Even as the bulk of the consumer electronics industry is struggling with single-digit growth rates, it is the action in the fast growing DVD player market which has caught the attention of major players.
The past year has seen the market grow by an astounding 250 per cent and according to estimates the current calendar year should see the segment grow by at least 150 per cent.
According to the Consumer Electronics and Television Manufacturers Association (CETMA), the segment, which had sales of about 1.3 million units last year, should grow to at least 3.5 million units in 2005. Further, the association expects DVD player sales to cross the 5-million mark in the next year. Compared to the about 300,000 units per annum sales about three years ago, the growth has been astounding for the product category.
A major factor for the boom has been the sharp decline in the prices, bridging the price gap between a DVD and a VCD player. In fact, entry-level prices have come down from around Rs 12,000 in 2002 to about Rs 3,990. The entry-level price can be even lower in case one goes in for a regional-level brand.
Philips, which has a market share of about 40 per cent in the segment, had spearheaded the price war last year with an entry-level price of Rs 4,990. The model had become a volume spinner for the company. "Another factor for growth in the category has been that the VCD consumer has been upgrading to this category, with the price gap between a VCD and a DVD player narrowing. In fact, even as DVD software prices have fallen, the fact that the DVD player can play all formats (such as VCD/Mp3) has helped to drive growth," says Gunjan Srivastava, Director (Audio &Video Marketing), Philips India.
The segment is further likely to see increased action from the Korean chaebols this year. LG Electronics, which launched an entry-level model at Rs 3,990 this year, is targeting a market share of about 30 per cent in 2005 helped by its new launches. The company sold about 200,000 units in the last year with most of the sales coming in the second half of the year, which is when the company expanded its product range.
Samsung India is also increasing its focus on the segment. "We are targeting a 50 per cent jump in DVD sales this year. We will be introducing three new DVD models in the next month," a company official said.
Other major players in the DVD segment include Onida, Sony, and Panasonic.
Meanwhile, with almost all national-level consumer electronics players seeking a foothold in the segment, the positive side has been that the unorganised sector has not been able to develop significantly, unlike in the VCD player segment. About 80 per cent of sales for VCD players come from the grey market, with most of the products being imported in a SKD form from China.
Early price corrections have also ensured that that there is little price difference between the national and regional brands. Industry analysts point out that this, combined with the fact that VCD players are likely to become obsolete in a few years time, may put tremendous pressure on the local players which were deriving a significant proportion of their sales from the sales of VCD players. At present, however, according to estimates, the regional/local brands (such as Oscar and Beltek) account for approximately 20-22 per cent of sales in the DVD player market.
B. A. Srinivasa, Director of the Chennai-based retail chain Vivek's, says that the category is set to grow "like anything." He sees the national brands doing better than the brands which do well in pockets.
Vivek itself sells China-made DVD players at the entry-level price of Rs 3,990 now; when it started out two years ago, they cost Rs 6,990. DVD players account for 15-20 per cent of the sales of electronic items (CTVs, audio products and DVD players) in Viveks. Most of the sales are in the basic model segment.
Meanwhile, the upsurge in the market has resulted in the creation of increased capacities of DVD players in the country with the national level players increasingly preferring to source these products locally rather then to import them. "There has been an impetus from January 2005 onwards to source/manufacture DVD players domestically in an effort to be competitive as the volumes start coming in," says an industry analyst.
LG Electronics, for instance, which was earlier importing the DVD players, is now sourcing 80 per cent of its requirement domestically with the rest coming from imports, says C.M. Singh, Product Group Head - Consumer Electronics, LG Electronics India. The ratio is further like to change in favour of domestic sourcing.
Similarly, Philips India is now sourcing 50 per cent of its requirement domestically. Meanwhile, Samsung India which is at present importing its DVD players, is conducting a feasibility study to commence domestic manufacturing of the products.
Another Korean player, Hyundai Electronics, is also investing in a manufacturing line for DVD players in the current year.
Meanwhile, industry officials add that several film distribution companies are also taking active measures to rationalise the pricing of DVD software and ensuring greater availability of DVD video titles. In fact, major Indian video publishing companies are believed to be investing significantly this year in ventures into DVD publishing.
Surely with DVD players and discs becoming more affordable for the consumer, the segment seems all set to replicate the kind of growth its had on the global front in the Indian market.