Ever wonder why digital TV converter boxes start at $40? That, of course, is the same amount the government is giving away to anyone who needs one or two of these converter boxes to watch TV after June 12.
From the names (or no-names) of some of the converter-box brands — AccessHD, Artec, Coship and Goodmind, to name a few — I figured the digital boxes were cheaply made in Asia. And I’ve wondered if some savvy entrepreneur is making millions inflating the price of cheaply made electronics to cash in on the government subsidy.
While, in fact, the only converter-box brand made in-house by a familiar name is Zenith, a brand owned by LG Electronics, other companies aren’t making a whole lot of money on digital converters, says Myra Moore, president of Digital Tech Consulting, a research-consulting firm that has tracked this very topic.
LG didn’t respond to calls for a comment. Other brands like RCA and Magnavox outsource their converter boxes to some Asian manufacturer you’ve probably never heard of, she said.
Moore did her own sleuthing and came up with the breakdown of how much it costs to make a digital converter box — between $28 to $32, she concluded in an article she wrote for EE Times.
I asked Moore to drill it down. Of that cost, between $16 to $22 pays for the cost of the demodulator, decoder chip, power supply, casing, remote control and input/output panel.
“No, you couldn’t make this for $20,” Moore agreed.
“The margins on the box are pretty low given what it costs to make the boxes and what little margin you need to put in for the developer and retailer. There wasn’t a lot of profit there. A lot of companies decided that because it was a short term, low margin product, they decided not to get into it.”
Add in other features the government felt was unnecessary – analog pass through, a smart antenna or programmable remote — and the price goes up.
There goes my conspiracy theory that the government inadvertently raised the price of a digital converter boxes by offering a $40 coupon. In fact, it was probably the other way around.
“They didn’t pick $40 out of thin air,” said Steve Baker, an analyst who tracks sales of consumer electronics for market researcher The NPD Group. “The goal wasn’t for everyone to make lots of dollars there but that their costs should be covered.”
According to the government division organizing the coupon program, 26.1 million (or exactly 26,136,855) coupons have been redeemed as of March 25, 2009. The coupon program can handle another 19.6 million converter boxes, although the amount is getting rapidly depleted as consumers request their share.
The big issue now, added Moore, is whether there will be enough converter boxes. Moore was certain there would be in December, but that was before President Obama and Congress moved the deadline four months to June 12.
“At the end of 2008, we were certain there were enough converter boxes in the pipelines to satisfy the February deadline. It’s a different story now. Until we finish the last quarter’s analysis of shipments, there’s a possibility that might have changed,” Moore said.
As a public service, I’m including information on how to get your coupon and where to find out more on how to get ready for digital TV:
For those who still need a coupon, here is how to get one:
Check out the Gadgetress Guide to the Digital TV transition. Latest DTV transition headlines: