'The Fabulous Invalid'

The recent gyrations and speculation about the CE industry in recent weeks reminds me of the classic line spoken by Bette Davis, playing fictional Broadway diva Margo Channing in the classic movie “All About Eve.” She warned some of her guests at a party she was throwing, “Fasten your seatbelts, it's going to be a bumpy ride.”

From what we've seen in the first quarter, it could be a bumpy ride for more than a few in the CE business this year.

Yes, this industry usually rides out downturns and recessions pretty well and that could be the case this time. But some surveys and pundits are saying that consumers won't shop for a while due to $4 a gallon gas and other economic ills. Heck, one survey said they won't even spend their Federal rebate checks on CE.

Still, Brand Source and its specialty A/V division, Home Entertainment Source, said last week it is gaining market share and its business is fine, thank you. And that was the same message its competition, Nationwide Marketing Group, gave earlier in March.

So, there are two things you can say with certainty:

1. CE is historically fast-paced, but during this economic downturn it is even more volatile than ever.

2. Manufacturers and retailers are looking to “sell up” for more profit. They can no longer be content with just moving boxes; they have to provide service, ease of use and “sell the experience.”

On that first point, top brands are repositioning themselves overnight, either to press their advantage, such as Sony, Samsung, Panasonic and others. Others are paring down operations to get profitable and more competitive. Toshiba's elimination of HD DVD to stop the losses and put resources into other categories is one example. Pioneer dropping plasma panel manufacturing and sourcing those components to push its Kuro line and other products, like car electronics, is another.

At retail, Wal-Mart and Best Buy are aggressively going after customers of Circuit City, Sears and Tweeter. The latter chain surprised those in the doom-and-gloom crowd this week and announced the opening of a new store.

As for the “sell up” trend, Sony and Panasonic both pushed the notion in recent meetings that they were going to emphasize and promote the notion that HDTV is not just a flat-panel screen. They will remind consumers that Blu-ray, upscale audio, digital cameras and HD camcorder are part of the experience.

Look at our coverage of Brand Source's Home Entertainment Source (HES) meeting, as well as MERA, EH Expo, PARA and Display Search, in this issue. Whether you are talking about home A/V systems and networks, or their equivalents on the road, in vehicles of all sizes, everyone is going after more upscale customers.

But will there be enough of these supposed upscale consumers who have recession-proof jobs to support all these upscale strategies the industry is pushing now?

Since I started mentioning Broadway I might as well end with it. Whenever the economy goes in the tank, Broadway types moan and groan that new plays and musicals are too expensive to produce and it's too tough to create hits. Yet somehow the public still goes to the Great White Way in the worst of times, to experience the magic of live theater. That's why theatrical types sometimes call Broadway “the fabulous invalid.”

I remember that line whenever I hear moaning and groaning about this business. You should remember that line too and remind yourselves that the same is true of CE industry, in good times and bad.