When Taiwan's Vizio started changing the pricing game in flat-screen televisions back in late 2006, larger competitors like Sony Corp. (NYSE: SNE) worried that Vizio would make all the profits vanish from the television market by virtue of its aggressive pricing just as consumers were ditching tube televisions for flat-screen ones.

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

Who would have thought that privately held, 2002 upstart Vizio could upset the LCD TV market and knock giant Sony (NYSE: SNE) off of its perch?

The world of televisions is transforming itself to flat-panel, high-definition and big screens. Vizio was founded in 2002 and is taking major market share from Sony and former second fiddle Samsung. Vizio's promise to its customers is simple -- small is big. The company has only 85 employees, mostly in sales and marketing, and outsources the manufacturing to other suppliers. The key to the Vizio story is getting the product through as many retail doors as possible.

The company has signed up a couple of big wigs in the retail sales channel: Wal-Mart (NYSE: WMT) and Costco (NASDAQ: COST), to go along with Sears (NASDAQ: SHLD) and Circuit City (NYSE: CC). Vizio is also available from Dell Computers e-commerce web site (NASDAQ: DELL). Vizio understands it's all about distribution, distribution, distribution.

Vizio has taken the marketing position that television decisions typically are the domain of the male of a household and, as such, has partnered up with the NFL. Football and big screen TVs are synonymous. Vizio has signed All-Pro running back LaDainian Tomlinson of the San Diego Chargers to be its spokesperson. Tomlinson is regarded as both a fine gentleman and perhaps the greatest running back since Barry Sanders. His wholesome image is magical to Vizio's marketing program.

The more I read about flat-panel television manufacturer Vizio, the more I understand how this company is almost single-handedly disrupting the price marketplace for the current technology that powers television viewing. Tube televisions are going out of style almost as fast as the cassette tape did in the early 1990s, and flat-panel sets featuring plasma or LCD technology are settling in as the new choice for almost every new television purchase. Of course, folks are still buying tube-style TV sets as fire sales blaze into many retailers, but I'll bet that will slow down in the next few years.

After having stepped into Circuit City Stores, Inc. (NYSE: CC), Wal-Mart Stores, Inc. (NYSE: WMT) and Costco Wholesale Corp. (NASDAQ: COST) recently, the Vizio nameplate was everywhere, from the 32-inch television to the 50-inch big screen set. The prices were 30% lower (on average) than from competing sets featuring the Sony Corp. (NYSE: SNE) and Samsung nameplates, but looked every bit as good from an aesthetic and picture point of view. Purists will dig into specifications and technical jargon, but the average consumer will buy on these bullets: price, price, looks and price. Vizio has no close competition in terms of overall style and price point from what I can see in some recent retail visits.

It comes as no surprise that the company has sold over two million television sets in the four years since the start of U.S. sales in September 2003. In fact, with the majority of those sets being of the HDTV ilk, Vizio is probably one of the handful of companies that have allowed U.S. consumers to prepare for an all-digital television future once the analog television airwaves are re-purposed in 2009. Vizio even predicts that it will climb past the 3,000,000 sets sold mark by the end of the 2007 holiday shopping season. I'll bet that's a correct guess.

Sony Corp. (NYSE: SNE) used to get me excited over a decade ago. The nameplate was at the top of the consumer electronics field and the Sony Playstation was one of the marquee brands of the wold. Today, Sony's brand is boring, plain and overpriced to millions of consumers, and the company's slumping sales of late signify this. Competitors Samsung and LG of Korea have mauled it a bit in the HDTV market, and upstart Vizio is killing it as well, undercutting prices in a huge way while maintaining great style and -- according to many -- similar quality. Why would anyone buy a Sony HDTV today?

An answer to that question may come this fall, when the venerable electronics giant unveils no less than 15 new flat-panel television sets in what could be seen as a desperate attempt to take shelf space from rivals in any way it can. A general rule of retail is: Whoever has the most shelf space, wins. It works for food, electronics and clothing merchandising in many cases.

Looks like Sony Corp. (NYSE: SNE) won't be resting under fearless CEO Sir Howard Stringer any time soon. The consumer electronics giant continues to get hammered in so many of the staple businesses that used to make up its bread-n-butter. In the latest installment, a rising star in the flat-panel television business seems to have its hand around Sony's neck in that market.

Vizio, a virtual unknown in the television business 18 months ago, has been undercutting plasma and LCD television prices for quite some time in the retail sector and is squeezing profits from Sony, Samsung and other big names. While competition is good, Sony may be publicly proclaiming that rapid-fire and deep flat-panel television pricing may be bad for the overall television market. Privately, Sony is probably feeling the profit pinch by this newer competitor that has ascended to the top spot in flat-panel LCD televisions shipped to retailers in the second quarter of this year.

How does Vizio do it? By using contract manufacturers for making all its televisions and a unique distribution strategy, according to CEO William Wang. Is Sony in such a diverse retail distribution field that includes Circuit City, Wal-Mart, Costco, Kmart and Sears? Apparently not -- but Vizio is. And, all that retail exposure is fanning the flames of its incredible flat-panel television sales. Would you rather spend $1,000 on a 32-inch Sony LCD television or a 47-inch Vizio unit if the quality was comparable? Customers are choosing Vizio.