Crossing the digital divide

On the eve of some of its most important product releases to date in the Middle East, Panasonic is confidently eyeing future commercial opportunities in the region. Aaron Greenwood reports.

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By  Published  October 31, 2006

As one of the biggest names in the consumer electronics industry, Japan’s Panasonic has pioneered the development of some of the most important consumer products in history, including the first colour TV and microwave oven in the 1960s, the first CD player and VHS camcorder in the 1980s, and the first plasma TVs in 1996.

The brand was established by Japanese industrial conglomerate Matsushita Electric Industrial Co in the US in 1961, eventually superseding the company’s venerable National brand in international markets over the next 30 years. It is now recognised as the corporation’s flagship brand for consumer electronics products outside Japan, and has formed the basis for its success in the Middle East and Africa.

While the company has struggled to keep pace with its trailblazing South Korean rivals LG Electronics and Samsung Electronics, which have both achieved annual regional sales turnover in excess of US$2 billion over the past three years, a renewed focus on innovative product development and a raft of new releases over the next three months will form the lynchpin of the company’s reinvigorated commercial strategy in the region.

According to Atsushi Hinoki, general manager of Panasonic Marketing Middle East’s Corporate Communications Department, the company is pegging its fortunes to its range of plasma televisions and its burgeoning Lumix digital camera portfolio, particularly in the Middle East.

“In terms of our overall portfolio, these represent our most important strategic product categories looking forward,” he said. “This is where we are concentrating our efforts and are expecting the greatest financial returns.”

While Panasonic is recognised as one of the biggest players in the plasma TV market, it is only a relative newcomer to the digital camera sector. As a result, it continues to commit huge resources to research and development and marketing support to its Lumix brand.

The company has also worked hard to gain a level of legitimacy in the notoriously fickle compact digital camera market, where brand loyalty is largely non-existent.

It contracted premium lens manufacturer Leica to develop lenses specifically for the Lumix range, and was one of the first vendors to include innovative optical image stabiliser technology – branded Mega OIS – as standard across its compact camera portfolio.

According to the manager of Panasonic Marketing Middle East’s Consumer Electronics Department, Koji Naka, these initiatives have seen the company’s share of the compact digital camera market increase significantly since the launch of the Lumix range in 2002.

“Our total market share continues to grow,” he claims. “In the Middle East, we are aiming to achieve 10% market share by next March. In 2005, our market share in the region was just six percent.

“We have been gradually expanding our product range and introducing new technologies, such as a 28mm wide-angle lens with Mega OIS, in addition to the world’s smallest 10x optical zoom digital camera (the TZ1).”

Hinoki says the company has also worked hard to expand the presence of the Lumix brand across the Middle East, securing distribution deals with major retailers including Carrefour and Geant.

Naka says that the 28mm wide-angle lens-equipped Lumix FX-01, which is the smallest of its type available on the market, is currently Panasonic’s biggest selling model in the Middle East.

The FX-01 was recently superseded in international markets by the FX-07, and Naka expects this camera to considerably boost Panasonic’s business in the Middle East when it is launched later this month.

Boasting similarly compact dimensions to its predecessor, the FX-01 features a 7.2-megapixel sensor, image stabilised 28-102mm equivalent, wide-angle 3.6x zoom, and Venus III processor.

“The FX-07 will become the flagship model of our compact camera range,” says Naka. “We expect it to generate significant business for us, particularly from tourists visiting the UAE.”

Despite this initial success, the slim margins typically associated with the compact camera sector have led Panasonic to review its overall commercial strategy for the Lumix brand.

As a result, the company has taken the decision to enter the similarly competitive but comparatively far more profitable digital SLR (D-SLR) camera market.

Long dominated by Canon, the D-SLR market has attracted a host of new players in recent years, including Panasonic’s archrival in the consumer electronics space, Sony.

However, unlike Sony, which for all intents bought its way into the business earlier this year after acquiring the D-SLR assets of former industry stalwart Konica Minolta, Panasonic set about developing its own high-end prosumer’ model, which would form the spearhead of an expanded Lumix D-SLR product line.

The result of these labours is the Lumix DMC-L1, which represents a significant accomplishment for a first-time effort.

The DMC-L1 features a Leica D Vario-Elmarit lens, which is the first specifically designed by Leica for a D-SLR camera. The lens also comes equipped with Panasonic’s Mega OIS technology.

The DMC-L1 incorporates a Live MOS image, 7.5- megapixel sensor that conforms to the ‘Four-Thirds’ standard developed by Olympus, and a full-time Live View function that lets users see the same image on the LCD screen as that captured by the sensor.

The camera also features a dust reduction system that Panasonic claims solves the problem of particles interfering with the D-SLR’s digital sensor.

The DMC-L1 was set to debut in the Middle East at the time of press, with agents in the UAE scheduled to receive the first shipments.

Depending on supply, the DMC-L1 will be introduced in Saudi Arabia, Kuwait, Oman, Qatar, Lebanon, and Iran before the end of the year.

Naka expects the initial batch of L1s to be snapped up “mainly by European tourists visiting Dubai, who appreciate Leica lens technology and have prior knowledge of the model”.

“We haven’t finalised retail pricing yet, but we expect it to be significantly cheaper than Europe, where it costs around US$2000,” he explains.

“Locally, we will be targeting the professional and semi-professional market with the L1. The inclusion of the Leica lens is a huge selling point that has attracted a great deal of interest from the ‘prosumer’ market.”

Hinoki claims that Panasonic is pursuing a different strategy to Sony in the D-SLR sector.

“Our product concept differs greatly to Sony’s with its Alpha range,” he says. “Sony’s price points are half that of ours, which reflects the professional market we’re aiming to tap with the L1. Sony doesn’t haven’t a presence at the top-end.”

Naka claims that this differentiation extends to the two companies’ respective approaches to developing D-SLR technology.

“Our Mega OIS system evolved from technology we developed for our professional movie cameras, and it is clearly superior to Sony’s,” he says. “Mega OIS technology is also standard across the entire Lumix range, which provides us with an advantange over our competitors in the marketplace.”

The arrival of the DMC-L1 and additions to the compact camera range coincides with a significant raft of new product releases from Panasonic at this month’s GITEX Dubai.

The centrepiece of the company’s GITEX 2006 showcase is its new 103-inch plasma TV, which is the largest in the world. Hinoki expects the ultra-bling allure of the plasma display to draw delegates to Panasonic’s stand in the thousands.

“We have already received strong interest from the local market, and have taken orders from certain individuals looking to upgrade their existing 65-inch Panasonic plasmas,” he says. “In terms of availability, we expect to ship the model to our Middle East retail partners in January.

“GITEX is a major event for us in the Middle East and provides a perfect opportunity to showcase our new product portfolio.”

Of arguably greater significance to the local consumer market is the launch of Panasonic’s Blu-ray DVD player at GITEX, the first to debut in the Middle East.

“We will launch the Blu-ray player in Dubai following GITEX, then introduce it to other markets throughout the GCC,” says Hinoki.

“The timing of the roll-out will largely depend on the commercial availability of Blu-ray DVD titles. In Europe, there will be 85 films released on Blu-ray DVD over the next two to three months.

“Given that the Middle East will share regional copyright protection coding, we anticipate that these titles will soon be made available in this region.”

Hinoki dismisses industry rumours that Panasonic plans to release a dual format HD DVD/Blu-ray DVD player in the future.

“We are strongly supporting Blu-ray and have no intention of diverting from this position,” he says.

Hinoki and Naka both stress the importance of high definition to Panasonic’s future product development.
“We are heavily promoting our high definition-capable products and plan to make the technology key to our commercial strategy moving forward,” says Hinoki. “Our entire plasma television range is already HD-ready.

“Given the lack of HDTV services in the Middle East, the launch of our Blu-ray player in the region means that local consumers will finally be provided access to HD content in their homes.”

GITEX will also be the venue for the Middle East launch of Panasonic’s innovative home networking technology, known as HD-PLC (High Definition-ready high-speed Power Line Communication).

As Hinoki explains, the technology utilises the existing power cable in a home to create an ether network.

The media automation server plugs directly into a wallmounted power socket.

“The product has proven very popular with consumers in the US,” he says.

“We expect a similar response in the Middle East. The technology allows you to network a range of devices to share content throughout the home, such has HD content to remote displays, or media stored on a PC.”

Naka says the introduction of a new range of HD camcorders in the first half of 2007 will complete Panasonic’s initial rollout phase of HD products in the Middle East.

“We are very excited about these new products,” he says. “The camcorders will provide a major boost to our line-up of HD products for viewing, recording and playback.

The camcorders will be available in hard disk and DVD-based models respectively.

“The HD camcorder business is set to be huge thanks to the increased availability of HD content and the increased consumer interest in high-resolution imagery and flat panel television displays.”

Gitex is a major event for us in the Middle East and provides a perfect opportunity to showcase our new product portfolio. Atsushi Hinoki.

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