Despite the technical advances in home theater audio components, the audio industry will continue its shift at CES towards simpler home theater solutions and quality two-channel minisystems and microsystems.
That is where the money is, suppliers and retailers have found. (See page 103 for new mini and microsystem introductions).
Unit home-theater-in-a-box (HTiB) sales, for example, doubled at the factory level to 1.5 million for the nine months through September 2001, with dollar volume up 125 percent to $570 million, CEA statistics show.
During that time, receiver sales fell 14 percent in units, CEA statistics show. Some suppliers, however, point out that, when sales of receiver-equipped HTiBs are factored in, receiver sales were actually up.
Not so with home theater shelf systems. Their factory-level sales fell during the first three quarters of 2001 by 52 percent in units and 48 percent in dollars, CEA says.
In 2001, suppliers continued to offer a big selection of home theater shelf systems, said Philips audio systems marketing director Art Hayes, "but not a lot were selling." In 2002, "some retailers will get out of it altogether and replace it with exciting stereo products with high power and aggressive design."
Consumers are opting for HTiBs over home theater shelf systems, said Philips audio component marketing manager Tom DeGroot, because home theater is a family purchase intended for larger livingrooms and family rooms, whereas shelf systems are more often personal purchases intended for bedrooms or home offices. Larger rooms, he noted, demand the higher power that HTiBs can deliver.
The inclusion of integrated and separate DVD players in HTiBs is also encouraging the shift, DeGroot said. Retail-level unit sales of DVD-equipped HTiBs are rising rapidly, accounting for 55 percent of unit HTiB sales in August 2001 compared to 35 percent in January 2001, he said in citing NPD Intelect statistics. "Our prediction is that by May 2002, 75 percent will include DVD." The majority of DVD HTiBs sold during the January-August period featured integrated DVD, in part because the integrated systems are often less expensive.
"Major retailers such as Circuit City, Best Buy and Sears already have 12 to 17 SKUs, including Bose. Most SKU expansion will occur in mass merchants that will go from an average of three to five. Mass merchants [Kmart, Target, Wal-Mart] are jumping in quickly. The clubs were already active," Degroot said.
HTiB sell-through for the first three quarters of 2001 went up 93 percent in units and 94 percent in dollars, according to NPDTechworld.
HTiB's success has prompted suppliers to expand their selections to the point that "retailers have never been so bombarded with so many offers" for 2002," DeGroot said. "It's more than they [dealers] can handle."
Dealers are also making more room for microsystems, said Philips's Hayes. "There's a strong belief by retailers that this is the next wave in systems." Mass merchants, in particular, will devote more space to micros, having skewed heavily toward minis in the past, he said. Specialty chains such as Tweeter and Ultimate are already heavily skewed toward micros, he noted.
At the retail level, micro's share of the shelf-system market was only 12 percent in units and about 18 percent in dollars during Q1-Q3 2001, according to NPD statistics, but that was up from about 10 percent and 15 percent, respectively, Hayes said.
At the factory level, micro sales through September were up 24 percent in units and 7 percent in dollars, even as minisystem sales fell by 14 percent in units and 25 percent in dollars, CEA statistics show.
In minisystems, manufacturers will focus on differentiating with power and design," said Philips' Hayes. "Four years ago, high power was 2x50 watts with 10 percent THD at 1kHz at $299," said Hayes. "For 2002, you'll see 350-500 watts at $299 to $399."
In microsystems, suppliers are moving in two directions: a focus on function in some models and a focus on design in others. The function-oriented micros are essentially slimmed down minis with a growing focus on higher power and multi-CD mechanisms, Hayes said. Design-centric micros include executive-style systems, wall-hanging systems, systems with vertical-load CD mechanism, and other eye-catching designs that were once the exclusive hallmarks of companies such as B&O.