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The Undersold Custom-Audio Market

12/08/2003 02:00:00 AM Eastern


TWICE: Some years back, a home audio supplier mused that as baby boomers aged, and their financial obligations declined, money would be freed up for them to once again pursue that generation's passion for audio. Maybe that hasn't happened in the traditional component-audio sense, but perhaps it is happening in the distributed-audio sense.

Eli Harary, Infinity: They're clearly spending money on custom, but audio is not getting enough of it. When I talk to a lot of our higher-end custom dealers, I analyze what went into their recent $100,000 job and look at how much of it is in better performing audio vs. control panels, lighting, security, etc. Baby boomers are spending more money than we ever hoped they were going to spend. We're just not getting a big enough share of it.

Franklin Karp, Harvey: What audio manufacturer can claim 50 percent growth last year? Crestron did. It's the wow factor, it's gee whiz, it's control. It's the GUI that anyone, including my 76-year-old father, can use. They're onto something, and they're getting perhaps a disproportionate share of the money being spent in custom.

They've simplified the client's life. We've always managed to complicate our clients' lives.

Harary: Ten years ago, if I said we were going to introduce a pair of $2,000 in-wall speakers, I would have gotten shot. There is a desire on behalf of some consumers to have better performance in their lifestyle-oriented products or their custom-installed systems. But again, it's a matter of getting dealers to take the time to present them, let customers know there are the differences, and then do all the added-value stuff that the custom guys are doing to make it simple to own it.

TWICE: Do the custom installers have the facilities to demonstrate step-up in-wall speakers? A lot of these guys don't even have showrooms.

Harary: A pretty good proportion is capable of doing it. The excuse that I hear, however, is that the customer wants 16 pairs of in-wall speakers, putting us into a situation in which we can spend only $200 each on the first eight rooms, and maybe in most cases, higher-end custom consumers don't even hear any of the speakers they're buying. They're just told what it is they're going to buy.

Franklin Karp, Harvey: Even through the dips in the economy, Wall Street, everything, the money is still out there. It's a matter of how you reach out and present it and get them to spend it.

Gary Bauhard, Pioneer: There's a tremendous opportunity in new construction. Look at houses today and the way they're being configured, especially in higher- priced houses. They have home theater rooms, wine storage, upscale appliances, upscale lighting, alarm systems, more space devoted to garages. At the end of the day, we're all fighting for disposable income, whether it's for Rolex watches or BMWs.

Karp: When people put in Viking stoves, they're not all chefs. But you know what? They're spending the money. They were told that this will enhance their lifestyle. I was in LG's showroom last night, and they had all their appliances and a video room. The appliances were cool-looking. You almost want to go into the white-goods business.

Kerry Moyer, CEA: Look at one of the latest issues of Newsweek. The whole issue was devoted to ... how Americans are willing to spend more money on products with good design, and how good design is filtering down into lower priced products available through stores like Target and others.

I want to note that 42 percent of all new American home starts include structured wiring, which is infrastructure. There's a huge opportunity here to look at audio as an attachment to that infrastructure.

Karp: Some of the biggest custom guys are huge customers of Crestron, AMX and Lutron, but they're not big audio customers. That speaks volumes. Are they leaving money on the table? Yes. Are they not demo-ing audio because they're really not thinking about it? Absolutely. It's an afterthought. Harvey tries to go at it the other way because we're audio first, and we're trying to attach the control.

I want to sell them the $1,000 in-wall speaker, and I want to sell them the cool, Krell components. So there's a philosophical difference.

Harary: The guy spending $100,000 is not financing it. In some cases, they may put it in their mortgage, but if he has to make a payment of an extra $700 a month, it's totally irrelevant. We could extract more dollars out of them for better sound.

Don Milks, Onkyo: I think one of the other issues is the wow factor. There's a big wow factor associated with a Crestron touchscreen and 60-inch plasma. But visually, there's really not much difference between a $100 dollar pair of in-wall speakers and a $1,000 pair.

Karp: I'll buy that. There are beautiful non- in-wall speakers that make statements. When people spend a lot of money on our gear, part of it is making a statement. But in-walls don't show off like the Viking range. For the in-wall, the demo makes the difference.

Factory Sales Of Audio Equipment

September and Year to Date 2003

Thousands of Dollars

September 2003 2002 % Change
Portable Audio* 259,939 209,468 24.1
Separate Components** 89,263 103,331 -13.6
Systems 183,066 180,286 1.5
Aftermarket Autosound 174,758 205,745 -15.1
Total 707,026 698,830 1.2
Year-to-Date** 2003 2002 % Change
Portable Audio* 1,391,438 1,474,995 -5.7
Separate Components** 634,087 884,957 -28.3
Systems 1,109,887 1,379,233 -19.5
Aftermarket Autosound 1,597,547 1,806,957 -11.6
Total 4,732,959 5,546,141 -14.7
NOTE: Totals and year-to-date may not add due to rounding.

* Includes home radio

** Comprised of electronic components and speakers

Information contained in this report reflects total market statistics for products sold in the United States regardless of the brand name or country of origin.

Source: Consumer Electronics Association ©TWICE 2003


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