Projector Prices Take the Plunge

If you want to see how the recession of 2001–2002 and the events of 9/11 impacted the presentations industry, just take a walk down the portable-projector aisle of any major office supply store or hop online and search any A/V dealer’s site. One thing should become immediately apparent: prices are lower than ever, driven by product glut and weakness on the buyer side. After 9/11, in particular, big purchases were put on hold, high-end products moved at the speed of a three-toed tree sloth, and major manufacturers were reporting flat or negative revenues compared to previous years. Who would have thought it could happen in an industry bursting with growth just a year earlier?

The challenge for many projector manufacturers is that they have invested a lot of research and development efforts into higher-end XGA products, but more and more businesses are buying solely on price, which means they are migrating to the lower-cost, lower-performing SVGA projectors. Here’s proof: By the end of 2001, SVGA projectors made up about 30 percent of the market, down from 40 percent in the middle of the year, according to Bill Cogshall, president of Pacific Media Associates, a Menlo Park, California-based company that tracks the 50 biggest projector resellers. With plummeting XGA prices and their superior performance, Cogshall expected the SVGA figure to continue trending down, but by mid-2002, it had popped back up to 40 percent of the market again as buyers opted for less performance at less cost. “If the economy were better, SVGA projectors should be down to around 25 percent of the market by now,” says Cogshall.

How low XGA projector prices have fallen indicates a startling trend. In May 2002, the average XGA projector sold for $2,950, down from $3,850 in May 2001, according to Cogshall. XGA prices are falling so quickly, in fact, that they are fast becoming cheaper than the previous year’s comparable SVGA models. Moreover, where there used to be a $1,500 to $2,000 premium for the XGA version of a 1500 ANSI lumen projector, now there’s a paltry $750 premium, says Cogshall. Yet where are all the buyers? Opting for the less-expensive SVGA models.

The fact is, budgets are so tight these days that companies making projector purchases are looking for the lowest-cost product that will do the job. “It’s become increasingly difficult for the industry to demonstrate what extra you get from a more expensive projector,” says Cogshall. “If it has the resolution, brightness and size you need, there’s not much value to getting a premium product. In that sense, projectors are headed in the direction of a commodity.”

That’s exactly what PLUS Vision Corp. of America is trying to avoid. In response to the tough economic conditions, the company aims to get customers to view projectors as one piece of a complete package rather than as a commodity to purchase at the lowest price. “We’re spending a lot more time with specific packaging for different market segments – government, education, training, conference rooms, Fortune 500 companies and the like – whereas in the past we’d focus on feature/function,” says Mark Hand, vice president of sales and marketing at PLUS Vision. In other words, when selling to the sales department of a large pharmaceutical company, PLUS might create a presentation package with, say, a two-pound projector and a PDA that stores a presentation in a wireless environment. “The big thing a salesperson needs is control of the environment, control of the sale,” says Hand. “We’re packaging things in a way that lets him have that control.”

The model for this initiative is Starbucks. Think about it, says Hand: You can make coffee at home, but most people will get out of bed, drive to Starbucks, stand in line, pick up the coffee themselves and pay more for all that because they give you an experience. “We want to do the same thing with projectors,” he explains.

It’s going to be a challenging shift in a market that has become exceptionally price-sensitive and exceptionally conscious of where each dollar is spent. Every seller of projectors has a story about customers scaling back, postponing or canceling purchases because of post-9/11 budget cuts. For instance, prior to 9/11, Presenting Solutions, a San Clemente, California-based provider of presentation products, had one customer forecasting it would purchase 150 projectors by yearend 2001; it wound up buying 50. Another was getting ready to sign a deal for 40 units, put it on hold after 9/11 and still hadn’t made the purchase by mid-2002. To top it off, competition increased as HP and Dell entered the portable projector market in early 2002. Suddenly, Presenting Solutions, which had grown from a $1.2 million business to a $17 million business in the five years prior to the recession, was looking at a year-over-year decline in revenues and a full-year loss for 2001.

“We’d been spending like a growth company; then when everything started shrinking we had to quickly tighten our belts,” says Presenting Solutions CEO Art Feierman. The company began a series of layoffs, dramatically reworked its advertising budget and in early 2002 persuaded an investment-banking firm to take a minority stake in the business. That firm promptly “went through the business from top to bottom, slashing our operating budget by more than half in less than 12 months,” says Feierman. It worked. “Despite business conditions not getting any better, we’ve just come off four consecutively profitable months,” he says. “We’re back in growth mode, we’re hiring salespeople, and we’re moving forward with projects that have been on hold the last 12 months.”

Things weren’t much rosier up the coast at Spinitar, an audiovisual and presentation product specialist in Santa Fe Springs, CA. On September 11, 2001, Spinitar had millions of dollars in proposals sitting on the desks of dot-com companies. When many of those companies evaporated in the post-9/11 aftermath, so did all that potential business. Shortly thereafter, a $2.5 million deal with Nortel fell to just under $1 million when Nortel closed a facility and redistributed its equipment rather than purchasing new products. “When the recession started, we saw people pulling back on their proposals and being more cautious,” says Jay Rogina, CEO of Spinitar. “Corporations either scaled back or postponed spending as they became more responsible for their bottom lines and tried to squeeze more time out of their existing technology.”

Typically, Spinitar would have expected to see 20 to 25 percent growth for its 2002 fiscal year ending August 31; instead, it was anticipating slightly better than 10 percent growth as that date approached. Most of the growth came from local government business. For fiscal year 2003, Rogina projects another 10 to 15 percent increase in revenues, driven in part by growing demand for its after-sales maintenance and service support and a series of new Websites, including allprojectors.com, wirelessprojectors.com and a new site for mobile projectors.

Prices Still Falling

The tough times are not over yet. Ten months after 9/11, high-end projectors were still moving sluggishly and prices were still falling. “Even the players who didn’t drop prices in the past are among the first to drop them now,” says PLUS Vision’s Hand. And although he says he tries to hold onto price “for as long as I possibly can,” Hand in mid-2002 anticipated a 22 percent to 25 percent price drop between September 2001 and September 2002 in under-six-pound projectors, PLUS Vision’s fastest-growing product segment. Those falling prices coupled with a boost in global demand for SVGA products translated into flat year-over-year revenues.

It’s the same story over at Epson America Inc. October 2001 reorders were “pretty much nonexistent,” but sales picked right back up in November, much to the company’s surprise, says Mark Pickard, Epson’s group product manager for A/V products. When its fiscal year came to an end in March, it reported essentially flat revenues with an increase in the number of projectors shipped. “What that meant to us was that our customers were choosing the lower-priced models, but they were still buying projectors,” says Pickard. “The growth in the market was all in the low end because of the pressure downward.” Epson defines a low-end product as any projector model with a street price below $2,000 and at least 1,000 ANSI lumens.

Epson has changed its tactics as a result of that shift toward low-end purchases. “With the average projector price coming down, we’re spending a lot more time considering and developing the low end of the market, because we know the market has come to expect a higher level of performance at that low end,” says Pickard. At the same time, the company aims to hook customers on the low end, then show them the value of moving up the chain, selling them higher-end, more expensive units with greater performance once the economy shifts back into high gear.

Still, the challenge for the projector industry is not just that companies increasingly are migrating toward the low-end products, but that there are fewer corporate buyers out there to purchase those products and they’re taking longer to make their purchase decisions. Boxlight, for instance, has seen its typical 30-day sales cycle for large orders swell to at least twice that long. “Having gone through the economic evaluation of their business expenses, people were making sure the kinds of products they were buying truly fit their needs,” says Jill Miller, Boxlight’s vice president of sales and marketing. “The sales cycle became a longer, more thoughtful process.”

It also has become more of a numbers game as prospective buyers grapple with cost-benefit issues. Boxlight’s response: “We’re putting a lot more emphasis on the ROI message. We’re showing them research on the perceptions of presentations done with a projector versus just a handout,” says Stacy Dore, marketing communications manager. “And we’re showing the cost of using overhead slides and comparing that to a projector purchase.”

In other words, it’s all about the numbers these days. Which means prices will continue to fall and buyers will continue to migrate toward lower-end SVGA products. How low can prices go? Cogshall of Pacific Media Associates says there’s been a lot of talk in the industry about a $999, 1000-lumen SVGA projector, and he predicts we’ll see it by the end of 2003. At the same time, XGA projectors are inching toward the $2,000 price point, a barrier that will open that high-end category to many new buyers. So for the foreseeable future, projector prices appear ready to remain at all-time lows.

When they do hit bottom, the industry will at last begin to see some consolidation, predicts Hand. “How can you continue to have 70 brands out there and survive? That’s where we are today,” he says. Already, PLUS Vision accelerated a merger with Lightware, eliminating the Lightware brand and all the costs associated with branding, marketing and warehousing that label. When industry consolidation is finished, Hand predicts there will be about 35 to 40 projector brands, instead of today’s 70. But it will take about three to five years to get there, he says. Still – a future with ultraaffordable projectors and less clutter to sift through to find the right product? That sounds bright indeed.