Some Suppliers Say Low-End CD Declining Fast

As the market for CD players, which represent half the business in mobile electronics, gradually declines, some suppliers say the low end is seeing a steeper fall than anticipated.

“Entry-level CD this year has fallen way short of everyone's predictions,” said Alpine's marketing VP Steve Witt. More specifically, industry CD player sales under $149 have fallen for the past five months, he said.

Pioneer also acknowledged the decline. In June, the company took action by introducing a $20 rebate on two low-end CD player models, bringing the price of the DEH-1700 down to $79. Rarely do suppliers offer rebates that early in the year, said industry members.

Pioneer's marketing VP Michael Townsen said, “We had thought entry-level CD would either be flat or slightly up because everybody's trying to cram more features into it.”

According to the The NPD Group/NPD Techworld, Port Washington, N.Y., sales for CD players under $200 declined 4 percent in units between January and August 2005, compared to the period in 2004. Similarly, dollar volume declined 6 percent. Data was not available for $150 and under.

Both Alpine and Pioneer, conversely, said their CD player sales in the over $150 category were up this year.

Both blame the high penetration of CD in new cars for the after-market shortfall, with Alpine claiming the CD penetration in new cars is now 100 percent, although only about half the cars on the road have a CD player. Townsen believes that the market is also suffering from competition with products outside the industry. “Maybe a consumer who might have purchased a $100 CD player is putting that money toward an iPod,” he said.

Despite the industry trend, Sony and Audiovox said the low end is one of their healthier segments in CD players.

Audiovox said the majority of its sales are at $129 and below and calls the upper end, from $149 to $499, the “no man's land” of the market. “That's a tough category until you make the leap to multimedia,” said mobile electronics senior VP Tom Malone.

Sony is taking the unusual step of introducing two models under $130 this month, well before the typical January sell in or the occasional early release in November or December.

Sony's mobile electronics general manager Andrew Sivori said the strategy is to give retailers time to change their demo boards before Christmas.

“We wanted to get the retailers behind the new product early enough so they could enjoy comfortable selling throughout the holiday,” he said. Retailers will also be under less pressure to keep holiday orders conservative, because the new products will continue in the line through part of next year, Sivori said.

New Sony models include the CDX-GT100 at a $99 suggested retail price and the CDX-GT200 at $129. The leader model has a front-panel auxiliary output, 52 watts by 4 channel output and a rotary knob controller (previously available at $179 and above). It also has a selectable subwoofer output and level control for the preamp output. The step-up model adds MP3, WMA and ATRAC 3 playback.

While acknowledging a general slowdown, JVC said sales of its low-end KDG 210 remain strong.