recalls. “At the time, we weren’t sure that was possible with this [steel] material. We hadn’t had any experience with it. And we were afraid of making a mistake, because the financial stakes were quite high.”

But Sony was confident that the Michigan firm-chosen after an extensive search – had what it takes to handle the job. “They thought we could get together on a price,” Mr. Nielsen recalls. “Finally, they said, |We’re going to take you to Japan and show you how to manufacture it.”‘

Sure enough, soon afterward, Mr. Nielsen and Dennis Smith, a Center project engineer, flew to Nagoya, Japan, where they visited Yajima Kogyo, one of Sony’s established frame suppliers. “We got a real dose of confidence,” Mr. Nielsen says. “Plus, we went to school. Their vendor actually showed us how to design the equipment we’d need.”

The visit alleviated most of Center’s concerns about manufacturing feasibility, and, subsequently, the disagreement on unit price was resolved.

“But, frankly, we kind of took a leap of faith,” Mr. Nielsen says. We could never really justify the numbers that we got our price down to. Yet it was something that we wanted to do. And it has turned out real well. In retrospect, the $1 million investment we made is probably the best million dollars we’ve ever spent.”

Today, Center is producing frames for the 20-in. Trinitron TV at a rate of more than 2 million a year – nearly triple the original volume. About 30% of its output is now exported to a Sony plant in Singapore. Perhaps more significant, the Sony contract – which paved the way for business from other Japanese transplants – has spurred Center’s growth from a $20 million-a-year firm in 1988 to about $55 million this year, a period during which its employment climbed from 130 to more than 400.

Along the way, however, there were a few bumps in the road.

One of the things Sony looks for in a supplier, advises John Pion, director of purchasing for Sony Electronics Inc., is the ability not only to meet stringent quality standards, but to maintain them as volumes double and triple. “Some suppliers are very good at a certain volume, but their quality drops off when the volume goes up,” he notes.

Early on, Center struggled with quality problems. “They had a very slow start-up,” recalls Arden Adelgais, purchasing manager for Sony’s display-tube business, who has worked closely with the Michigan company. “There were problems in welding the frame and then milling it down to the proper radius. It took them about five months to be able to build up volume and maintain quality.”

But Sony wasn’t about to let its new partner dangle unaided in the winds of start-up difficulties. In mid-1989, engineers from Sony’s San Diego complex and from Yajima in Japan paid a series of visits to the suburban Grand Rapids plant to help Center’s engineers “tweak the equipment” and make adjustments, Mr. Adelgais recalls. The entourage from Japan included Hisao Kume, the chief inventor of the Trinitron frame, who spent many days at Center offering advice and encouragement.

Today, the Michigan firm produces more than 180,000 AG frames a month – with a low defect rate. “They have no real quality problems,” Mr. Pion says. “There is no doubt in my mind that they are a world-class supplier.”

And there is no doubt in Mr. Nielsen’s mind that Sony is a world-class customer.

“They are good people to do business with,” he says. “They are extremely demanding. They know what they want – and they know why they want it. But they are very reasonable. I think that we, as a company, are better because of the discipline we’ve learned from doing business with them. And technically we’re much better. We didn’t have any robotic experience, for example, until we took on the Sony project.” Now the company has about 30 robots in its three plants, two in Byron Center and one in Cobourg, Ont.

“Technically, this project has taken us to another level,” Mr. Nielsen says. “So our success as a corporation because of this piece of business really transcends the profit we make on it. And I think the credibility we’ve gained by doing business with a well-known Japanese company has opened some doors for us.” Center’s customer base now also includes such names as Honda, Nippondenso, Yamaha, Toshiba, and Yamakawa (a subsidiary of Nissan).

Sony, one of the pioneers in Japan’s movement to transplant manufacturing operations, built its first North American plant in San Diego in 1972. Initially, it simply assembled components produced in Japan. But during the last 20 years, manufacturing operations – and component sourcing – have been shifted to the U.S.

When it decided in the late 1980s to seek a U.S. supplier for AG frames, Sony sought out vendors it would feel comfortable with. “They really looked hard at the philosophy of the company,” recalls Derek Cushman, Center’s sales director. “They wanted to know whether we were willing to learn and to work with them for the long term.”

Mr. Pion points out that one of the characteristics Sony seeks in a supplier is a willingness to jointly pursue cost reduction. And Center’s efforts along that line have been aided by volume increases related to its exports to Sony plants in Japan and Singapore, which Mr. Pion and Mr. Adelgais helped to arrange. They were instrumental in persuading Sony executives that exporting U.S.-made frames would reap cost benefits stemming from economies of scale. Besides, the notion of ushering a supplier into the export arena is not inconsistent with Sony’s philosophy of “local globalization,” Mr. Pion says. “If we find a world-class supplier, we can send its products anywhere in the world.”

That philosophy paid an unexpected dividend last fall, when Sony officials feared that a pending shortage of AG frames might force a production shutdown at its TV plant in Inazawa, Japan. In a closely coordinated effort, Mr. Nielsen and his team at Center came to the rescue, expediting the transportation logistics, to get urgently needed frames to Japan in just 15 days. It was the Michigan firm’s turn to live up to the code of supply-chain partnership.

Other U.S. companies could learn a thing or two from business dealings with Japanese-owned firms, Mr. Nielsen suspects. “But I think most American companies get discouraged before they get the opportunity to do business with a Japanese-owned customer,” he says. “It takes a lot of perseverence to develop into a supplier that can do business with a Japanese account. But what I’ve found with Sony and some of our other Japanese customers is that loyalty to the vendor makes it a true partnership. They spend a lot of time and invest a lot in developing a supplier. It’s not just a case of going with the low bidder.”

Sure, Sony got the price it wanted – as well as the quality it expects. But the partnership clearly hasn’t been one-sided, Mr. Nielsen asserts. “It has turned into a win-win relationship for both of us.”


Key decision-making shifted from Japan to San Diego in 1987.

When Sony Corp. established its first U.S. manufacturing facility in San Diego in 1972 – at a time when American TV manufacturers were moving their production offshore in search of cheaper labor – it was strictly an assembly plant. All of the key components came from Japan. But in the years since, Sony has gradually expanded its U.S. manufacturing capability and its reliance on domestic suppliers.

“With relatively high labor costs in the U.S., it did not make good business sense to have only simple assembly operations here,” stated Kunitake Ando, then president of Sony Engineering & Manufacturing of America (now Sony Electronics Inc.), at an industry conference early this year. “Therefore, one of our top priorities was to increase local procurement of parts, especially those of key components.”

A major step, he noted, was the 1987 decision to move the business group responsible for American TV production to San Diego – which meant that product planning and design decisions would be made in San Diego rather than in Japan. “Now we can make decisions locally with those who are closest to the customer, resulting in quicker response and increased customer satisfaction.” Moreover, U.S. design capability has accelerated the procurement of domestic parts. “Local design enables our American engineers to design U.S. manufactured parts into new products and models,” Mr. Ando observed

John Pion, purchasing director for Sony Electronics, points out that in 1986 U.S.-made parts accounted for only about 18% of the total cost of the parts that go into the San Diego plant’s Trinitron TV tubes. “Today,” he says, it is about 95%.”

Categories: TV

Getting the big picture

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Large-screen televisions, with diagonal screen sizes 25 inches and above, are a rapidly growing segment of the consumer electronics market. Consumers purchased 8.8 million large-screen TVs in 1993, up from 7.3 million in 1992, and sales are expected to grow 17% in 1994. Large-screen TV product lines from several manufacturers, along with marketing strategies, are discussed.

With 25- and 27-inch direct-view screen sizes plus various projection systems leading the way, sales of larger-screen color televisions in 1994 appear to have nowhere to go but up.

The Electronic Industries Association reported unit sales to dealers of 25-inch and up screen sizes at 7.3 million in 1992 and 8.8 million in 1993, and the association is projecting a 17 percent hike in 1994.

It also reported 25-inch and up accounted for some 30 percent of all color TVs sold in 1993, with the majority of that 30 percent being 25- and 27-inch systems.

Falling prices, better picture quality, features like picture-in-picture, replacement cycles and even lifestyle changes–which is where home theater comes in–were cited by industry participants as escalating consumer interest in the category.

Consumer demand is particularly strong in the 25- to 27-inch arena, noted Britt Beemer, chairman of America’s Research Group. “We believe manufacturers trying to sell home theater should focus more on those sizes rather than the larger screen sizes they often promote in home theater packages,” he observed.

“When you combine audio and video, you don’t need overpowering individual pieces asserted Mark STephenson, marketing vice president for color TVs at Philips Consumer Electronis. “With a good sound system and a good TV, even a 27-inch can be home theater.”

Consumers de finitely want bigger screens, noted Ray Navarrete, vice president of strategic merchandise planning at Edison, N.J.-based Tops Appliance City. “The TV is one of the few big-ticket purchases the whole family gets to enjoy; having a larger-screen TV in a family room is something everyone can get excited about.”

Navarrete pointed to the replacement business in projection systems as one example of the move to larger screen sizes. “People who bought first-generation projection TVs now find they can buy a set that gives them better picture quality at a better price point and nifty features like picture-in-picture.”

At Savemart, 27-inch is definitely the champ, representing 18 percent of te New York-based chain’s larger-screen business. Close behind is 25-inch, at 14 percent (but with no margin left, according to Savemart officials), followed by 30- and 32-inch combined at 9 percent, 35-inch at 6 percent and projection systems at 5 percent.

At this point, the 25-inch and over range represents 50 percent of Savemart’s TV unit sales; three years ago, that number was 25 percent. “It’s all marketing and price points pushing larger screens,” noted Ben Blank, chairman. “Also, the overall size of larger screen models has beenr educed, so there are more places they can be put.”

All new Savemart locations will be built to accommodate larger screen TVs. “From this point on, we’re building in a department for these products rather than just squeezing them in,” Blank stated.

This kind of thinking has to be music to a supplier’s ears. Jon Lezon, national product marketing manager for color TV at Sharp Electronics, said his firm this year will work to get away from commodity-driven sizes such as 25-inch and focus on “value-driven” larger sizes like 27-inch.

“We see basically flat sales in 25-inch by 1995 but continued growth in 27-inch. We want to expoand our distribution as much as we possibly can and will become much more focused on 27-inch,” he commented. “We will also become very involved with derivative lines for warehouse clubs and mass merchants. Larger screen sizes become increasingly important as home theater evolves.”

Home theater coupled with better value is on every supplier’s mind. Gregory Gronowski, vice president for product management at Zenith Electronics, said his firm’s goal for 1994 will be to offer enhancements to its AVI line, introduced last year, including various audio and cabinetry improvements.

“We’ve gained a lot of momentum with this line, some of which has to do with home theater,” he remarked. “What made AVI different was a whole new way of addressing video processing in terms of picture performance and audio improvements.”

The AVI line starts with 27-inch at $599 and covers every key price point from there, according to Gronowski. “We try to give the customer a good value, which has been our strategy for many years. Coupled with our brand name, we command high customer loyalty,” he said.

Fred Erdmann, national TV marketing manager at Quasar Company, said his firm’s upcoming Crystal Vision line (HFD, Feb. 28, page 61) will be composed in part of moderately priced 27- and 31-inch models and will serve as a absolute statement about where the firm wants to be in larger screen sizes in 1994.

“We’re already in the ultra-high performance area, and we will go more main-stream with this new line,” he related. “All models will feature dark tint tubes and improved phosphors; we’re borrowing some of the technology from our high end and bringing it down to our general line.”

Citing the new line’s 27-inch models, Erdmann said: “At retail, we’ll shed about $200. Previously, we’ve been at the $700 to $900 level and are now headed for $500 to $700. We’re trying to become more in tune with the industry itself and make better sense of our product line, with a special emphasis on home theater has helped drive Mitsubishi Elecetronics’ larger screen business. Bill Lowenthal, manager of product development, remarked: “We’ve been involved in home theater since the very beginning. New projection systems with smaller cabinets have allowed more people to get involved in home theater. Our new 45-inch tabletop system (HFD, Feb. 7, page 92) has been well received, and we see this as the category of the future; it answers obections about not having room for a projection TV and gets new consumers into the big-screen market.”

Getting customers excited about the category depends on a proper demonstration, he added. “The importance of the retail demonstration and the quality of the signal used to give that the demonstration cannot be overemphasized. Our most successful dealers are the ones that pay attention to these aspects. It’s also interesting to hear customers say how much they think projection TV has improved. We feel that’s really an exciting story the retailers can tell through effective merchandising.”

Projection TV is also hot for Thomson Consumer Electronics, which claims to have had the fastest-growing projection line over the last two years. “It’s all about improved picture quality,” noted Dave Spomer, RCA brand manager. “We’ll also have a continued emphasis on 27-inch and above based on consumer demand for a bigger, better picture as they replace older sets.”

As with many other suppliers, Thomson views home theater as the chief building block to selling larger screen sizes. “The whole home theater phenomenon is becoming ore of a way of life for people, many of whom are not doing as much traveling as they used to. They’re staing home and want to be entertained,” said Spomer.

Bringing that theater experienced into the home is paramount in pushing all larger screen sizes but most particularly projection products, noted Diane Kilroy, director of marketing, Consumer TV Products Group, Sony Electronics.

“Better audio and improved picture quality have played their part. The customer knows he can get better picture quality than in the past, particularly in prediction,” she said. “Also projection systems can now be put in places they couldn’t fit before. It’s no secret to say our emphasis is on 27-inch and over this year, including projection.”

Philips has also experienced big growth in both 27-inch and projection. Marketing executive Stephenson said 27-inch stereo TVs have become an excellent seller right up there with 25-inch and for the same reasons: an acceptable price point and a size that appeals to the consumer.

“The consumer sees a discernible difference between 25- and 27-inch, and 27-inch has become available for just a little more money than 25-inch,” he explained.

Forty-six-inch projection TV also has been a phenomenal seller for Philips, according to Stephenson. “It’s not an overpowering size and yet offers a tremendous viewing experience,” he said, adding Philips sees projection TV not as a replacement but a primary viewing set for heavy TV watchers who have decided to make the investment to maximize their viewing experience.

At Pioneer Electronics, which offers only projection systems, video brand manager Dave McCollough said the firm’s best seller has been a 50-inch system that features Cinema Wide, an aspect ratio that approaches more of a rectangle than a box, and Full Cinema Mode, which allows letterboxed pictures to be viewed minus the black bars above and below.

“We expect strong continued sales in projection systems with home theater the driving force,” he said. “Customers want and expect a higher level of performance in picture quality and overall entertainment experience, and they are being that with today’s products.”

The strongest sellers at Hitachi Home Electronics have been 50-inch projection systems, followed by 27-inch direct view systems. “We have a 50-inch Ultra Vision model at $2,799 which we could have sold twice as many as we produced,” noted Gary Bennett, the firm’s vice president of sales. “And our 27-inch UltraBlack at $599 really started getting our TV business moving last June.”

Bennett added the firm also has experienced strong growth in 31-inch, with 35-inch coming long. Two Hitachi predictions for the rest of 1994: More products will have improved sound, and more dealers will start displaying and selling furniture as part of the home theater push.

Steve Nickerson, assistant vice president of marketing for color TVs at Toshiba America, said 32-inch proved particularly hot last fall because of price points, heavy promotion and brand name visibility (Sony and Zenith are two other 32-inch players, and Philips will shortly join them). “Thirty-five-inch was also extremely strong for us, particularly a top-of-the-line model with dark tint and complete audio package.”

Toshiba recently entered the widescreen projection business (HFD, Jan. 31, page 84), which led Nickerson to remark: “Retailers will need to explore how much commitment they need to make to widescreen product which will see a lot more software this year. Having the right product will be important.”

While he acknowledged the strength of 27-inch, Nickerson said the market will have to deal this year with the negative impact of lower-priced, $399 models on better-margined, $500 to $600 sets. “That business will depend on how retailers handle their mix and how they train their sales force,” he averred.

Robert DeYoung, assistant general manager, marketing for Matsushita Television Company, pointed out 27-ionch may be the biggest seller but 30-inch and up is coming along. Panasonic will get into 35-inch direct view this year, he added.

“There will be a continued push for better picture quality in the industry,” said DeYoung. “The next buzzword will be ‘high-contrast picture quality,’ and our strategy is built around the CRT in 1994.”

Jeff Imada, general manager for the color TV division of JVC, said his biggest sellers have been 27-and 31-inch models based on price, design and features. “We changed the cosmetics this year. I predict the industry will grow 6 to 7 percent over the course of 1994, and there will be a steady increase in the TV business especially with TV/VCR combines sales,” he remarked, adding electronics/appliance chains remain JVC’s best source for selling larger screen systems because of the need to demonstrate features.

Three companies that will begin emphasizing larger screen sizes this year are Goldstar, Emerson and Samsung.

Philip Petescia, marketing director for TV/VCR at Goldstar, said his firm currently has two 25-inch, one 27-inch and one 31-inch. “We will introduce one more 25-inch this summer, and we’re working on an additional 27-inch,” he noted. “Right now we’re building our 20- and 25-inch business, and next year we’ll concentrate on 27-inch with two new models including one with our Art Vision Ultra Flat tube. We just completed a factory that can make flat tubes, so we’ll be able to sell a 27-inch flat screen TV with picture-in-picture for the same price as a basic 27-inch from another manufacturer.”

Samsung, which had very little presence in the category last year, now has three 25-inch, three 27-inhc and one 31 inch. It plans to introduce one additional 31-inch in the second half (HFD, Feb. 21, page 74). Marketing manager Kevin Procter commented: “We’re saying we’re no longer an entry-level player in this market. With our expanded, full feature line, we expect to make an immediate impact on the growing large screen market.”

Emerson currently has two 25-inch, one 27-inch and one 30-inch model. Marketing vice president Gerry Calabrese Said: “We have to concentrate on improving our business in larger screen sizes, but this will take us a bit more time than everyone else because of our distributing, which is the non-selling floor like Wal-Mart and Target. We’re trying to make something happen in the second half but our emphasis frankly will be on large-screen combination TV/VCR products.”

Emerson, which offers a number of smaller screen combo units, introduced its first 25-inch combo model at Winter CES. Calabrese said: “We’re going from 19- to 25-inch here, which seems a natural progression. There has been some 27-inch product at the high end, but I understand it hasn’t done very well. We feel 25-inch means convenience and features, hits a price point and is a package that allows the consumer to utilize both TV and VCR technology in the most flexible way.”

Categories: TV

Experts see limited TV/PC/phone/set-top convergence

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Cross-industry projections of an eventual convergence of the television, computer, cable set-top and telephone are giving way rapidly to a more segmented consumer electronics vision.

However many wires drop into cable homes of the 21st century, operators and manufacturers say, signals almost certainly will be bused via wires and radio frequencies to a variety of devices around the house.

On the TV side, they say, consumers will gradually replace 190 million analog TVs with digital/analog TVs, allowing the set-top to become a simplified “setback” descrambler.

On the other hand, TV and VCR manufacturers will contend with set-top makers to incorporate increasing interactive capability, as well as digital processing, into their products.

The consensus, however, is that most of the interactive revolution in cable homes will take place not in the TV-centric living room theater, but in a computer-centric work/study room down the hall, as well as over screen phones, pocket phones, video phones, stand-alone game machines and personal digital assistants (PDAs) spread across the house and neighborhood.


New products at this week’s Western Show in Anaheim, Calif., will heat up the debate over where future set-tops will end and TVs begin.

GI will bring a rough mock-up of its “Joey” TV-in-a-pouch concept. Joey leaps back out of the closet for the first time since it upset cable-consumer electronics compatibility negotiations last May.

At that time, TV makers attacked the idea that any manufacturer would choose to make “dumb” displays, thereby opening itself up to competition from companies like GI or Apple Computer Inc. to make removable TV components.

Nevertheless, Dan Moloney, GI’s director of subscriber product management, said GI will likely sign a Joey development agreement with a “major consumer electronics manufacturer” and/or a display maker within six months.

Such a deal could turn the fundamental definitions of TV, set-top and computer upside down.

Gary Shapiro, vice president of the Consumer Electronics Group of the Electronic Industries Association, believes that the 1992 Cable Act — which mandates new compatibility rules — envisions a “converterless future.”

At bottom, few if any cable operators disagree. TV makers and others are welcome to take on the digital decompression, tuning, graphics, “everything but the security,” said David Fellows, senior vice president of engineering and technology at Continental Cablevision Inc. “Every time I convince a customer to buy my capital for me, that’s great.”

Zenith Electronics Corp., for example, will begin selling a new TV in January that incorporates StarSight Telecast’s interactive on-screen program guide — the same guide now featured in advanced set-tops.

Consequently, the new dividing line between TV and set-top may be who pays (consumer or MSO), rather than whether a digital decompressor/interactive module slides into a TV or a separate box.

In general, said D. Joseph Donahue, senior vice president of technology and business development for Thomson Consumer Electronics, “you probably start with a box for a lot of services. But the successful ones migrate to the TV receiver.”

GI’s Moloney agreed that duplication among set-tops, TVs and VCRs must be removed. “What we’ve proposed with Joey is to find the right dividing line: Which technology and functionality goes into the consumer electronics device, which into the ‘compuverter’?”

That dividing line may remain a moving target, said William Luehrs, vice president of video systems for Scientific-Atlanta Inc. Given the threat of upsetting a consumer by making his high-cost TV obsolete with next week’s technological advance, he argued that “the world is better served by a single device to carry the upgrade evolution. The set-top has provided that for 15 years.”

The computer industry has gone with components for the same reasons, he said. “Each category of component is on a different upgrade timetable.”


A variety of new consumer interface products also will illustrate the segmented home terminal vision during the Western Show.

Zenith and Digital Equipment Corp. will lead a pack of vendors showing modem products for Ethernet and Internet access over cable. GI will exhibit prototypes of a PC circuit board which functions as a cable modem and tuner.

As part of its Linx interactive-module-in-a-set-top package, GI will also show a wireless set-top component designed to communicate with PDAs. S-A is developing a set-top component to interface with home thermostats for energy management applications.

Primarily, MSOs have realized that more than 30 million PCs in about 25 percent of U.S. homes can be served now.

“I have renewed hope for the computer becoming my interactive platform,” said Fellows. Indeed, he believes that in five years, up to 30 percent of his subscribers will have not just PCs but multimedia-CD-capable computers.

Consequently, Fellows wants manufacturers to “cram a computer into the set-top,” rather than the reverse.

Dean DiBiase — hired away from Antec Corp. two months ago to form new cross-media partnerships for Zenith — went further. Assuming family “contention” for control of the living room TV, Zenith will develop partnerships and new products in several areas additional to higher-speed PC modems.

It also will develop interface and display products to serve screen phones and video phones in the kitchen; Nintendo and Sega games on bedroom TVs; PDAs and other new “appliances” around the house, and bus and software products “to branch off applications to the proper spot.”

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ATV alliance bends on display scan rift

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The Advanced Television (ATV) Grand Alliance has acceded to TV set maker demands and backed off from its original plan to require all 34-inch and above sets to use only computer-like progressive scan displays, the consortium revealed last week. The FCC Advisory Committee Technical Subgroup was told the Grand Alliance now believes barring current TV interlace scan displays from the larger size sets “may not be appropriate.”

Further Grand Alliance differences on scanning formats came to light when the FCC Advisory group was told one of the consortium’s five partners–the Massachusetts Institute of Technology’s Advanced Television Labs–continues to register “a minority position” opposing any use of interlace scanning at all in the new ATV (formerly HDTV) standard being developed.

The scanning format has erupted as one of the most controversial areas of the new combined ATV system being put together by the Grand Alliance of the original contenders: an AT&T/Zenith Electronics team, a General Instruments/MIT team, and a group consisting of the David Sarnoff Research Center, Thomson Consumer Electronics and North American Philips (EN, May 31).

MIT and a bevy of U.S. computer firms want progressive scan mandated for ATV sets to handle interactive and multimedia displays that suffer in interlaced displays. By contrast, TV set makers want to prolong the use of interlaced displays they now use.

As a compromise, the Grand Alliance originally proposed making both interlaced and progressive scanned displays an option in TV sets under 34-inch size, but mandating only progressive scan in the larger size sets.

Japanese TV set makers especially questioned the exclusion of interlace scanning from large size HDTV receivers. Japan has been concentrating HDTV efforts on large size sets–almost totally with interlaced scanning. Laurence Thorpe, Sony America vice-president of production technology, wrote the FCC advisory panel that the Grand Alliance proposal “would appear to fly in the face of historical precedent, which generally leaves receiver performance and features to the dynamics of a competitive marketplace.”

The foreign opposition to progressive scanning is in contrast to U.S. computer industry arguments that this scan mode would give American companies a competitive edge in the new ATV market. Rep. Edward Markey (D., Mass.), chairman of the House Commerce telecommunications subcommittee, suggested in hearings last month that foreign rivals entrenched in the older interlaced scan technology could be surpassed by U.S. firms which already have a major lead in progressive scanned displays.

The Grand Alliance last week tried to assure industry and government interests that their final ATV design “hasn’t been set in concrete.” Robert Rast, GI vice president of HDTV business development, told the FCC panel, “We’re still in the development phase. The cake hasn’t been baked yet.” He said the group welcomed outside comments, as it tried to put together its final system design.

Scanning format isn’t the only unresolved issue within the Grand Alliance, the FCC advisory group heard last week. Questions still remain on the video compression standard, which proposes a variant of the upcoming MPEG-2 standard. The Alliance has its own customized algorithm it hopes can be accepted as an extension of MPEG-2, and the group also does not use the “B frame” portion of MPEG because of the cost and complexity this could add to ATV receivers.

Other open issues are said to include how to migrate to higher line scans from the present 720 and 960-line format, using 59.95Hz or 60Hz frame rates, and total pixel counts of the lines.

The timetable calls for the Grand Alliance to have its final plan completed by September 30. That will be submitted to the FCC body to get a green-light to build the prototype that will go into testing next year. The Grand Alliance is now the only ATV concept being considered, since the FCC Advisory panel last week officially dropped the four original ATV proposals from consideration.

The Grand Alliance is now discussing what portions of the prototype each partner will make–in transport, transmission, video encoder, and video decoder. It is still undecided where these subsystems will be integrated into a total product to be tested. The group must also select from three contenders–Dolby, MIT or Musicam–to build the audio portion for the prototype.

Mr. Rast said the alliance expects to build and integrate its ATV prototype in nine months, which would be ready for testing by May 1, 1994. If the laboratory checkout is successful, the system would then go into field tests in Charlotte, N.C.

Categories: TV

HDTVs are here, for consumers and industry, too

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Development of high-definition TV in Japan is progressing along two lines: public and industrial applications. Sony Corp.’s announcement last November of an HDTV-compatible receiver for the home has been followed by announcements by all of Japan’s major manufacturers, causing anticipation regarding HDTV to rise.

By July, Fujitsu, Hitachi, JVC, Mitsubishi, Panasonic, Sony, and Toshiba had all announced 36-in. HDTV sets with cathode-ray tubes for the home. This was a step above the earlier, 32-in. CRT design. For industrial use, both Sharp Corp. and Sanyo Electric Co. Ltd. have announced liquid-crystal-display projection sets.

HDTV software is a major requirement before home HDTV sets become popular. It will likely come from one of two sources: broadcasts or packaged programs. Broadcasts will have to be made using satellites or cable TV, since there is not enough bandwidth left to fit HDTV into Japan’s ground-wave frequencies. As for packaged software, Sony, Matsushita, and Hitachi announced a joint HD-VCR standard in July, which should open up this market.

There are currently three broadcast satellite channels operating in Japan: two NHK channels and one private pay channel, Japan Satellite Broadcasting (JSB). All originate from the BS-3a satellite. The number of households receiving satellite broadcasts stood at 4 million, or 10% of all households, as of June JSB, which began operations only last December, has already attracted 400,000 subscribers.

One of the two channels operated by the national broadcaster, NHK, currently conducts tests for “Hi-Vision,” as HDTV is called in Japan, for one hour every day. Another satellite, BS-3b, having three transponders, was due for launch in August. One channel currently on BS-3a will be moved to BS-3b, one channel will be set aside as backup, and the third will be used solely for Hi-Vision test broadcasts eight hours a day starting at the end of the year. NHK says it plans to launch another satellite, BS-3h, in mid-1992, and BS-4 in 1997. At least one of these is to be used for 24-hour HDTV broadcasting.

Commercial broadcast stations seriously preparing for Hi-Vision compatibility are concentrated in the Tokyo or Kansas areas. If BS-3b is launched successfully, capital investment for HDTV studios and other facilities can be expected to rise soon after. Of the commercial broadcast stations, Fuji Television, followed by TBS, appear to be the most aggressive in pursuing Hi-Vision. NTV is active in pursuing compatibility with wide-screen formats, including extended-definition TV.

The biggest problem with HDTV at present is the price of the equipment needed for reception. The cost of an HDTV set is about $29,000–$14,500 for the 36-in. CRT monitor plus another $14,500 for the MUSE decoder. Manufacturers are rushing to be ready for Hi-Vision broadcasts of the 1992 Summer Olympics in Barcelona, Spain. Although they are fighting to get the price of equipment to about half its current level, they won’t be ready to mass-produce second-generation circuits for the MUSE decoder until 1993 at the earliest.

One method manufacturers are using to develop a market for HDTV sets is to produce relatively low-priced, NTSC wide-screen TVs, which are easier to popularize than full-scale HDTV. The first of these was JVC’s Multi-Wide-Vision set marketed in March at $7,300. A production level of 1,000 units per month is expected. NTSC wide-screen TVs from other manufacturers will likely be priced almost identically.

For perspective on HDTV penetration, it is enlightening to look back at the popularization of past TV formats in Japan. Traditionally, a new medium requires 10% penetration to be considered accepted. In Japan, this means that HDTV would need to be in 4 million homes. In 1959, when the proportion of households owning a black-and-white TV reached 10%, the price of a TV was $437, while the average household income was $255 per month. This means that a set cost about two months’ salary.

The same was true in the popularization of color TV. When the number of households owning a color TV reached 10%, the price of a set was $1,300 and the average household monthly income was $656. If this relationship still holds true today, then a $7,300 price tag on an HDTV set–twice the average monthly household income–could actually be low enough for wide-screen TVs to reach 10% penetration.

That’s why many industry watchers believe that offering a down converter plus wide-screen monitor is a good lead up to the popularization of HDTV. This same concept was used in Europe by the Eureka camp of Thomson SA and Philips Electronics NV to sell sets compatible with the D2MAC and PAL+ transmission systems. One possible problem with this strategy, however, is that consumers will mistake low-resolution, TV-grade equipment with Hi-Vision gear and be left thinking that high prices won’t buy good picture quality. If this happens the consumer might even come to shun HDTV altogether.

The ideal way to popularize HDTV is to get comparatively low-priced wide-screen sets into people’s homes, while keeping them aware of the higher picture quality HDTV provides and hopefully selling some true HDTV sets in the process. The importance of having consumers experience HDTV’s high picture quality themselves is also important.

From the beginning, NHK has said that a screen having a diagonal of at least 1 meter is necessary to be able to fully appreciate the advantages of HDTV. With a direct-view CRT tube, this would require a 40-in. screen. However, of screens currently being manufactured, the largest screen size that could be used in a comparison is the 36-in. HDTV size; 37 in. is the largest NTSC screen size available.

This is one reason why wide-screen projection TVs are being given more attention. NTSC rear-projection TV screens are becoming remarkably better looking with advances in projection-tube brightness and screen processing technology. Even front-projection TVs have become easy to install in homes ever since Sharp came out with liquid-crystal projection TVs. There is plenty of room left for technological advances in projection TVs.

Meanwhile, NHK is aggressively trying to put together a library of video software so that it can begin Hi-Vision broadcasting. But there is not enough software in existence. The price of making one hour of HDTV software per day or converting movies to the HDTV format (including copyright fees) is said to require an investment of $36 million to $44 million per year. When you add in the cost of operating a satellite transponder the costs become enormous. Broadcasters need to be prudent with the timing of their investments.

Although it appears that it will take a long time before HDTV can reach the 10% penetration level, black-and-white TV took seven years to get there and color TV took 10. It will take a lot of work by the HDTV industry to get anywhere near 10% diffusion.

Categories: TV

TV makers focus on upscale models

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Upscale models in the new crop of televisions being unveiled at the Consumer Electronics Show here this week incorporate a host of innovative features and improvements to both picture quality and sound.

With television sales expected to be flat this year, supplies are viewing these high-ticket sets as a means of compensating for losses in unit sales.

“We are looking at a 200,000 increase in unit sales for the industry this year, which is relatively flat,” said Jeff Mullarkey, Toshiba’s assistant vice president of marketing and merchandising, “but people are now spending more money on better goods.”

Hot features this year include sophisticated on-screen menus with multicolored graphics; universal remote controls with learn modes; built-in MTS/SAP decoders; digital special effects; super-VHS INPUTS: and surround sound circuitry.

TV manufacturers are racing to develop the industry’s most extensive on-screen menus with colored graphics, coupled with the most intelligent remote controls.

For instance, Magnavox has recently introduced with its new TV’s a third-generation universal remote that features an LCD screen. Magnavox offers several versions of the remote control; the most sophisticated variation can adjust all audio and video functions, including picture-in-picture. It also allows the viewer to control a cable box and practically all brands of remote-controlled VCRs, Furthermore, Magnavox’s top-of-the-line remote control features a learn mode, enabling it to learn the functions of 16 different remotes.

“The color television business has reached a level where convenience features, such as total remote, have become an integral part of the consumer’s purchasing decision.” said Mark Stephenson, director of marketing, Magnavox color television.

JVC has come up with a new line of television featuring the Master Command II line of newly designed remote controls. The remotes can access new menu items, including the Home Sitter, A/V Status Memory, and Channel Guard.

The Home Sitter feature is designed to make the television a supplementary home security system by permitting programming of the set to turn on and off while the viewer is away. A/V Status Memory allows storage of different picture/sound fine adjustments of two program sources. Channel Guard allows viewers to set up to three guarded channels, preventing access for viewing unless a previously selected ID number is entered.

According to Al Levene, JVC’s national sales and marketing manager/color television division, the remote controls were designed with user-friendliness in mind. “We made the remotes very easy to use in a dark bedroom. We made the frequently used buttons very large and slanted, and put them in a corner of the remote,” said Levene.

Televisions in Panasonic’s new upscale line — called Prism — incorporate on-screen menus with multi-colored graphics that give visual confirmation of nearly all functions, including picture color adjustment. Furthermore, the sets all come with an intelligent remote control, capable of learning the commands of other remotes.

For each operating function, the Prism on-screen display presents a bar graph that also offers a preset factory standard. Users who choose to alter this setting can do so by touching a single button on the remote control. With the on-screen graph, consumers have a visual reference of their choice settings.

RCA has broadened the number of its TV models that include the company’s ColorTrak chassis system. Last year, ColorTrak was basically featured just in RCA’s 27-inch sets. ColorTrak allows sophisticated on-screen menu tuning. Most of these sets come with the Dimensia remote control, offering an enormous amount of functions.

Suppliers are starting to realize that improvements in TV sound are just as important as improvements in picture quality. A study released this year, which was conducted by Zenith Electronics Corp. and the Massachusetts Institute of Technology, found that consumers watching a TV with stereo sound perceived the picture to be better than the picture on a TV with mono sound.

The Electronic Industries Assn. has projected that 40 percent of all color TVs sold in 1988 will include a built-in stereo decoders. Prompted by growing consumer demand and an increasing number of broadcasters getting involved with stereo, TV suppliers are putting MTS/SAP decoders into more of their models this year.

Surround sound is also starting to catch on although most manufacturers are still limiting this feature to a few big-screen sets.

In a unique approach to TV sound enhancement, Toshiba has teamed up with Carver — a high-end audio manufacturer — to jointly develop a new line of stereo televisions that feature the Carver Sonic Holography System. The effect of the system was described by the two companies as three-dimensional sound.

“Unlike other stereo enhancement systems and add-on devices, Carver’s Sonic Holography System creates this revolutionary sound by processing the signal to eliminate virtually all inter-aural crosstalk. It restores the depth and ambience in the stereo image, which are masked in ordinary stereo playback,” said Toshiba’s Mullarkey. The new sets are slated for delivery in the fourth quarter; the sets will cost the consumer several thousands of dollars.

Several companies are developing high-definition televisions (HDTV), although applications for consumer use are expected to be several years away.

A forerunner of HDTV called Improved Definition TVs (IDTVs) is on display at the Phillips, Toshiba and Panasonic booths.

Phillips’ IDTV, which is slated for fall availability, utilizes digital technology. According to the company, through non-interlace scanning, the system doubles the number of scan lines from the standard 262.5 lines every 1/60th of a second to 525 lines every 1/60th of a second, or a total of 525 lines per field. Field-comb filtering are also employed to improve the picture.

“The Phillips IDTV system is the first giant step available today toward the evolution of high-definition television utilizing the existing NTSC television system,” said Ron Marsiglio, vice president of product planning for Phillips Consumer Electronics. “It represents today’s building-block approach on this technological path for achieving high-definition television in the mid-’90s.”

Toshiba’s IDTV is model CZ2898. According to the company, conventional television receivers utilize an interlaced scanning system that uses two fields to constitute one frame. Each field of 262.5 lines is separately scanned in 1/60th of a second; both fields together comprise one frame of 525 lines.

The new IDTV from Toshiba was said to utilize a vast memory capacity to store the signal information of each field and combine them to form a complete picture. The result is that two fields combined — totaling 525 lines — are produced each 1/60th of a second. Although Toshiba showed IDTV technology at the January CES and will show a 28-inch IDTV model at the June show, it has not yet disclosed availability or pricing information.

Panasonic will display here a 27-inch television with IDTV technology, according to Jerry Surprise, product/merchandising manager, Matsushita Electric Corp. of America’s North American television division. He said the company has set not yet set marketing plans for the unit.

Digital features, such as picture-in-picture, are available from several companies on a few select sets.

Sony has introduced a 27-inch tabletop monitor/receiver that incorporates what it calls advanced digital picture-in-picture. With two built-in tuners, the new digital feature in model KV-27TX20 offers the following functions:

Split-screen — Places pictures from two channels side by side on the screen. The viewers can then switch the stereo sound from one channel to the other by touching the swap button on the remote control;

P-I-P — Displays a second channel in whichever corner of the screen the viewer selects. The inset picture can be set at one-ninth or one-quarter screen-size at the push of a button;

Replay — Allows the viewer to run an instant replay. The previous two seconds are played back in 16 frames, and will repeat continuously until stopped;

Channel Index — Display seven freeze-frame inset images along the side and bottom of the screen to monitor the programming on other channels in the tuner memory. Information is updated automatically every four seconds.

Most suppliers this spring are broadening their lines to include new screen sizes. Sony has unveiled two 32-inch models, which are the largest direct-view TVs ever offered by Sony and marks a new screen size for the industry. Meanwhile, NEC has introduced its first 48- and 52-inch projection TVs.

Categories: TV

Watch words

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Some new government figures came out the other day that make it timely to take a new look at jewelry store watch sales.

Preliminary figures from the 1982 Census of Retail Trade show that watches accounted for 12.5% of all sales that year in jewelry stores with payroll. Put in dollar terms, that amounted to just over $1 billion in sales–a very important slice of business. Now, that 12.5% figure is down from the 1977 Census high of 14.1%; that year, both the watch business and the economy were booming. But it is higher than the 12.2% recorded in the 1972 Census and much higher than the 10.3% which JCK research developed for 1979. These few figures make one thing clear to us: Watches continue to show very real strength in the jewelry store, in spite of a move by some jewelers to get out of this business.

We know there are those who disagree with us. We know stores that have dropped watches, complaining that discounting has killed the business and that servicing is a headache no one wants. These are understandable reactions to the turmoil that has plagued the watch market for the past three to four years. But we think they’re mistaken.

Let’s look at the market as it is today. Let’s start with the horrifying import numbers which would seem to threaten the market with death by drowning in unwanted product. The import total for stuhrling skeleton watches and movements last year, according to government figures, came to more than 140 million. Since total watch purchases through all outlets was only about 50 to 55 million a year as we entered the ’80s, those imports promised a gross over-supply. The truth seems to be that the consumption figure is a better guide to the jeweler than the import figure. Timex Corp., which long has kept a close tab on watch buying, says that about 66 million watches were sold in the U.S. last year. If this figure is correct–and we find it believable– what happened to the other 70 to 75 million imported units? No one knows for sure, but it’s our guess that most were novelty, giveaway or gimmick timepieces and the rest were junk watches, the sort that wholesale for $1.25.

The truth, it seems to us, is that a relatively stable “traditional” watch market is re-establishing itself. Alongside it will exist a low-, low-end market supplied by Far East producers. This market will diminish or disappear only when the American consumer gets fed up with the low quality or when the producers turn their efforts to some new field.

What’s important to us, of course, is the traditional market, in which the jeweler has a long-time stake. Today it is hurt by discounting, particularly in the middle price ranges. Many jewelers, including the mammoth Zale corp., are willing to live with the price cutting on some lines. But you can be sure they’re getting good markup on the more exclusive, “jewelry” watch lines. They’re also using their akribos watches xxiv as traffic builders; it’s still true that the brand lines are leaders in consumer advertising for our industry.

We see another trend in the jeweler’s watch business. Among more marketing-oriented businesses, we see a greater willingness to carry the fashion line along with the high-end models. We can’t see the sense of not carrying some high-fashion watches and at least a small selection of modestly-priced pieces. Why not appeal to the impulse buy? Why not sell color as well as accuracy? Why not have a watch that will appeal to a teenager’s budget? Why not use watches like these to help young people overcome the fear still many have of entering a jewelry store?

To stock such lines doesn’t mean that a jeweler has to drop his high-end lines. Far from it. A well-balanced watch inventory can accommodate lines with different appeals to different customers. The better the selection, the broader the appeal.

To jewelers who don’t agree with us that nixon gold watches can be one of their best friends, we suggest this. In the last few shopping days before Christman (and in the days after, too) promote and display your watch stock with enthusiasm and imagination. We think you may be surprised at how well customers respond.

Jewelry repair

Your article “Jewelry repair takes the gold,” in the September issue of JC-K, caught our attention.

We are a young business (three years old) and a jewelry repair service. When we opened our store we had no merchandise inventory–we had invested in repair and engraving equipment and supplies. Our original plan was to become a trade shop, although we felt we would have a small amount of retail trade.

We opened for business on Sept. 8, 1981, and word seemed to spread quickly. We did a lot of repairs and custom work that first Christmas season. It wasn’t long until we abandoned the idea of a trade shop–our walk-in business kept steadily increasing. Our sales were done on an ordering basis. We had catalogs showing available merchandise, but did not stock. Soon our customers were coming in just to order merchandise.

Over the past three years our service business has allowed us to expand our inventory and we now have a varied assortment of retail merchandise in stock. We replaced our counter with two display cases and have stocked them in preparation for this Christmas season. This year we’ve had customers come in “just to look,” which was a novelty for us.

We are currently planning an expansion. That will allow us to stock more merchandise than we do currently, but we will also expand our repair center. We do a lot of custom work and plan to do our own castings in the near future.

We are a mom-and-pop store and we believe the personal attention and service our customers receive is what has helped our gross sales increase approximately 40% each year.

We are not without competition. There are two other jewelry stores in our town, which has a population of about 7000. Whenever we are unable to help a customer we refer them to our competition, a policy which most businessmen would shun, but we don’t feel it has hurt us.

Our repairs and custom work are still our major source of revenue, but the retail sales are rapidly increasing.

When we decided to open a jewelry repair service we were told by other jewelry that “you can’t make enough money doing repairs.” Well, those repairs are making enough money to enable us to become a full service jewelry store.

For us, “jewelry repair takes the gold.”

Watchmakers’ future

No one has a crystal ball to predict the future of the watchmaker, but based on in-depth studies and surveys by industry leaders and on my own 20 years at the bench as an independent trade watchmaker, the following analysis should give watchmakers an idea of what they can expect for some time to come.

Mechanical watches will not totally disappear for many reasons, such as consumer fears of battery failures. Rolex and other companies are still manufacturing mechanical watches. Also, old, valuable or sentimental watches will be retained.

Throw-away Hong Kong watches will not replace repairable watches in the same way that the Timex pin lever did not replace the fine jewel lever watch. More high grade watches were imported in 1983 than in 1982, and this seems to be the trend as people search for durable value.

Watch companies and importers cannot service their watches. Many have independent repair shops handling this responsibility. Retail jewelers, too, can no longer afford or even find a watchmaker to keep on their premises.

There are currently 225 million repairable watches in the U.S.A. (A repairable watch is one which sells for more than $50 and is a 17-jewel lever, analog quartz, LCD digital or a combination analog/LCD.) This number increases by 15 million per year on the average. More than half of these watches are still mechanical, but in the future they will be predominantly quartz and quartz watches do require service and can be repaired by qualified watchmakers.

Presently, there are only 10,000 watchmakers in this country, and their median age is 62. The ratio of old-timer leaving (through retirement or death) to new young people coming in is 99 to 1. There is hardly any new talent to speak of.

Furthermore, only a few are competent. These are the trade shop watchmakers who survive wholly on repair receipts. They are the true experts in the watch repair field, with the best equipment, knowledge and experience and they are able to service the ever-increasing variety of watches that appear on the market today.

Consequently, I feel that the small number of well-equipped watchmakers who continue in their trade, and meet the challenges of the future, will have their rewards in the years ahead.

Gold watches

It is very disturbing when we read untruths in your magazine. We refer to your story on the Cyma watch line in the “Upfront” section of the September issue.

Before you quote anyone, the facts should be ascertained. It definitely isn’t true that “There hasn’t been a range of brand name gold bracelet watches at $695 since 1977.”

We have had many gold bracelet watches since 1977 that sold under $695. Furthermore, how can they call themselves a brand name when they admit they spend no money on advertising?

FTC Guides

I am writing to correct three erroneous statements made by JC-K in reference to FTC Guides for the Jewelry Industry.

Two of these appear in the “UpFront” section of your June 1984 issue. First, you ask the rhetorical question, “Is it permissible to call a synthetic stone a gemstone?” Then, you answer the question yourself by saying, “The present Federal Trade Commission guides say ‘yes’…”

In fact, the current FTC guides make no reference to the word “gemstone” whatsoever. Perhaps you are confusing the FTC guides with the Jewelers Vigilance Committee’s recommendations. A second error was apparently made in the same article when you gave a definition of “gemstone” which appears to be from the JVC recommendations, not, as you suggest, from the FTC Guides.

There are FTC guidelines for usage of the word “gem,” which are followed by a note which states that “use of the word ‘gem’ with respect to cultured pearls and synthetic stones should be avoided since few cultured pearls or synthetic stones possess the necessary qualifications to properly be termed ‘gems.'” (The “qualifications” referred to include rarity and value.)

Since synthetic stones can be mass-produced, the FTC has apparently determined that they are neither rare enough nor sufficiently valuable to be termed ‘gems.’

AGTA concurs, and we are now requesting that the same theory be applied to the word “gemstone.”

The other error occurs in the “Forum” section of your August, 1984 issue.

In answering a letter from Konrad Wild of Idar-Oberstein, you say that “the guides specifically acknowledge the right of the Chatham company to call its products Chatham-created emeralds, rubies, etc.”

The FTC Guides do not refer to Chatham (by name) or the word “created.”

The only FTC document which comes close to using the wording you have chosen is a 1963 ruling which allows usage of the term “Chatham-created emerald.” (The FTC guides were promulgated in 1957, six years earlier.) This ruling said nothing about synthetic rubies, sapphires or other stones. We, therefore, must assume that such products should still be sold in accordance with the FTC guides.

As part of your response, you also say that “Mr. Wild, like a number of readers, is confused….” For that, I believe you owe Mr. Wild, a highly respected leader of the gemstone industry, an apology.

I also believe that you owe your readers the courtesy of checking the facts before you attempt to “quote” federal guidelines in the future. Such errors can only add to the confusion over this important issue.

Roland Naftule, President American Gem Trade Association to be very precise, Mr. Naftule is correct; the FTC Guides do not say it’s permissible to call a synthetic stone a gemstone. What the Guides say is that if “ruby” or “sapphire” or the name of any other precious stone is used to describe a synthetic stone, then the word “synthetic” must precede the name of the stone in question. But can a synthetic correctly be called a gemstone? The Guides say that a stone must possess “beauty, symmetry, rarity and value” to merit the name gem (the FTC uses the word “gem” rather than the word “gemstone” in the Guides). It’s clear that these qualities may be possessed by synthetic and natural stones alike; some merit being called gems, some do not.

Categories: Fashion Tags: Tags: ,

Clock market: a largely untapped goldmine

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In his capacity as vp/general manager of the Clock Division of Bulova Watch Co., Anthony J. Rodriguez has seen more than his share of jewelry stores, department stores, and any outlet worldwide where clocks are sold.

What he has seen in his travels leads him to believe the clock market in the U.S. is relatively unexploited, and housewares retailers that merchandise clocks as a fashion item could be sitting on a goldmine.

The way to do that, he says, is to create a profit center for clock sales and by cross merchandising.

“The American retailer should adopt a small clock area for gift purchases as is done around the world. In this country, you find clocks in several departments.” He added that clocks are mostly a gift purchase, and by stocking broad and deep, a stocking broad and deep, a retailer has the opportunity for multiple and upgraded sales.

Less In Jewelry

“Jewelry is less than 20% of the total clock market now. Department stores and other retailers account for about 55%. “Bulova diamond watch numbers also indicate the mass market accounts for 30% of all clock sales, and lines such as the new Caravelle by Bulova (see story, May 7-13, 1985, HOUSEWARES), are being specifically targeted for that segment.

Rodriguez continued that by cross merchandising, retailers may see incremental sales they wouldn’t have had if they didn’t place clocks in different settings throughout their stores.

“With 50% of the husbands and wives both working in this country, consumers don’t want to waste their time in a store. You have to do something to hold them.

“People are enticed by what they see,” he said. Rodriguez, who began his career with Bulova 20 years ago as an Accutron watch repairman in the company’s lobby while attending law school, said that once clocks are given their own identity, there is no reason they won’t move.

“One of the reasons clocks have never reached their potential sales in the U.S. is they have never been given their own identity. Only one retailer I know of has given clocks a department number of its own, identifying the category as a profit center. With a clock center, a retailer can build in cross merchandising in the store.

“Just look at a clock shop. All they do is sell clocks successfully. Why? Because consumers know they can go there for selection.

“The difficulty is that housewares retailers and manufacturers are both concerned about expense. Retailers are going to part-time clerks and are concerned about having too much inventory. If you have a large selection, you can sell the customer up. If stores handle a broad range and have a good selection to choose from, clock sales and the average dollar sale will both increase.

“Clocks must be designed for the American market, and you need a broad assortment.

“Buyers seem to understand clocks are important. It’s up to upper management to increase selection. Many times, management is too concerned with quick return on investment. With a little intelligent marketing, they could be sitting on a real goldmine.”

Rodriguez doesn’t seem concerned about the number of kitchen appliances having clocks on them. He comments the average home contains 5.5 clocks, not counting those on appliances.

“The one place in the home where you have more ways to tell time than anywhere else is the kitchen, yet kitchen wall clocks are the largest selling wall clock category. That’s where tradition falls in. The kitchen is where you start your day, and people want a clock there.”

Rodriguez commented that last year, U.S. clock sales were over $600 million. If all sales were put together as a fashion element with clocks cross merchandised in various departments with a focus in housewares, there’s no reason clocks couldn’t reach $2-$3 billion in sales, he said.

“If you put clocks in some retail setting, put it in not just as a functional item, but also as a designer, fashion item. It then becomes a consumable item.”

Rodriguez commented that housewares departments are where most retailers want to sell in an unserviced housewares department, packaging has to tell the story.

“Our citizen watches for men are pictured in an environment on the package. If you make the package bright and descriptive enough, the product will sell.

“Quartz clocks today can last 25 years. If all of them do, we’re in trouble. We have to emphasize clocks as a fashion item for the resale.

“Retailers are decorating an area anyhow. All they are doing by adding clocks is utilizing the space currently available to them. It’s good marketing for housewares to put their clocks in any setting available.

“Clocks should change with fashion. The cost of a clock is insignificant when compared to the total cost of a persona redoing their home. The clock is like the final brushstroke on a painting. A nice clock in a setting is an accent. If you see a clock in a setting, it’s a neutral, incremental sale.”

Categories: Fashion Tags: Tags: , , , ,

RCA stereo TV is compact; multi-featured unit will be attractively priced

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RCA stereo TV is compact NEW YORK — RCA has introduced its first 20-inch color TV with built-in stereo sound. The unit will offer an attractive price point considering it has stereo and is highly featured, according to RCA.

Called Model FMR570, the unit features two 5-inch oval speakers with separate five-watts-per-channel amplifiers. In addition, the new receiver offers a square screen, separate audio program (SAP) for bilingual broadcasts, 94-cable channel tuning, auto-programming, a built-in dbx system that automatically suppresses noise during stereo broadcasts, a 10-jack audio-video monitor panel and unified remote control that can also operate compatible RCA VCRs.

This 20-inch TV “will put us at a new retail price point for a built-in stereo set that’s compact yet loaded with features,” said Stephen Stepnes, division vice president for marketing at RCA Consumer Electronics.

Stepnes, who introduced the unit at a press conference here, said suggested retail was $599 and that the unit was currently shipping. Concerning the five-watt amplifiers, Stepnes said these “have two watts more than any amplifier on the market in 20-inch TV. Listening is believing,” he said.

In line with the new price point, Stepnes said the FMR570 20-inch stereo TV will serve as the nucleus for a new low-priced stereo audio-video system that will sell for as low as a suggested $1,498 retail.

RCA also introduced a second stereo color receiver with built-in broadcast stereo system. Called Model FMR722, the 26-inch unit, which has a $699 suggested retail, has the same five-watt dual speakers as the 20-inch set. It also offers a square screen, SAP capability, remote control command center with on-screen and channel display and 10-jack audio-video monitor panel that can handle a variety of components.

Stepnes, who said TV hardware manufacturers are moving quickly to broaden their variety of stereo models, believes 1986 will be the “breakthrough year for stereo TV.” RCA is predicting that 9 million color sets capable of receiving stereo broadcasts will be moved by the industry this year — adding up to more than 50 percent of all color sets sold.

As for RCA’s sales, Stepnes said when the new 20- and 26-inch TVs are included, “88 percent of our models 20-inch and over have the capability of receiving stereo. Our commitment to stereo will grow through the year as we broaden the stereo feature throughout the line,” he said.

Stepnes said 1985 was the biggest year for stereo yet, when “stereo programming began to reach some 50 percent of the U.S. TV homes. Industry sales of built-in stereo TV receivers hit 1.5 million sets last year, six times 1984, said Stepnes. When this is combined with RCA’s estimate of 3 million stereo-adaptable receivers sold last year, the total number of stereo-compatible receivers sold in the United States in 1985 was 4 million, about 26 percent of all color sets sold, according to RCA.

Looking at consumer awareness of stereo, Stepnes said network television’s growing list of stereo programs, promotions such as one being developed for the fall by the Consumer Electronics Group of Electronic Industries Assn., a robust economy and the proven consumer thirst for home video products will help build sales of stereo TV.

RCA also has introduced three 19-inch XL-100 series sets. Models FMR425E and FMR425W are mechanically tuned leader color TV receivers in ebony and walnut respectively, while FMR455W features keypad 57-channel tuning.

Noting that 19- and 20-inch models comprise 40 percent of total color TV sales, RCA’s Stepnes said the company plans eventually to replace 19-inch units with square-screen 20-inch sets, although “certainly through 1986 the two screen sizes will coexist,” he said.

Other RCA color TV introductions include a nine-inch AC/DC set in ebony, Model EMR295, and two 12-inch black and white sets in two finishes: the ebony BWT122E, and the walnut BWT122W.

Categories: TV

The new TVs; will they bring the profits back?

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The marketing and merchandising muscle of the TV industry will be put to the test this fall when the industry attempts to convince consumers to purchase a new generation of high tech, more costly sets.

The autumn selling season of 1985 will mark the first time that a full range of models with new picture tubes and screen sizes and sets with stereo capability have appeared on the market. Consumers will also see a broader selection of models with other advanced features such as digital circuitry and flat screens.

The new generation of color TV sets represents an investment of hundreds of millions of dollars by manufacturers as well as years of developmental work. Manufacturers have also updated the cosmetics of their sets, providing a high tech TV monitor look for many more models than previously.

The new lines of merchandise carry prices that are frequently hundreds of dollars higher than the “commodity” sets that have dominated retail sales floors and newspaper ads in the past. In an industry hard pressed for profits, the new generation of sets represents new profit opportunities for retailers and manufacturers alike. While manufacturers and retailers agree the long-term market viability of high tech TV units is strong, manufacturers are somewhat more confident that the new merchandise will be a long-term cure for sagging profits.

Retailers, on the other hand, show some natural skepticism about what will be a major roll out of high tech TVs this fall, saying that retail price competition still will become a major factor in this market segment as it has with low-end products. Retailers also feel they can make more money on promotional TVs because of lower dealer cost than on some higher priced TV units.

(For the retail reaction to the coming of high tech TV, see the sidebar on the next page.)

Even so, many manufacturers are bullish. They believe that when consumers see and hear the capabilities of these new products in retail stores, strong sales at healthy prices will follow.

Jack Sauter, group vice president, RCA Corp., feels that the industry is coming into the fall selling season with a healthier mix of products than it has had in years.

Sauter believes that as much as $2.5 billion could be added to retail sales this fall if merchants take advantage of all the opportunities there are in selling higher priced, better featured color television sets, projection televisions and camcorders.

“This is the high end video boom and it is where the industry’s dollar growth will come from. That growth could be substantial if everybody gets behind the sale of these products,” says Sauter.

Sauter points out that in 25-inch monitor-receivers alone, the industry will do $1 billion or 10 percent of its unit volume. This compares with about one percent in 25-inch table models back in 1982.

“We have an excellent opportunity to alter the sales mix with the new screen sizes, stereo, improved cosmetics and more models with remote controls,” Sauter says.

Dick Komiyama, senior vice president-image display devices, Sony Corp. of America, comments that his firm’s new high tech units are, “the most important introduction for Sony in many years. The upgraded sets will give many retailers an opportunity for higher prices and higher gross margin sales.”

With the introductions last spring, Sony’s full lineup is made up of monitor/receivers even at the low end. Also, for the first time all Sony sets have a stereo decoder/adaptor, or decoder built-in. In addition, Komiyama says that all Sony sets now incorporate Microblack picture tube technology, which provides better contrast and resolution.

This month Sony will be introducing its first 27-inch screen size with a flat picture tube. Komiyama believes that high tech sets like these are, “where the future of the industry will be.”

Emphasizing better features

Zenith recently introduced its new color TV line, which emphasizes better featured, higher-priced models. Gerald McCarthy, president of Zenith, Sales Co., hopes that the move toward high tech TVs will take the emphasis away from lower-priced commodity-type merchandise.

“There is no question we are placing more importance on more expensive, fully-featured merchandise than we have in the past,” McCarthy says.

McCarthy also says that with the new introductions, “Our strategy is to build on Zenith’s traditional strength in more fully-featured color TV sets and to focus on the industry’s growth segments, (which include) large screen table models, stereo television and projection TV.

Jack Pluckhan, president of Quasar Co., comments that manufacturers in this market segment, “are all hoping that the new sets will help us get out of the price gutter, but the realities of the situation may not measure up to our hopes.”

Pluckhan explains that for the retailer it’s a tough step from a 19-inch conventional model to a 20-inch receiver/monitor. “It’s hard to justify the extra $200 to the customer.”

If prices on conventional color television sets had not eroded during the past two years the way they did, the opportunities in selling better sets would be greater, but there does not seem to be any bottom to price levels.

Nevertheless, Pluckhan is hopeful that three will be sales opportunities in stereo models, particularly if broadcasters push the feature in their programming.

Kent Hammond, national merchandising manager for TV-video with Sanyo, says that sales of his company’s Vision Art line have boomed during the second half of the year.

“Last year at this time we had a couple of high tech units and it was 15 percent of our TV business. Now our high tech line will be 40 percent of our sales for the year.”

Hammond reports that stereo TV sets will represent about 5 percent of overall TV sales in 1985, according to industry estimates. He labels that estimate a “conservative number. If the industry is going to sell 15 million units this year, that would mean 800,000 units will be stereo TVs. I think stereo TVs will do better than that.”

Hammond adds that stereo TVs, and high tech units in general, “Will contribute to industry growth this year and more in the next few years. This year is just the tip of the iceberg.”

Jerry Surprise, national merchandise manager-television for Panasonic, says that the key new appeal for all of these new sets is stereo, which is a departure from the way TVs were bought in the past.

“Picture quality has always sold TVs, but now everyone’s picture resolution is just fine. The turn-on now for consumers is stereo,” Surprise notes.

Dealers are very upbeat on other features of high tech sets, some which have been around for awhile, and others which are brand new, Surprise says. “The new features of these sets have been very well accepted by dealers. They feel they need new features for step up sales. For example, Audio-visual jacks are very important to VCR owners because they provide a better picture.”

Surprise stresses that manufacturers make more margins on high tech TVs and that “retailers should be able to do the same thing. These units are designed for higher margins. If retailers can’t get higher margins we (manufacturers) really can’t do anything about it.”

Herb Galliford, video marketing manager for Sharp, admits that high tech TVs probably won’t solve the low margin problem the TV industry is experiencing, but “these new units may help solve the problem. There are still plenty of price-sensitive consumers out there. Manufacturers and retailers must present this as an opportunity to both retailers and consumers.”

Galliford reports that Sharp, which was selling a leader line last year, is now emphasizing its high tech line, called the Visual Integration series, which so far this year “is selling at 25 to 30 percent better than projections.”

Galliford adds that this year there is more consumer interest in “remote control and stereo features. In areas where stereo TV sound is broadcast–such as Chicago, Seattle and Los Angeles–sales are up.”

Galliford notes that retailers in locales where little or no stereo TV sound is broadcast should remind consumers, “TVs last for seven, eight or 10 years and that stereo will be broadcast extensively two or three years down the road.”

Toshiba America is another major TV set producer, known for its promotional TV merchandise, and that has begun to emphasize higher priced units. Paul Michie, executive vice president of Toshiba America, remarks that technology has permitted his company to reposition itself as a vendor of medium and higher priced products.

The Japanese parent early in the decade disclosed that it was working on a new picture tube with squarer corners and a flatter front plate. In 1983, the first sets with the so-called FST tubes were introduced to the market in the 14-inch and 20-inch screen sizes. These sizes were followed in 1984 by a 26-inch picture tube-equipped model.

By introducing the FST and bringing the technology to the marketplace Toshiba has succeeded in broadening its retail distribution and is getting more shelf space among existing accounts.

Gary Thorne, vice president-brand manager for Magnavox, says that his company “expects to get a better sales ticket for our new line of color television sets, but I’m very familiar with the problem the whole industry faces.”

That “problem” is disappearing margins for all types of TV sets. Thorne notes that, as industry prices continue to erode on lower priced conventional models, it affects the pricing on higher end merchandise.

For its new line, Magnavox included stereo in 40 percent of all models, compared with 20 percent of the models in last year’s line.

The company also introduced new 20- and 26-inch picture tubes this year. The latter models incorporate a new tuning feature for Magnavox called Personal Preference Control, which enables consumers to permanently pre-set such video functions as color, tint and hue and such audio functions as bass, treble and balance.

Lucy Sherrill, television market manager for General Electric, suggests that price erosion in the TV marketplace is a reality but, “initially high tech-high end products will help everyone. The questions are: How will the price curve travel? How can manufacturers drive down the cost curve so price reductions won’t hurt margins?”

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