Dropping TV Prices: The Free Market in Action

The first computer my company purchased in mid-1985 cost $7500. It was huge and could only perform a few simple tasks, mostly word processing, and even that wasn’t very good. The floppy disks were the size of dinner plates and held very little data (360K). If a disk was left in the drive and the electricity went out, the heads on the drive would crash and ruin the disk and all the data that was on it.

Almost overnight, computer prices dropped and performance levels increased dramatically. The IBM PC was born. Today’s computers, especially when inflation is factored in, are marvels of affordability considering what they can do when compared to a model that was produced just five years ago. Market forces made price reductions and performance levels possible, not government intervention.

The same is true for televisions. The average price for all models of TVs in 2007 was $935. Today, the average price is $535. There are a number of reasons for this drop in price. One of them is the nature of the economy. When people hold onto their money, sales drop. What do retailers do? They drop their prices. The following is from a USA Today article:

Economic woes made consumers hesitant to spend on big-ticket items such as TVs throughout the year. That has left retailers with a surplus of displays and sets on hand. Those TVs need to be sold to make room for 2012 models, which will likely include new entries from Apple and Google.

Unlike governments, retailers and manufacturers can’t force people to buy anything. When a business needs money, it can’t go in the back room to print it. When a company is in the red, it has to cut spending and lower prices.

The marketplace is competitive. The company that had the best computer or TV this year can’t rest on its laurels. It better be ready to compete with other companies who want a larger market share. Innovation is the key word.

With TV makers expected to add more Net and Web-based connectivity to next year’s models, “This holiday season might be the last year you are buying a TV as you know it,” says Eric Bleeker, senior technologist at The Motley Fool. In 2012, he says, “Everything on the TV is about to change.”

TV makers have been touting 3-D and “smart” features that deliver Internet-based services such as Netflix, but he and other analysts foresee most Black Friday and holiday shoppers focused on the price and size of a TV as the most important aspects of their buying decision.

So what’s a consumer to do? Because we live in an almost free market, there are lots of choices, and no one is telling consumers what they must do. No one is forcing them to buy now or later. If a consumer is price conscious, he or she will buy at the end of this year or the beginning of next year if some models are still in stock. There are some great deals out there. If another consumer is looking for some new bells and whistles, he’ll wait for next year’s model. In the end, the market remains free, and the majority of consumers are happy, and the government didn’t have anything to do with except to make the economy miserable. But we are getting our big-boy toys at lower prices, if you have a job and some extra money to spend. I guess that’s something.