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Suppliers: Soundbars, HTiBs Appealing To Different Customers

4/23/2012 12:01:00 AM Eastern

NEW YORK – Soundbar sales are rising rapidly.
HTiB sales are declining rapidly. But the two trends
aren’t related because the two products are purchased
largely for different reasons, multiple suppliers
contended.

Consumers are buying soundbars mainly to enhance
flat-panel TV sound, even if the products include
virtual-surround technology, suppliers said. Consumers
also buy soundbars purely for aesthetic reasons or
for placement in secondary and tertiary rooms.

HTiBs, on the other hand, remain the preferred option
for consumers who want a full surround-sound
experience, have living rooms or media rooms configured
for the placement of five or more speakers, aren’t
intimidated by system setup, and want a simple purchasing
decision that makes it unnecessary to mix and
match audio components.

Though full-fledged surround-sound systems are still
the system of choice for many people, HTiBs aren’t the
only solution. Retailers are increasingly creating their
own HTiBs from different brands of audio components
in inventory, contributing to the decline of single-brand
HTiBs marketed by audio and A/V suppliers.

“I think there is probably more cannibalization of
HTiB from the retailer-made bundles than from sound
bars, which seem to be much more related to the necessity
of improving the flat-panel TV sound,” said Tom Sumner, senior VP of Yamaha Corp. of America.

“If you look at it, you’ll see that online retailers like Amazon.com and Newegg and brick-and-mortar retailers like Best
Buy and hhgregg are offering their own packages with an
A/V receiver and speakers,” Sumner explained. “The packages
still offer consumers a complete solution that is approved
by the retailer and offers the retailers more flexibility
in changing their offering on a regular basis.”

The trend to dealer-packaged HTiBs, he noted, is “one
factor driving HTiB sales lower and component sales up.”

Marketers also note another potential reason for declining
HTiB fortunes: market maturity. Household penetration of
surround sound systems of any type grew to 39 percent of
all U.S. households by January 2012, Consumer Electronics
Association (CEA) statistics show.

The decline in HTiB sales accelerated in 2011, when factory-
level unit sales fell 17.7 percent to 2.3 million and dollar
sales fell 27.3 percent to $556 million, CEA statistics show.
The 2011 decline followed 2010’s 9.8 percent unit decline
and 14 percent dollar decline. For 2012, CEA forecasts a
decline of 14.7 percent in units and 15.9 percent in dollars.

Soundbars, on the other hand, are surging. In 2010, factory-
level unit sales skyrocketed 325 percent to 672,000 on
a 278 percent dollar gain to $146 million. Both percentage
gains were based on admittedly small bases, but unit and
dollar sales surged again in 2011 at high double-digit rates,
and dollar volume in 2012 is forecast by CEA to grow 117
percent to $485 million.

For its part, The NPD Group said retail-level HTiB sales
fell in 2011 by 9 percent in units and 12 percent in dollars
while soundbar sell-through rose 64 percent in units and 67
percent in dollars. Soundbar average selling prices rose by
2 percent in 2011.

Interestingly, NPD found that 2011 sales of HTiBs lacking
a video source (including supplier-made receiver/speaker
packages) grew 8 percent in units and 10 percent in dollars.
“I would think these devices would be more in direct competition
with soundbars, [yet] we are seeing both categories
grow at the same time,” said Ben Arnold, industry analysis
director for consumer technology at NPD.

For his part, Samsung’s Joe Stinziano said bars are
growing in part because they’re often used in secondary
and tertiary rooms that don’t accommodate multi-speaker
HTiBs. “The majority buy it for aesthetics or to enhance
the TV-listening experience,” the senior home entertainment
VP added. The company doesn’t recommend soundbars
as replacements for HTiBs, even if the bars feature virtualsurround
technologies.

Bar buyers come in three types, Stinziano continued.
One is concerned about aesthetics, another is concerned
about ease of use, and a third is the value consumer.

Dealer positioning is also playing a role in preventing
soundbars from cannibalizing HTiBs, said Troy Livingston,
Panasonic audio product manager. “Dealers are advertising
a simple solution with no cables or rear speakers.”

Panasonic senior product manager Alex Fried agreed
that dealers are positioning soundbars not as HTiB replacements
but as “more of an enhancement of audio for TV. Virtual
surround is secondary.”

For many consumers, Fried noted, HTiBs used to serve
as a way to augment TV sound, but with TV prices having
eroded faster than HTiB prices, those consumers are more
reluctant to add a $400 to $500 HTiB onto a TV that now
costs $1,200, or about half the price of only a few years ago.
These consumers are now opting for soundbars, which are
generally lower priced than $400-$500 HTiBs, he said.

For his part, Samsung’s Joe Stinziano also sees a dichotomy
between soundbar and HTiB buyers. Bar buyers
come in three types, said the senior VP for home entertainment.
One is concerned about aesthetics, and another is concerned about ease of use. Some bar customers are also
value consumers. “The majority buy it for aesthetics or to enhance
the TV-listening experience,” he said. The company
doesn’t recommend soundbars as replacements for HTiBs,
even if the bars feature virtual-surround technologies.

Soundbars are also growing for another reason, he said.
They often fit in secondary and tertiary rooms where a multispeaker
setup wouldn’t make the cut.

Yamaha’s Sumner also sees bars and HTiBs appealing to
different customers. “The first driving force [behind soundbar
growth] is that the flat-panel TV continues to get thinner,
which seems to be preferred by consumers, but it also
makes it very difficult for the TV to produce good sound,”
he said. “The thinner sound of the TV in some cases makes
it a necessity for consumers to have some form of external
audio.”

A second driving force “is what we lovingly call WAF, or
‘Wife Acceptance Factor,’ ” he said. “Historically the hometheater
system was sort of the man’s domain, but now with
flat-panel TV being stylish and part of the décor, the woman
of the house wants to have more of a say in the appearance of the entertainment system.”

A third factor driving soundbar sales is convenience,
Sumner added. “It really does take some
work to install a complete home-theater system —
either HTiB or components — in a home. Soundbars
are just easier to install and don’t usually require
any cutting into drywall or running wires,” he
said. “We do find that people who are seriously
into video games, sporting events, movies or music
tend to invest the time and money to get the
real immersive experience, at least in their main
man cave. Those same customers may opt for a
sound bar in secondary rooms like bedrooms or
dens.”

As a result of these market forces, sound bar
sales are up significantly in all price bands, including
$500-plus, Sumner said, but the sweet
spot is the $200 to $299 price range, which accounts
for about half the market.

Many retailers, however, are taking steps to
entice consumers in stepping beyond $299.
Sumner pointed out that at International CES,
several retailers were impressed with a display
that Yamaha set up to showcase several sound
bars. “At least one retailer implemented almost
the exact display to demonstrate to customers
what they get by trading up from $250 to $800
to $2,000,” Sumner said.

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