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To woo a new generation of loyal buyers, General Electric is lending its name to a variety of youth-oriented consumer electronics products
General Electric wants to bring more good things to life. The company known for washing machines, wind turbines, and jet engines is putting its name on a line of digital cameras and photo printers.
Under a licensing agreement, the new products—eight digital cameras and a photo printer—will be sold worldwide with the GE (GE) brand, though they are being designed and marketed by a new company, General Imaging. The Torrance (Calif.) startup will unveil the consumer gadgets at the annual Photo Marketing Assn. trade show in Las Vegas in March. Prices haven't been announced, but the cameras will be available to American consumers in mid-April.
GE and General Imaging executives wouldn't disclose their financial arrangements or identify investors in the startup, but it's clear that GE had a big hand in putting the company together. Last summer, GE convinced Hiroshi Komiya, the former president of camera maker Olympus Imaging, to give up retirement to start General Imaging, using some technology from GE's medical imaging business. Six months later, Komiya has a line of digital cameras, offering resolution from 7 to 12 megapixels, that, he says, will hit "almost every price point" in the market.
GE got out of a big swath of the consumer electronics business 20 years ago, so why jump into digital cameras now? The company is on something of a youth kick. GE wants to put its brand on a variety of consumer electronics products "to keep our brand fresh, young, and new," says Marc Bertino, president of GE Trademark Licensing. "We want to make GE relevant to all generations. Older people remember GE radios, and that helps sell appliances. Now, we are looking at the products that connect with young people."
Later this year, Bertino says, the company might unveil other consumer-oriented licensing deals. He declined to discuss which companies or products he is looking to associate with the GE brand.
In September, European manufacturer Thomson will lose the use of the GE name it acquired back in 1987, when it bought GE's consumer electronics business, selling TVs, radios, and VCRs. Thomson will continue licensing the GE brand for the home phones it sells in the U.S., but as of this fall, GE will be free to offer the use of its brand to consumer electronics manufacturers of devices other than phones.
Few industry analysts believe that putting the GE name on consumer electronics devices will help strengthen the company's brand. General Imaging is certainly viewed as a warning shot to digital camera makers Canon (CAJ), Sony (SNE), Kodak (EK), and Hewlett-Packard (HPQ). But its success is far from certain. And the licensing deal itself is raising questions as to whether GE might, in the long term, actually jeopardize its brand—one of top four most trusted brands in America—by expanding its consumer-electronics licensing program.
Today, GE has six consumer-electronics licensees, which make everything from phones to Web cameras to Christmas lights. The $163 billion company earns an estimated $250 million from those deals, according to Nick Heymann, an analyst with Prudential Equity Group. Sure, the company has few costs associated with its licensee sales, and licensing is commonly viewed as money that falls right to the bottom line. But if the General Imaging business—or another new licensee—were to run into problems, that could hurt the GE brand.
GE is more susceptible because it's much more diverse than, say, Ferrari, which licenses its name to PC maker Acer (see BusinessWeek.com, 1/29/07, "A Racer Called Acer"). Most consumers know their notebook computers weren't designed by the car manufacturer. But with GE, the lines blur. "Given the diversity of GE's businesses and their history in consumer electronics, it's an easy assumption for consumers to make that the technology is produced in-house," says Geordie McClelland, vice-president and director of strategy at branding consultancy Straightline International, which has consulted for the likes of T-Mobile (DT).
Indeed, General Imaging's ads state, "Introducing the first digital cameras worthy of the GE name." GE's own recent survey of 711 U.S. adults—age 25 to 65—shows that 26% thought GE manufactured digital cameras already. More than 80% of the respondents say they would buy a GE camera if the company offered one. The new products will likely only increase this confusion. "I'd be very surprised to see this deal being structured in a way that makes it worth the risk," McClelland says.
GE's Bertino isn't worried about his licensing deals backfiring. He says he will use his company's engineering teams, based in the U.S. and China, as well as third-party companies to audit his licensees' products. GE will sign off on any new product introduced. "We have our hand in the entire process," he says. "We feel the risk is mitigated." Yet consumer electronics still tends to be a business frequently plagued by battery recalls, problems with liquid-crystal display screens, and software glitches.
The risk is all the greater, as General Imaging is going after a market where, some analysts say, it might find it hard to succeed. U.S. camera unit sales have flattened, with 30 million digital cameras expected to be sold this year, vs. 29.5 million last year, according to consultancy IDC. Average selling prices on cameras have fallen 3% in the last year, as Canon, Sony, and Kodak fight it out in an increasingly tight market.
Yet, here comes GE General Imaging, with its grand ambitions. "We are trying to be, in the next five years, in the top five [list of camera makers]," says Komiya, who wouldn't comment on his company's marketing strategy. Komiya says he hopes to differentiate the company's products by offering more features than his competitors for the same price and through design.
Indeed, the company's chief designer, Takeyoshi Kawano, created the Sony Walkman, the Sony VAIO computer, and the Olympus Stylus camera series. Komiya himself is legendary for making Olympus the top camera maker during his reign. Yet, his latest venture is facing much larger rivals, who likely have more resources. "Let's face it, GE is not a consumer electronics brand anymore," says Chris Chute, an analyst with IDC. "It's going to be very difficult."
GE General Imaging's foray into printing looks just as tough. That market got ferocious last Christmas, when many retailers lowered their prices on in-store photo processing and printing, encouraging consumers not to print photos at home. Photo printer sales fell 20.7% in the fourth quarter of 2006, vs. the same period in 2005, according to consultancy NPD Group. "The price cuts have been very aggressive," says Stephen Baker, an analyst with NPD Group. "The entire market is very competitive." And it is getting more competitive still, with Kodak having rolled out a new line of printers on Feb. 6 (see BusinessWeek.com, 2/6/07, "Kodak Launches a Printer Offensive").
Not that GE necessarily expects its latest venture to grab a huge market share. "This whole initiative is about keeping the brand relevant," says Bertino. And some of GE's consumer electronics licensees have done well. Thomson recently recaptured its No. 1 position in the U.S. home-phone market. "It's been a terrific relationship," says Doug DeLor, director of Americas Marketing Communications for Thomson. "The GE brand, which stands for quality and reliability, really lend itself to this."