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Wednesday, May 23, 2012, 05:42 am PT (08:42 am ET)

Samsung, Sony begin enforcing minimum prices on HDTVs to grow margins

Sony and Samsung, two of the world's largest TV makers, have begun enforcing minimum prices on their sets, in an effort to aid brick-and-mortar retailers and improve margins in the cutthroat HDTV business.

Both Samsung and Sony began enforcing the new policy last month, according to The Wall Street Journal. The companies hope the move will stop the slide of HDTV prices, which have fallen 15 percent over the last two years to an average selling price of $545.

In fact, the strategy takes a page out of Apple's playbook, as the iPod maker has strict rules that restrict the prices at which the company's products can be sold. Apple's policies with third-party resellers help to ensure that Apple can maintain its margins. In its last holiday quarter, Apple reported reported gross margins of 47.4 percent.

Sony had previously set strict minimum prices for products like its PlayStation videogame consoles and Handycam camcorders, but enforcing minimum prices on HDTVs is a new policy that industry watchers say could pose a risk. Because Sony is only joined by Samsung in this strategy, competitors like Panasonic, Sharp and LG could see their sales grow through continued steep discounts at online retailers like Amazon.

Low margins in the struggling HDTV business have had a significant effect, prompting Samsung to spin off its LCD manufacturing business into a separate company in April. Officials at Samsung hope the separate LCD business will merge with Samsung Mobile Display and become more competitive going forward.

HDTV


Sharp was also compelled to sell a 10 percent share in its struggling LCD business to device assembler Foxconn in March, after seeing the largest losses in the company's 99-year history. The deal bought Foxconn $808 million worth of shares in Sharp Corp., which both companies hope will help create demand for products from Sharp's state-of-the-art LCD factory in Sakai, Japan.

Industry watchers have speculated that the partnership between Foxconn and Sharp could be a strategic move by both companies to attempt to produce panels for Apple's rumored television set. It has been suggested that Apple could be interested in using Sharp's technology to produce Indium Gallium Zinc Oxide (IGZO) panels for an anticipated television set.

Rumors of an Apple television have continued to pick up steam since last year, when biographer Walter Isaacson revealed that Apple co-founder Steve Jobs told him he felt he had figured out the secret to a simpler HDTV. Jobs indicated to Isaacson that he "wanted to do for television sets what he had done fro computers, music players and phones: make them simple and elegant."

Apple's ability to sell millions of products at margins considerably higher than its competition has been cited as one of the main reasons the company could shake up the struggling television market. And one analysis issued last week suggested that an Apple television could double the annual spending of the average U.S. household on Apple products to $888 by the year 2015.