Should You Buy a TV From a PC Maker?

When you're shopping for a new TV, Dell and Gateway may not be the first names that come to mind. They're well-known for their PCs, but should you buy a TV from them? Consider this: Soon, PC makers are likely to offer more cutting-edge TV products than most consumer electronics vendors--and to sell them at a lower price.

PC makers are entering the TV market in full force, industry watchers say. Some companies, like Sony and Toshiba, have been in both markets for years, through separate consumer electronics and tech divisions. For example, Sony produces televisions in its Home Entertainment Product Division, while the VAIO line of desktop and notebook computers are part of Sony's Information Technology Product Division. But the established TV makers have new competition.

Gateway LCD TV

Gateway already sells plasma and LCD TVs, and Dell is shipping its own LCD TV. Hewlett-Packard executives have hinted that HP will begin selling TVs in the next few years. PC makers could offer both good deals and advanced technology in a rapidly evolving marketplace, analysts say.

Making the Switch

The jump from PC to TV is less of a stretch today than it would have been just a few years ago. As manufacturers gear computers more toward entertainment, and as televisions gain more features typically found in PCs (think DVD recorders and Internet connectivity), the devices become more compatible.

"Look at Windows Media Center," says Charles Smulders, vice president with industry research firm Gartner. "You have a PC that offers entertainment functions, that can be connected to a monitor or a TV. PC content has made its way into the living room."

PC brands have made their way into our homes--and our minds. "PC companies have become comfortable, familiar brands," says Bob O'Donnell, director of personal technology with market researcher IDC. "PCs have become just as important in our homes as TVs were in the past."

But having a recognizable brand is not the same as having a proven track record in a field. So should you consider buying a TV from a PC maker?

The answer could be depend on the kind of technology you want. The TVs currently in the works from Dell and Gateway are high-end models, with plasma and LCD screens. They are unlike the CRT, or tube, TVs found in most homes.

"If you go into Sears, you can buy a 27-inch tube TV for $200 or $250. But a 26-inch LCD will run you ten times the price--$2500 or so," O'Donnell says.

Despite being more expensive, these flat TVs hold a certain allure, O'Donnell says. "Flat TVs are cool, they take up less space, and they look good," he says. "It's just like LCD monitors for the PC. The fact is that CRT monitors are better for certain applications, but flat displays just look cool. That's what people want."

Cutting Costs

Gateway plasma TV

In this high-end market, PC makers are well positioned to offer lower prices, O'Donnell and Smulders say. After less than a year, Gateway is the best-selling brand of plasma TV, topping Sony, an established CRT television maker, O'Donnell says. Gateway's 42-inch enhanced-definition plasma TV, launched last November, garnered a 28 percent share of the market in six months, according to sales figures from Gateway and NPD retail point-of-sales data.

Gateway is succeeding in consumer electronics because it offers great deals, O'Donnell says. Its 42-inch plasma HDTV sells for $3999 at Gateway.com, whereas a 42-inch HDTV-ready plasma model from Sony lists for $5999 on BestBuy.com.

How can Gateway afford to price a similar product so much lower? PC companies typically have much more efficient operations than most consumer electronics companies, O'Donnell and Smulders say.

"The nature of how consumer electronics have been sold to date is very different than the PC market. The consumer electronics industry is based on profit margins of 30 to 40 percent," O'Donnell says. "The PC industry is used to working on a 10 to 12 percent profit margin. The bottom line is, they can take an identical product and the PC company can sell it for less, because they're accustomed to operating on a lower profit margin."

Gateway, however, disputes this analysis. "We don't want to go into a business with the mentality that we can live on smaller margins," says Gui Kahl, Gateway's director of digital solutions. "We want to challenge the existing business model. Our plan is much more streamlined than what's been in place for the past 60 years. We're challenging the status quo, just like [Gateway founder] Ted [Waitt] did in 1985 when he entered the PC market. He eliminated the middleman, and we saw the same ability here, to bypass all of that and go directly to the customer. We pass those savings on to the customer."

Sales Strategy

Like its PCs and peripherals, Gateway's TV products are available through Gateway.com and at its Gateway Country Stores. The company has no plans to sell its TVs through other retailers, but it won't rule out the possibility. "We can't say never, but as our core business, we're fully committed to having our stores serve as the center of how we showcase and distribute our technology," Kahl says.

Dell wide-screen TV

Dell, likewise, doesn't plan to change its direct-sales model in marketing its LCD TVs. The company's first TV, a 17-inch wide-screen HDTV-ready LCD, is available from Dell.com for $699. In contrast, a 17-inch wide-screen HDTV Samsung LCD currently sells on BestBuy.com for $1200.

Dell credits its direct-sales model as the key to low prices. "Because we are a direct company, we are not burdened by the pricing requirements of selling through the channel, and can therefore offer our customers competitive products at compelling prices," says Scott Hardy, senior manager of product marketing for Dell Displays.

But these sales models could pose a challenge in the TV market, as companies try to get their brand into consumers' minds. "It doesn't happen overnight," Gateway's Kahl agrees. "We need to establish that we're one place you can come to--an environment where people can learn how technology will work in their homes."

Technology enthusiasts and early adopters are likely to be the first to buy flat-panel TVs, industry analysts and company executives agree. But PC makers are wise to enter this market, O'Donnell says. "We still expect that flat TVs will take a while to become mainstream," he says. "Clearly this is the future of TV. It's smart to jump in now, and as prices come down and this technology becomes mainstream, [Dell and Gateway] will be well positioned."

Gateway believes that the technology involves more than just TVs. Kahl says that the company positions its TV products as part of the bigger picture, and he says that Gateway stores are the perfect place to learn about new entertainment technology. "It's the entire EHome model--the network, a PC, maybe a server, a TV, a DVD player. You can learn how they all interrelate," he says.

Technical Advantage

The interaction among devicesmay be where PC makers have their greatest advantage in the TV market.

"PC companies tend to innovate at a much higher rate than consumer electronics companies," O'Donnell says. "Over the past ten years, the biggest innovation in TV technology has probably been Picture in Picture. PC companies are likely to shake up the market, offering integrated wireless technology, network support. PC companies will innovate much more quickly because that's the nature of their business."

Toshiba ethernet TV

PC makers are not the only ones introducing innovative TV technology, however. Sony, for example, offers TVs with built-in memory card slots. In October, Toshiba will market in Japan TVs with ethernet connections for downloading firmware updates. The first update will add an Internet browser so people can surf the Web using their television, the company says.

Sony, Toshiba, and Sharp all manufacture PCs in addition to their consumer electronics products. But the technology is advancing across divisions.

Sharp Aquos LC-15L1U-S TV

One of Sharp's newest TVs, the Aquos LC-15L1U-S, introduced in September, offers a unique take on wireless networking. The 15-inch LCD detaches from its base, and users can use the built-in handle on its frame to tote it around. The battery-powered TV connects via 802.11b wireless to its base station, which transmits content from a video source (such as a cable box or DVD player) to the set, so you can watch movies or TV in any room--or even in the backyard.

Educating Consumers

With all this new technology, and many new options in the TV market, how do you decide what to buy?

"The first step is to decide which technology you want, whether it's a standard technology like CRT or an emerging technology such as LCD or plasma," Smulders says.

If you opt for a flat-panel TV, you have more choices to make. First, a plasma screen or an LCD? Both technologies have their upsides and downsides.

"The deciding factor, generally, is size," O'Donnell says. Plasma TVs tend to be bigger--40 inches or larger--while LCDs larger than 40 inches are extremely rare.

LCDs have a slower response time, which can be a problem for viewing fast-moving images, since it can produce a smearing effect (a noticeable blurring of images), O'Donnell says. All LCD manufacturers report their response rates; O'Donnell recommends purchasing a TV with a response time of 25 milliseconds or less. Other authorities say that the response rate should not exceed 16 milliseconds.

LCDs offer a crisper, brighter image than plasma screens for viewing text, which is key if your TV will do double duty as a PC monitor, or if you use it as part of a Windows Media Center setup.

Plasma TVs generally are brighter, offer better color saturation, and cost less per inch than LCD TVs, O'Donnell says. Gateway's low-end 42-inch plasma TV, which lacks high-definition resolution, is available for $2799, but the company recently launched a 30-inch LCD TV retailing for $2999 that does offer a higher resolution.

In the past, plasma displays have had problems with image burn-in, but this issue is largely irrelevant when the display is used as a TV, O'Donnell says. Burn-in is likely to occur only when the same image, such as a sign, is continuously displayed on the screen, he says. Since TV images are constantly in motion, burn-in isn't likely to be a problem.

You also need to decide whether you want an HDTV-compatible display. Though they're more expensive, HDTV displays offer superior image quality, which can be important on LCD TVs.

"LCD TVs are very unforgiving when you look at a standard-definition model," O'Donnell says. By offering more pixels (1280 by 720 resolution or higher), HDTV displays offer a much sharper picture. For you to experience that level of clarity, the program you're watching must be broadcast in HDTV--but that's increasingly common. "More programming than most people think is available in high-definition. Most mainstream shows are broadcast in HD," O'Donnell says.

If you watch standard-definition broadcasts on your high-definition TV, however, you may see a poorer-quality image, O'Donnell says.

"You can't really generalize. In each category [plasma and LCD], there are a lot of differences in products. There are a lot of variations from TV to TV. Some LCD TVs look terrible, while others look great," he says. "The source material really is the difference."

Tips to Decide

So consider what you watch, and do your homework before making a decision. And once you've decided on the technology, don't neglect the price. "Look around at the value that's being offered for your price point," Smulders says.

PC makers offer good deals and seemingly have a technological advantage. Is there any reason not to buy from a PC company? You'll want to make sure that the company will be around to support the product, but that's a risk you take when you buy any product, Smulders says. He advises consumers to examine the warranty closely, and to consider their decision thoroughly before buying.

Dell says that its TV products will come with the same tech support services and warranty options that the company offers for PCs. Dell offers free, around-the-clock phone support and a one-year warranty for its TVs. Customers may pay extra to upgrade the warranty.

Gateway offers a one-year standard warranty on its plasma and LCD TVs. A three-year extended warranty on an LCD TV starts at $50 for the smallest model, and the price increases with the size of the TV. A three-year extended warranty on a plasma TV starts at $399. Gateway also offers protection against accidental damage to its plasma TVs, starting at $150 for three years. Gateway claims to be the only plasma TV manufacturer currently offering this type of protection, which covers everything from damage caused by dropping the TV to burn-in caused if the kids accidentally leave their video game on the TV for hours after they've finished playing it.

But Smulders and O'Donnell agree that buying a TV from a PC vendor has no real downside.

"People will come to realize that high-definition, flat-panel TVs are more like monitors than regular TVs, so there's no disadvantage to buying them from PC companies," O'Donnell says. "I think there's going to be a big shake-up in the market. And I'd be very nervous if I was a big consumer electronics company who hadn't figured that out."

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