LG Electronics is looking to move to a new model to generate revenue after their recent profit fall, the move will see the Company allow consumers to get access to appliance subscriptions and TVs via an expanded subscription model.
Over the weekend the business said that they plan to accelerate the shift in the home appliance paradigm by expanding its subscriptions business, which allows customers to select desired home appliances and services they want via a subscription model.
The move could strip revenue from retailers, and comes as profits fell in the last quarter at LG.
While Samsung profits are rolling in arch rival LG Electronics profits are falling with the business tipped to report a 11% year on year decline despite sales of its home appliances growing, one division that is struggling is their wholesale display and TVs business, despite Samsung moving to sell OLED TVs with panels sourced from LG.
LG operating profit for the January-March period came in at A$1.49 billion, down 11% from a year ago, according to the company’s earnings guidance released over the weekend.
But this was still above the consensus of 1.28 trillion won predicted by local analysts, at market intelligence firm FnGuide.
Sales were expected to have increased 2.2 percent year on-year which would be a first-quarter record for the company.
The downturn in profits comes as arch rival Samsung Electronics who will today release their new 2024 TV range in Australia, predicted a more than tenfold increase in its operating profit for the January-March period, signalling a dramatic resurgence in its semiconductor business on rebounding demand for memory chips.
Samsung’s first-quarter operating profit is estimated to be around A$7.49 billion, up 931% from a year ago, according to its earnings guidance.
The amount surpassed the consensus of 5.26 trillion won predicted by local analysts, as provided by the market intelligence firm FnGuide.
LG management claim that the operating profit for the January-March period fell due to rising material costs and intensifying market competition.
LG attributed the highest first-quarter sales result to its new business strategies, such as subscriptions from their WebOS operating system, and expanded business-to-business models meanwhile their retail consumer business struggling.
Last year LG Electronics outlined its ambition to grow revenue from US$51 billion company to US$78 billion over the next six and a half years, due in part to advertising streamed to its TVs and subscription services for its appliances.
“LG will innovate with a platform-based service business model that continuously generates profits, such as content and services, subscriptions and solutions, to the hardware-oriented businesses, which generate sales and profits at the time of purchase,” the company said at the time.
LG called this a “customer engagement” centred business model that relies on appliances already present in customers’ homes, such as 200-million strong fleet of its smart TVS currently already in use. Those tellies, including the premium end OLED and QNED TVs, will soon have content, services and product ads expanded in an attempt to turn the company into a media and entertainment service provider.
Back in 2022 LG Electronics revealed a scheme called “Evolving Appliances For You” that promised software upgrades to home appliances. The company offered the example of a family that moves to a different home, and different climate, and upgrades its clothes drier with routines suited to local conditions.
The entrance to subscription media comprises part of what CEO William Cho claims is a transformation for LG to a “smart life solutions company,” a goal he’s hoping to hit by 2030.
LG Electronics has outlined its ambition to grow revenue from $51 billion company to $78 billion over the next six and a half years, due in part to ads streamed to TVs and appliances.
“LG will innovate with a platform-based service business model that continuously generates profits, such as content and services, subscriptions and solutions, to the hardware-oriented businesses, which generate sales and profits at the time of purchase,” the company claims.
LG called this a “customer engagement” centred business model that relies on the 200 million appliances and TVs already present in customers’ homes.
The 2024 LG TVs including the premium end OLED and QNED models, have a new webOS which has been expanded in an attempt to turn the company into a media and entertainment service provider up against free to air TV services.
In 2022 LG revealed a scheme called “Evolving Appliances For You” that promised software upgrades to home appliances. The company offered the example of a family that moves to a different home, and different climate, and upgrades its clothes drier with routines suited to local conditions.
The new subscription models have become the company’s key driving forces in overcoming uncertainties such as delays in market demand recovery.
Diversifying its home appliance product lineups, along with their premium OLED TVs boosted the company’s overall sales for the January-March period, the company claimed in their lates filings.
The company claims that they will pursue a dual-track strategy from this year — focusing on OLED TVs and premium LCD QNED TVs — to increase competitiveness in the global TV market.
LG also said it will also continue investment in promising business sectors to secure future growth engines.
