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The Evolution of Components, Systems

1/08/2007 02:00:00 AM Eastern

TWICE: Will component audio survive only as the hub of a custom-installed multiroom audio system, or as the hub of a custom-installed home theater system?

Klipsch: Custom installed multiroom audio systems and home theater rooms are where the growth is, so as we move into the future, I think component audio will become even more dependent on the custom installation channel.

Talmadge: A large part of component-audio growth is driven by the explosive growth of advanced televisions and most definitely by the custom channel, so we are targeting feature sets that keep the A/V receiver the hub of a multizone, multisource home entertainment system that optimizes the home theater experience that consumers are demanding. Audio and video distribution and seamless integration with third-party control systems are seen as keys for component audio in the whole-house audio/video market. Multichannel A/V receivers are currently the center of many distributed-audio systems, due in part to multizone preamp outputs and also due to the fact that the majority of home theater applications are 5.1 channels. With many A/V receivers employing seven channels of amplification (for Dolby Surround EX, dts ES surround), the extra unused two channels can be made to deliver separate source audio/video to other zones, or to another distributed-audio component.

In 2006, the main driver for audio components sales was the re-emergence of the A/V receiver as the center, or hub, of the consumer's entertainment experience. With one central device, consumers now have the ability to connect, control and enjoy many forms of rich content media; all from the convenience of their living room. Integration of HDMI connectivity, with conversion, and with scaling of other sources up to HDMI, for single-cable connection was a key feature. Add to that the ability to connect and control iPods through mainstream audio components, and there has been a tremendous lift. That includes some products being able to stream Internet Radio and music files from PCs.

TWICE: Does the future of the component and system business lie in networked devices that use Ethernet or no-new-wires networking technology to distribute music throughout the house?

Bales: Yes, networked devices will be a large factor in the consumer component and system business. Will traditional audio and CE suppliers leave music networking (via Ethernet and no-new-wires networks) to PC and IT brands? No way. It's too easy to incorporate, at the minimum, "client" technology into existing components, speakers, systems and TVs. It's already happening. The HD game console is several years ahead of anyone in this area and, while very popular, we do not believe it will become the primary source device for network entertainment.

Sonos-type devices are popular but do not replace the home theatre "Big System." We are already seeing a resurgence in "audiophile" type two-channel listening in Europe and Asia with Internet music and portable audio connectivity being a key feature. Powerline and Bluetooth technologies are still viable future solutions. New digital amplification devices are coming to market via the CE industry, and room calibration technologies have advanced and have become standard features in CE products. Speakers are inherently CE products.

To their credit, PC and IT brands have brought new and exciting "source" technology and business models to the CE industry but will not dominate the Ethernet (music or video) application or product offerings in the future.

Bente: The ability for components to not only deliver outstanding picture and sound quality but to be able to deliver it anywhere in the house and from any source, including the Internet, is without question the future of the component business. We have seen a remarkable uptake in whole-house entertainment solutions, and we will indeed see more. Our own solutions will address not only the flexibility required to be in the right place at the right time, but will do so in a manner free from the clutter of menus derived from PCs, and computer jargon.

Klipsch: Yes, it is a very big opportunity. We think it is extremely important for consumers to be able to access all of their stored content from anywhere in their house. A few companies have already started to work on such projects, and I believe many more will follow suit.

No, I do not think that traditional audio suppliers will leave this task solely up to PC and IT brands. Our industry is already focused on developing such solutions.

TWICE: Will advanced iPod connectivity (not just minijack inputs) and Internet-radio streaming help ensure that component audio and systems remain relevant to consumers?

Bales: We think it will be one of the primary driving forces in the immediate future. Again, iPod and Internet radio are just another source of digital entertainment that should be in the living room as well as other rooms in the home.

Bente: These features will certainly attract younger customers to component audio and indeed allow these customers to continue to enjoy what they have been enjoying on their PCs.

TWICE: Although iPod-dedicated amplified speaker systems (and a few iPod-docking shelf systems) probably aren't categorized by the industry yet as two-channel shelf systems, are they fulfilling a similar role in the house?

Bente: Without question, the iPod has been a catalyst in the development of a whole new spin on the tabletop or shelf system. The estimates we see for market size are well over $1 billion and growing. We knew the iPod was not simply a product, it was a whole new way for people to relate to music — music they already owned and music they would soon buy through iTunes. That intersection of technology changing peoples' behavior is where we live, where our opportunities come from

Klipsch: Yes, I believe iPod-dedicated speakers are starting to fill the role of two-channel systems in some living environments and will continue to do so. People are using these setups as secondary systems in their living rooms, bedrooms and kitchens and as primary systems in their offices and dorm rooms. In fact, every Klipsch iPod system is a true two-way design that's powerful enough to fill a party with sound.

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