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Portable Audio Sales Top Home Units

3/27/2006 02:00:00 AM Eastern


It was a great year to be in the audio business in 2005 — if you were selling MP3 portables.

In 2005, factory-level portable audio sales exceeded sales of home audio equipment for the first time in history, Consumer Electronics Association (CEA) statistics show. Portable sales also came close to exceeding combined home/after-market autosound sales for the first time in 2005, when portable sales hit $5 billion compared with $5.11 billion for combined home and car sales, including home tabletop radios.

The CEA said combined factory-level sales of home, portable and after-market car audio rose 29 percent to a record $10.1 billion in 2005, easily exceeding their previous peak of $8.59 billion in 2000. Almost all of the growth was driven by exploding sales of headphone MP3 portables, whose sales grew to account for 85 percent of factory-level portable audio sales, CEA statistics show. Sales of home audio shrank 16 percent to $2.68 billion, and after-market car audio sales grew by only 4 percent to $2.43 billion.

Portable audio sales, in contrast, rose 119 percent to an all-time high of $5 billion in 2005, easily exceeding the previous record of $2.8 billion set in 1994. The figure excludes home radios. The only growth segment in portables was headphone MP3 players, whose factory-level sales more than tripled to $4.23 billion, CEA said. Of that segment, Apple's share was 72.5 percent of units sold by retailers for the first three quarters of 2005, NPD Techworld noted. That represented a tripling of Apple's unit sales compared to the year-ago period, NPD said.

Besides making portable audio products outsell home audio equipment, the iPod phenomenon was also responsible for making headphone MP3 players extend their dominance within the portable audio industry. Headphone MP3 player sales grew to account for the majority of portable audio dollar sales for the first time in 2004, when MP3 share hit 59 percent, CEA statistics show. In 2005, MP3 grew to account for 85 percent of portable audio volume.

MP3's share gains reflected a tripling of factory-level headphone-MP3 sales in 2005, when factory-level MP3 dollar volume grew 228 percent to $4.23 billion following 2004 growth of 204 percent, CEA statistics show. Sales of “legacy” portables dropped 22 percent to $774 million. Legacy devices include CD- and cassette-based headphone stereos and boomboxes, as well as voice recorders and headphone radios.

Simultaneously, factory-level home audio sales suffered an unprecedented one-year decline of 16 percent in 2005 to $2.68 billion, with sales of components and systems both dropping at double-digit percentage rates. Some component segments — speakers and electronics other than receivers — nonetheless posted gains, CEA also found.

Excluding autosound, combined home and portable audio sales rose 40% in 2005 to a record $7.68 billion.

Here's a more detailed look at 2005's sales trends:

Portable Audio: Compressed-music portables were solely responsible for three consecutive years of factory-level portable-audio sales gains during 2003 through 2005, when factory-level sales of legacy portable audio platforms.

Total portable sales were up 119 percent in 2005 to an all-time high of $5 billion, driven by a 228 percent increase in headphone-MP3 sales to $4.23 billion. Factory-level sales of legacy portable audio platforms dropped 22 percent to $774 million in 2005.

In 2004, factory-level dollar sales of headphone-MP3 stereos exceeded headphone-CD sales for the first time since MP3 portables debuted in the United States in 1998. The gap widened in 2005, when sales of headphone CD players fell 22 percent to $383 million compared to MP3's $4.23 billion. Factory-level dollar sales of CD- and cassette-equipped headphone portables fell for the fourth consecutive year in 2005.

Sales of boomboxes, headphone CD players and headphone cassette players have fallen to the point that MP3 portables accounted for 85 percent of factory-level dollar sales of portable audio products in 2005, up from 59 percent in 2004, CEA's statistics show.

MP3's influence in the portable audio market also grew in another way. A growing number of headphone CD players play WMA- and MP3-encoded CDs. In 2005, about 39 percent of headphone CD players sold at the wholesale level were able to play CDs encoded in one or more compressed-music formats, up from 9 percent in 2002.

Home Audio: Home audio sales resumed their decline in 2005 following a 2004 gain of 13 percent that interrupted three consecutive years of declines. In 2005, factory-level sales fell 16 percent to $2.68 billion. With the 2005 slump, home audio sales stood 28 percent below their 2000 peak of $3.74 billion, CEA statistics show.

Sales were essentially flat in component home audio and plummeted in all other major home audio categories: compact all-in-one stereo systems, home theater in a box (HTiB) systems and table radios (including clock radios).

Component sales: Even with flat component-audio sales in 2005, the year's $1.14 billion factory-level volume stood far below the industry's 1990 peak of $1.93 billion, CEA statistics show. Component audio sales declined almost every year since 1990 with the exception of slight blips upward in 1993, 1994, 1995 and 2000 and an unusual 16 percent upward spike in 2004. That spike, however, merely overcame a 2003 double-digit percentage drop to return sales to levels only slightly above 2002 levels.

Despite components' overall decline, component speaker sales grew in 2005 by 16 percent in dollar volume to $516.1 million, although their unit sales declined 1 percent. Home receiver sales, on the other hand, took a unit and dollar dive. Factory-level sales fell 18 percent in dollars to $435 million and 19 percent in units to 1.65 million, CEA statistics show. Other types of electronics components, including preamp processors, did better in the aggregate, rising 18 percent in dollars to $185.8 million and 27 percent in units to 1.02 million.

Home system sales: Despite their own double-digit percentage decline in 2005, sales of home audio systems (HTiBs and compact stereo systems combined) exceeded sales of separate audio components for the ninth consecutive year. In 2005, system volume exceeded $1.34 billion, edging out component-audio volume of $1.14 billion. As a result, system sales accounted for 54 percent of total 2005 factory-level home audio sales, excluding clock radios and table radios, CEA said.

Total system sales fell 26.7 percent at the factory level to $1.34 billion in 2005 on a unit-sales decline of 15.2 percent to 9.82 million units. Both system types experience double-digit percentage declines, CEA statistics show. Compact sales fell 32 percent in dollars to $611.9 million on a unit-sales decline of 13 percent to 6.01 million. HTiBs posted their second consecutive annual decline, this time falling 22 percent in dollars to $730 million on a unit-sales decline of 19 percent to 3.81 million units.

Compact-system sales are well below their peak of $1.78 billion in 2000. HTiB sales peaked in 2003 at $961 million following five consecutive years of growth.

Car audio: After-market autosound sales rose 4 percent in 2005 to $2.43 billion, but they would have fallen markedly if were not for satellite radio, whose sales, including transportable plug-and-play units and home docking stations, are included in the autosound category by CEA.

Factory-level satellite radio sales rose 46 percent in dollars to $605.4 million and 24 percent in units to 7.36 million, CEA statistics show.

The statistics exclude automaker sales of autosound and satellite radio.

CEA's 2005 Factory-Level Audio Sales

2005 2004 YoY%
TOTAL HOME AUDIO*
Dollar value $2,680,701,275 $3,195,180,819 -16%
Home Receivers
Units 1,646,945 2,026,766 -19%
Dollar value $434,973,464 $530,857,894 -18%
Other Home Separates
Units 1,038,762 814,901 27%
Dollar value $185,841,600 $157,059,943 18%
Component Speakers
Units 6,276,370 6,331,665 -1%
Dollar value $516,114,194 $445,324,759 16%
Home Radios
Units 9,066,491 9,983,456 -9%
Dollar value $201,826,854 $231,646,724 -13%
HTiBs
Units 3,807,249 4,701,644 -19%
Dollar value $730,015,270 $930,684,504 -22%
Compact Systems
Units 6,010,453 6,873,969 -13%
Dollar value $611,929,893 $899,606,995 -32%
TOTAL PORTABLE AUDIO**
Units 48,208,350 34,577,578 39%
Dollar value $5,002,925,778 $2,279,446,677 119%
MP3 Players
Units 24,811,852 7,126,182 248%
Dollar value $4,228,554,530 $1,288,557,324 228%
Non-MP3 Port. Audio
Units 23,396,498 27,451,396 -15%
Dollar value $774,371,248 $990,889,353 -22%
Boomboxes***
Units 4,240,023 5,555,258 -24%
Dollar value $193,472,530 $265,700,153 -27%
CD headphone stereo***
Units 12,831,868 13,373,927 -4%
Dollar value $382,966,023 $491,908,894 -22%
TOTAL AFTERMARKET AUTOSOUND
Units 28,938,634 29,052,842 0%
Dollar value $2,427,710,941 $2,338,586,128 4%
TOTAL AUDIO MARKET****
Dollar value $10,111,337,994 $7,813,213,624 29%
* Includes receivers, speakers, all other separates, HTIBs, compact systems, component speakers and tabletop radios.

** Includes MP3 and non-MP3 portables, the latter including headphone stereo and boomboxes.

*** included in non-MP3 portables.

**** Combined home, portable, car

Source: Consumer Electronics Association ©TWICE 2006