By Lisa Johnston
New products on display at the American International Toy Fair, held in N
TWICE: In the first half, factory-level home audio sales, excluding home radio, fell below aftermarket autosound levels for the first time ever. Is this a short-term trend, or is the home audio industry in a transition period that could last for years?
Eli Harary, Infinity: Whether it takes years depends primarily on how distribution deals with the industry's fundamental exposure problem. There's not enough focus on presenting home audio to consumers so that they can determine why they should spend on audio.
That's caused by a lot of things. There's clearly a lot of enthusiasm around display technologies on the salesfloor and by consumers. What people used to spend on high-end TV five or 10 years ago was $1,000. Now they're spending $5,000 or $10,000 or more, and I don't think their incomes went up commensurately to do that and invest in other entertainment segments. It is our job to give them a wonderful enough taste of the experience that it gives them a good enough reason to spend those additional dollars.
Kerry Moyer, CEA: When I walk into an audio store, I'm confronted immediately with plasma and LCD screens. That's good because it's exciting what consumers want, but I'm starting to see more video than audio on display.
Franklin Karp, Harvey: Correct. There is a level of guilt on the part of audio guys who promote flat-panel technology, but adopting flat panels was the right thing to do.
If you go back in the history of hi-fi stores, we didn't sell television. Everybody was excited about audio. It was cool and the thing to do. Unfortunately, we've lost passion for audio, yet the truth is that the audio part of the [home theater] experience is more important than the video part.
TWICE: Who lost the passion? Retailers or consumers?
Karp: I think retailers are guilty because, for the most part, the people on the floor selling audio are not the hobbyists and enthusiasts with whom I grew up. A lot of guys I grew up with are still in the business but moved on, some working on the manufacturer side. Some are still in retail. But there is something absent.
I remember how exciting it was when the first CD player hit the floor. Everybody went crazy. I remember the first laserdisc player. It was the audio side that excited us because the sound quality was so impressive.
I'm not saying it's lost because the industry has gone to big-box retailers. The art of the demonstration, the passion, getting people involved in the musical side — that has deteriorated dramatically. And that's something that we're making a very conscious effort to bring back.
Video's getting them in the door. The flat-panel business is the best thing that happened to this business in my history. But we can't forget that the rest of the experience — the audio side — is really what we need to get back to.
Everyone knows what's going to happen with [flat-panel] price compression. Audio makes for paydays.
Moyer: Do you still have a dedicated sound room to switch speakers and receivers?
Karp: I have no intention of abandoning that.
Moyer: I spoke with a specialty retailer who talked about his home theater vignettes, and he had a small sound room that wasn't like the area he had years ago. I can't help but wonder if things might change things for the retailer if he went back to switching loudspeakers and presenting people with choices, rather than just showing systems.
Karp: About two years ago, a constituency in my company advocated making all the rooms strictly lifestyle. I resisted because there's still a high-end consumer who wants to listen, and we need to force them to listen.
Moyer: [Vignettes] were one way that some retailers used to try to differentiate themselves from big-box retailers, but to some degree it may have backfired because some big-box retailers don't have any real way of even comparison demo-ing equipment. Product is pretty much just set up on islands with no way to present a choice between two or three speakers.
Karp: There's no question that the specialist has a job to do — to take discretionary spending dollars from clients who could spend it on a new car, a new watch, or any number of luxury items. We're a luxury item. The kind of clientele that the specialty audio guy is appealing to has the ability to spend a lot more than $98 on a DVD. He just has to be shown why he should spend more.
Gary Bauhard, Pioneer: The fundamental experience when you go into retail has changed. In the old days, you went in to listen to an audio system. That system had to create the illusion that the band was in the room with you. Now the stimulation comes from video. I'm sure that in a lot of cases, for a retail salesperson, it's not any more work, or maybe even less, to sell a plasma than it might be to sell a $3,000 or $4,000 receiver.
Moyer: Today's younger crowd is a much more visual crowd. Even Gen-Xers and Gen-Yers grew up watching MTV music videos on a TV with TV sound quality.
Harary: On the other hand, we all grew up in the business of A-B-ing loudspeakers. How do you sell a customer a $300 pair of loudspeakers instead of a $99 loudspeaker? You show them a difference in performance. Some percentage of customers will want better performance, and they can hear it. Yet, in store after store, some retailers have done the most beautiful job of setting up HTiB systems, in some cases even playing them. But none of those HTiB systems are in the mix-and-match or A-B comparison rooms.
If customers are driven to buy video and have an interest in adding good-enough audio to that video purchase, you can take that customer and say, "Listen, before you walk out of the store, I want to make sure you've heard what better audio might sound like." That was a fundamental practice in our industry when I started. Now, there's no fundamental plan to present them with a step-up version of that little box full of speakers called HTiB.
The biggest opportunity we have, and the biggest problem, is taking thousands of video customers and getting them into something better than a $300 dollar HTiB system.
Don Milks, Onkyo: Everybody would agree that video is drawing all the customers into retail. It's as much the responsibility of retailers as manufacturers to convert those customers into audio customers, not just into HTiB customers. Circuit City's brand new store in Millbury, Mass., is unlike any other Circuit that I've been in. It was pleasing to see an actual audio room where customers could switch home theater systems with different speaker configurations as well as see vignettes with demonstrable home theater. Obviously, the audio room is focused around video, but audio is very much a strong part. We need to do more of that.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.