DVD Player Manufacturers Only Making $1 Per Unit

[Jason Dunn]

<div class='os_post_top_link'><a href='http://news.com.com/DVD+player+profits+down+to+%241/2100-1041_3-5302728.html?tag=nefd.top' target='_blank'>http://news.com.com/DVD+player+profits+down+to+%241/2100-1041_3-5302728.html?tag=nefd.top</a><br /><br /></div><i>"Commoditization is hitting China's DVD player manufacturers hard, according to researcher iSuppli. Between January and May, the average selling price of a DVD player exported out of the Guangdong province came to $40.80, leaving just about $1 in profit margins for the manufacturers. The province accounts for 84.2 percent of China's exports of DVD players and exported 34.5 million of the players during the January to May period."</i><br /><br />Ouch - rough business to be in! This news doesn't surprise me all that much though, because I'm constantly amazed at how inexpensive DVD players have become. At places such as Costco, I've seen DVD players for less than $50 CND - it costs more to get a VCR today than a DVD player! And the $50 DVD players are surprisingly capable as well, offering DVD/VCD/MP3 playback, JPEG display and other features that are now standard. I wonder what other consumer electronics products are next? Here's hoping it's plasma or DLP TV's. :lol:

[Felix Torres]

I wonder what other consumer electronics products are next? Here's hoping it's plasma or DLP TV's. :lol:

Wish-ful thinking!! :wink:

Much as I would like to see HDTV pricing collapse, it is two years too early for that. If nothing else, the market is supply-constrained right now.

The pricing collapse we're seeing on DVD players has happened before (calculators, portable CD-players, B&W TVs, VCRs, CRT monitors...) and we'll see it again; it is the result of the commoditization of components outstripping market demand for/acceptance of added-value features.

To put it another way, when good enough is *more* than enough and high-end vendors can't add *desirable* features fast enough to justify a premium, the center of gravity of the market will quickly slide towards the low end, making everybody but the lowest of low-cost bidders unprofitable because consumers start to think of the product as disposable.

Lets face it, for all the features of the highest-end DVD players, what do 90% of customers use the players for?
To watch movies on analog TV sets.
And for that function, your basic $50 player is as good as your $150 name-brand player because the limiting factor is the TV, not the player.
Until HDTVs make up a major fraction of the market it is more cost-effective to buy a no-name player and replace it when it dies than it is to buy a premium player.

Applying the same line of thought to other products, one product comes to mind that could see a pricing collapse over the next year: digital music players.
Why?
Decoder chips are dirt cheap.
Flash RAM is collapsing in price.
Micro-drives are becoming abundant and cheap.
Everybody and their uncle is jumping into the business.
PC-side software can/will be licensed for free or less (bringing a bounty).

I expect to see an upper limit of $99 on 1Gb players (both flash and micro-drive) and $150 on 20Gb players by this time next year.
(Of course, this does not apply to the Pod.)

We might even see 20GB players at $99 if some vendor realizes that not all customers demand shirt-pocket sized players; there is an under-served market for cheap players for kids with backpacks that can be met using 2.5in drives. :wink:

[David Horn]

I find it quite sad that a DVD player can be picked up (new) for less than $40 in the UK, but a DVD (taking LotR 3, £17.99 here) costs about $33.

And the industry wonders why more and more people are pirating DVDs.... :roll:

[Jason Dunn]

I find it quite sad that a DVD player can be picked up (new) for less than $40 in the UK, but a DVD (taking LotR 3, £17.99 here) costs about $33.

Yeah, that is pretty sad. :-( DVDs and CDs have never seen a significant drop in price, because years ago when the manufacturing costs dropped, the music/movie studios looked at it as extra profit. &lt;sigh>

[Felix Torres]

I find it quite sad that a DVD player can be picked up (new) for less than $40 in the UK, but a DVD (taking LotR 3, £17.99 here) costs about $33.

And the industry wonders why more and more people are pirating DVDs.... :roll:

On the other hand, LoTR cost $300 million up-front while the DVD plants got started with minimal upfront expenditures, given the way the chinese government has been freely greasing the wheels of industry...

Which isn't to say that the CDs and DVDs aren't over-priced, they are, but they *are* very different businesses.

On the content side, for every Spider-man a Sony gets out the door, there's a Showgirls or three to eat into the profits...

I'd love to see CDs at $5 and (good) DVDs at $10 but the prices we see tend to be average prices; otherwise Showgirls would be 99 cents and LoTR would be $99.