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Best Buy Stock Set to Flame Out in Ultra-High Def

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Can electronics retailer Best Buy (NYSE: BBY  ) really keep its stock afloat by focusing on a niche market like ultra-high-definition TVs? You'd think it would have learned after the debacle that was 3-D TV, but it seems it's following the same script when it comes to the next next-gen advance in big small-screen viewing.

As my colleague Tim Beyers noted last year, despite its faltering initial footsteps, the ones that seemed to herald the decline in Best Buy, 3-D TV is on its way regardless of whether we think it's worth it or not. According to the market researchers at NPD Group, 3-D is set to pop out at you at an astonishing rate between now and 2019, growing from 25 million sets in 2011 to 180 million in another six year's time.

I'm not so sure that will actually happen, since it was pointed out earlier this year that at the 2013 Consumer Electronics Show, 3-D TV's were all but absent from the show floor, replaced instead by the ultra-hi-defs of 4K TVs.

What's 4K? Well, they've got a gazillion pixels in them (almost 8.3 million, to be more exact), four times as many as today's 1080p sets, with large-screen formats of 55 inches and up. They also carry an equally large price tag. Although the sets Sony (NYSE: SNE  ) unveiled at CES sported price tags around $25,000, Best Buy will carry sets from the manufacturer with bargain-basement pricing starting below $5,000. While they'll also be available at small chains like hhgregg (NYSE: HGG  ) and regional shops such as P.C. Richards & Sons, Best Buy is the only national chain carrying its sets.

Part of the reason Sony chose Best Buy was because of the employee training the company invested in as a way to differentiate itself from the online competition and to dull the impact of "showrooming."

So the retailer has a bit of exclusivity that could give it a leg up on everyone else -- except that there's no reason to buy a 4K TV; certainly not at $25,000 and not even at $5,000. The thinking that "if you build it, they will come" was what doomed 3-D TV. There's hardly enough eye-popping content available to justify the price tags of those sets -- let alone quality content -- and with 4K sets, there's zero programming. You're essentially buying a big honkin' expensive TV and hoping content providers will come through.

This is just too reminiscent of Best Buy's foray into 3-D televisions where it expected a boom and was stuck with tons of inventory that in part led to a crash in the price of its stock. With most programming still offered in 720p, you get all the definition you need with a standard 1080p set. While Blu-ray showed just how sharp a picture you can get with the right technology, you're not really upping the ante any by opting for TVs with eye-bulging clarity or price tags.

Shares of Best Buy have more than doubled already in 2013, but that may represent its defining achievement if it's counting on 4K TVs to take it to yet another level.

Grab some popcorn and settle in...
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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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