Interview with Steve Woo, Vice President of Sales, Viewsonic

Viewsonic is one of the most well-known and well-respected names in the display industry, and provides CRT and LCD monitors, projectors, and digital signage to businesses and individuals. It only makes sense that a well-established display company would consider getting into a new, emerging display market: digital picture frames.

Not that they’re ready to announce anything yet. Digitimes, an technology publication with close ties to many of the Asian manufacturers that source electronics products for US companies, recently reported that Viewsonic and HP were going to be entering the digital picture frame space soon.

We spoke to Steve Woo, Viewsonic’s vice president of sales, to find out what the story was. And though he couldn’t confirm Digitimes’ story, it sure sounds like Viewsonic will be selling digital picture frames soon.

Digitimes recently reported that Viewsonic would be offering a digital picture frame. Could you comment on that?
Viewsonic worldwide has been studying the marketplace as there’s been enormous quantity and variety of vendors coming into the (digital picture frame) marketplace. We see that there’s a growing quantity of units, and it looks like a marketplace that we want to take a look at seeing how we can utilize our strength in the panel industry, how we can migrate into this business space.

So that sounds like that you’re looking at moving into this space but aren’t ready to make a formal announcement yet. Is that a fair characterization?
That’s probably the best way to say it. What I can say is that in our Asian sister company we are starting to play in that marketplace already. We have put our toe in the water. I’m actually going back (to Asia) this week to look at our business plan on this particular product. If we jump into the marketplace in the Americas, we will jump in very quickly and we will utilize our buying power in LCDs, from the small 7-inch up to the 12-to-15-inch frames.

Given that your core business is displays, digital picture frames seem like a natural extension. How does Viewsonic approach making the decision to enter new markets?
What it revolves around is (understanding) what type of customer is buying this product. We like to use a stair-step approach starting at who the customer is. We want to take a look at how they buy. We want to look at what they buy, what type of feature sets do they really want and need versus the features that are being provided. We take a look at the best-in-class vendors currently in the marketplace and what price structure they’re working under. Then we look at what the margin enhancement is for us. Once we uncover that and understand that, then we’ll put together a whole business plan and launch plan around this product.

What is research telling you about who customers are?
From data that we have, a high percentage of the customers are women. There is some adoption by men, but they’re primarily buying it for women. And the second thing is that it’s really more of a home buy than a business buy. They’re usually educated and reasonably well to do people, middle class. They usually buy more than one.

Given that we’re halfway through July, if you decided to enter the space, will you be able to ramp up in time for the holiday buying season?
Yes.

That’s pretty straightforward! What would go into that kind of ramp up? What would you need to do to move a large volume of units by Christmas?
Viewsonic would not want to jump full bear into the marketplace without first going to our channel partners, because we sell everything through channel, we don’t sell anything direct. We’d go to our channel partners that would fit the type of customer we’re trying to reach and we’d work out marketing plans with them. We’d work out the (frame) sizes and the quantity of the product that they want.

When you take a look at the marketplace, there’s really only Philips that has a name brand. There are some ancillary brands that are playing in the marketplace, but they’re small brands. Our IT and retail partners would love to have a Viewsonic-branded product, not only in the holiday timeframe but also on an ongoing basis.

Given that your research says that the majority of customers are women, will you need to look at non-traditional Viewsonic sales channels to reach those customers?
We absolutely would take a look at channels that were not your typical IT or retail IT channels. There are many, many of those that we have already highlighted and started the process of communications with to make our intent to understand their size and willingness to market digital photo frames known.

Can you give me an example of the type of channel that would be?
You have your basic office superstores and your basic retailers. You also have your consumer etailers. You also have your women’s-targeted e-tailers online that also have women’s-oriented TV shows. There’s also a TV shopping, home network type arrangement. There’s also a variety specialty retail stores that sell photographic equipment that would be a great category as well.

Looking at the current competitive landscape, what are the relative strengths and weaknesses of the products in the space right now?
There are a lot of fine products out there right now, (but) people don’t know the brands. Once brands get into this game, I think consumers will trend towards those brands at a much faster and more reliable pace because then they see it’s a product area of substance. The feature sets and the things that the current manufacturers have, some are good and some are not so good. Just like when you had a VCR originally and you couldn’t code the 12 (on the clock). It’s not dissimilar to many of the features that are on a digital photo frame — even though it’s there, you won’t use it. We’re trying to hone in on the core features that really will delight the customer and give them the best viewing possible with the easiest method of driving content to the device.

What role will wireless connectivity play in this kind of display application?
The adoption of that type of application in today’s world, I think, would be pretty small. Only because most consumers don’t have the basic level of understanding of how to set up that kind of network. Most of them are lucky just to be able to upload their pictures into a digital photo frame today. I think as a business application, though, a digital photo frame could be almost a small digital sign. If you have multiple locations in a retail store, but you don’t have space to put a 37-inch-plus digital signage product, we could put that in retail stores and have shelf digital signage for retail applications using a digital photo frame.

What price point is your research telling you is really going to blow these frames out the door?
It’s hard to say that a particular price point will drive it. Who’s to say that having a branded product selling at that same price point would (force us) to drive our price lower? Just making it a more trusted product would drive incremental sales. I don’t know that I can answer your question about whether there’s a magic price point, other than the fact that it’s got to be competitive with the current marketplace.

Would you envision there being a pricing premium associated with a brand like Viewsonic or would you be trying to follow the pricing models already put forth by people in the space?
If we were to enter the marketplace, we would enter at a similar price point to everybody else. I wouldn’t want to give the perception that we’re trying to overprice our product. And because we buy so many panels from the same suppliers that sell these panels to all these other companies, that our margin structure will be better. We’ll make more money selling at the same price point.

What do you think the key features of digital frames are that will spur adoption?
Ease of out-of-box experience. If you give a digital photo frame to a person in their mid-to-late 30s/early 40s and you make it very simple for the person to migrate the content onto the onboard member or a flash memory card, and allow it just to turn on and show the pictures, I think that’s probably 70-75% of the success case right there.

Most people on the mass don’t really care about having speakers on it. Most people don’t really care about wireless right now. Most people don’t really care about having a remote control. Most people want to get the content, turn it on, and walk away. It’s about does it look good in its current state, does it look good in the out-of-box experience, and can I walk away from it? Then they’re happy.

When Viewsonic enters a new consumer market, how do you approach the question of how much inventory to do have at launch?
We look at it the same way we do for our normal LCD display business and our LCD TV business and our projector business. We rotate our inventory very rapidly so all of our product and prices are fresh. We go through a reseller channel so we give them anywhere from a 15-to-30-day supply of product, depending on how they like to manage their product.

What is your research telling you about the potential total size of the digital picture frame market over the next few years?
What I’m finding is that the data is very poor. I don’t think anyone has a good crystal ball right now. The data I’ve got is from a single or dual (analyst) source. It states, in general, the following: in 2007-2008, that there’s about a 2-million unit TAM [total available market] in the Americas. By 2010, it will be somewhere between 9-11 million units sold, at varying price points.

Let’s say for the sake of discussion that those figures are roughly correct. How much of the market will Viewsonic need to capture to deem moving into digital picture frames success?
We would want to be #1 in the market we serve. That’s our goal. Based upon the current contenders in the marketplace, we see a prime opportunity to be a #1 shareholder in this market. I don’t really have a specific percentage.

When you say #1 in the space, you mean in terms of total number of units sold?
Yes.

What is the likelihood of Viewsonic entering the digital picture frame market in the next 6 months?
I think it’s better than 50%.

How much better?
I would say it’s a very positive percentage better than 50%.

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