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MP3 Speaker Systems Take Home Audio Lead

1/07/2010 02:00:00 AM Eastern

Sales of MP3-docking speaker systems held up better in 2009 than any other major home audio category and will do so again in 2010, marketers contend as they refresh their docking-speaker lineups here at International CES.

For 2010, retail-level sales could grow as much as 5 percent in both units and dollars, with high-end devices at $299 and up enjoying about the same growth rates, suppliers said.

Sales have remained robust because of the continued rise in household penetration of iPods and iPhones, the growth of multi-iPod households, the constant need to charge battery-draining iPhones, and affordable prices (mostly less than $199), marketers told TWICE.

Docking-speaker sales have been so strong, and sales of other home audio products so weak, that docking speakers were expected to emerge in 2009 as the largest home audio category in factory-level dollars, according to the Consumer Electronics Association's (CEA) mid-2009 forecast. CEA forecast 2009 docking-speaker volume would grow to $1.09 billion (excluding iPod-docking clock radios and home radios) compared to a forecast $943 million in home audio component sales, $937 million in system sales (combined two-channel compact systems and home theater in a box systems), and $240 million in tabletop home and clock radios, including docking models. If those forecasts hold up, docking-speaker systems sales in 2009 will exceed component audio sales for the first time and, for the second consecutive year, home theater in a box (HTiB) sales, CEA's statistics show.

Docking speaker sales have held up well in a brutal economy, an Altec Lansing spokesperson said, because “there are so many iPods in the house that need to be charged, especially the iPhone because you use it all the time.”

Nonetheless, the market is maturing. Several years of double- and triple-digit dollar gains have come to an end because of the segment's high household penetration rate, but there's still room to grow because much of the total addressable market is still untapped. The household penetration of MP3 players stood at 46 percent in January 2009, well ahead of docking speakers' 30 percent, CEA consumer surveys show.

High household penetration and the recession combined to slow unit sell-through growth to low-single-digit rates during the first three quarters of 2009, with dollars falling about 5 percent to 6 percent as suppliers and retailers reduced prices to combat the recession, marketers said. But suppliers expected growth to return in the fourth quarter, perhaps as much as 10 percent in units compared to a flat year-ago quarter, with dollars up at a lower percentage rate. Even if unit sales grew as much as 10 percent in the fourth quarter, however, dollar sales for the full year would likely be flat to down 3 percent, marketers said.

The strongest unit sales have come in $50 to $80 systems, although they lost some share in 2009 to the $20 to $50 segment, which competes successfully with Apple's speaker-less charging stands at $40 to $50 and iPod-charging wall warts at $30, said an Altec Lansing spokesperson. “You can get a speaker system for the same price at Walmart,” the spokesman said.

The $299 to $599 high-performance segment remains the smallest segment because of price and possibly because of the proliferation of higher-power dock-equipped A/V receivers, HTiBs, and compact stereo systems, some marketers said. In its mid-2009 forecast revisions, CEA projected that 90 percent of receivers would ship in 2009 with the ability to control a docked iPod or MP3 player, while included docks would ship with 48 percent of HTiBs, 44 percent of home radios and 74 percent of clock radios.