Samsung Widens the Gap with Sony in TV

Despite Sony's brand recognition, its Korean rival is well ahead in TVs with LCD screens, helped by the decline in Korea's currency

By Moon Ihlwan

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Is "extreme shepherding" the latest craze out of Scotland or New Zealand? Making the rounds on YouTube these days is a goofy video of sheep covered with LED lights being herded around a hillside in the darkness. As the flock makes its way across the heath, viewed from afar the lights form and re-form into various shapes and ultimately bounce through fields like the old Pong video game.

But what looks like yet another oddball clip by some unknown group of college kids is actually a clever marketing ploy by electronics maker Samsung. The Korean company hired a British TV studio to make the short film as part of its campaign to launch a new flat-screen technology that uses LEDs (light emitting diodes) as its light source. So far, some 5 million people have watched the clip, which only mentions Samsung in the last 10 seconds or so.

This combination of smart marketing and cutting-edge technology has helped Samsung unseat Sony as the leader in the race to dominate sales of flat TVs. For several years, Samsung and Sony (SNE) were neck and neck in the race to sell LCD TVs. But as Sony has stumbled in recent months, Samsung has surged ahead of its Japanese rival. Last year, Samsung's U.S. share of TVs with liquid-crystal display screens hit 25.1% vs. Sony's 16.5%, according to market researcher NPD Group. "It looks like we've hit the sweet spot with consumers in our campaign to generate curiosity and interest in LED technology," says Sue Shim, Samsung's senior vice-president for marketing.

Tapping Into Sports Passion

Of course, Samsung isn't pinning its marketing push solely on Internet sheep videos. This year, it will spend more than $50 million on marketing in the U.S. alone, says Tim Baxter, president of Samsung's American consumer-electronics division. More than half of that U.S. figure went toward a deal with the National Football League and various promotions tied to it. "Sports is the best way to promote HD [high-definition TVs], and in the U.S., sports is the NFL," Baxter says. "We've really tapped into the passion of the fans."

Can Samsung maintain its lead? Many industry watchers believe the Korean company has significant advantages that will help it stay in the top spot for some time. For starters, Samsung has been one of the world's biggest advertisers over the past decade, building its brand into one of the most recognizable names on earth. And Samsung has been boosting its marketing budget: Last year, it spent 6.5% of its revenue on marketing, up from 4% in 2007. "Samsung has put a tremendous amount of money into creating brand recognition, and that is paying off," says TV analyst Riddhi Patel at market researcher iSuppli.

Samsung executives believe their company has found a winning formula that's backed by better financial health. Samsung has also managed to convince many product reviewers and consumers that the quality of its TVs is as good as that of Sony's. A recent Consumer Reports survey shows Samsung tops product ratings in four of the six main sizes of LCD TVs.

Yoon's Three Advantages

Sure, Sony still commands considerable consumer respect for its brand. And Yoon Boo Keun, Samsung's TV chief, acknowledges his company must work for years to match the kind of brand awareness enjoyed by Sony.