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Audio Roundtable: You Can Hear Us Now

12/20/2010 12:01:00 AM Eastern
NEW YORK — A slowly reviving economy, demand for HDMI connectivity options to HDTVs and Blu-ray players, demand for connections to music stored on smartphones and PCs, and growing demand for old-school two-channel audio — updated to connect to new audio sources — are driving up component-audio sales.

That’s the consensus of marketers polled by TWICE for a “virtual roundtable” in which they responded to questions by email. Here’s what they are thinking as the year ends and the industry prepares for International CES:

TWICE: How did component audio sales fare at the retail level in 2010, and what’s the outlook for 2011?

Tom Sumner, Yamaha: Component audio sales turned around in 2010. Of course, you could postulate that part of the reason is comparisons over a pretty gloomy 2009, but we are seeing growth in A/V receivers and speakers that has been pretty consistent each month. We believe there are a couple of key reasons for the growth. One is that as flat panels have gotten flatter, and the sound has finally come to the point where consumers can’t stand it. Audio has become a must to purchase with new TVs just to hear a newscast, let alone enjoy a music or sporting event.

The other factor is there is some pent-up demand as consumers have updated their TV, Blu-ray player or settop box and find that their old A/V receiver that still works doesn’t have the connections and features they need for their new system. Part of this is related to 3D, but so far this year (though November 2010), 3D is not yet a major purchase factor, and most of the pent-up demand is from all the consumers who purchased all those flat panels over the past few years.

Streaming content is clearly one factor that is growing demand for our products and will continue to drive business in 2011.

Wireless is also a trend that is moving customers, and we believe it will continue to grow business in 2011. Having content that you can wirelessly stream from your phone or your computer is compelling.

Al Baron, Polk: Despite the weak employment picture and stagnant wages, there seems to be a healthy appetite for consumer electronics and component audio at levels well above last year’s. It’s logical to assume that consumer demand for products that allow them to stream audio from digital players, computers, smartphones and games is helping to drive sales of more traditional components, such as speakers and receivers, that offer new ways to enjoy digital audio and video.

No matter what, innovative companies will continue to adapt and reconfigure products to adapt to the new ways people receive audio.

Bob Weissburg, D&M: Industry sell-through has been up over the past year for the past seven months [as of November]. After a down year in 2009, consumers are back in the market to upgrade their audio and video gear. I believe that there have been several factors driving growth, including increased demand, excellent value in the market, and new technology features such as networking, HDMI 1.4a, iPod connectivity and room-correction technology from Audyssey.

At D&M we have seen a nice lift in sales over the $1,000 price point, which indicated that consumers are still demanding the complete A/V experience and new features. We have had great response to the [Apple] AirPlay feature found on select Denon and Marantz AVRs and desktop music systems. This is a clear indication that consumers want to hear their music content from their iTunes collection aggregated to their main entertainment system, enabling the AVR as the “hub” of the networked home.

2011 should be another year of increased sales in home audio as new innovation and technology is introduced at new price points and form factors to create renewed interest and demand.

Russ Johnston, Pioneer: According to NPD data, the industry experienced a decline in unit sales year over year in the multichannel A/V receiver category every month for over three years. However, this trend has turned around and since March, 2010, the industry has experienced growth each month vs. 2009.

The key contributor to this growth is the advent of 3D TVs and the need to upgrade to audio components that can pass the 3D signal via new HDMI standards. Along with 3D connectivity, more than likely the consumer will also be gaining HD Audio Decoding, Internet connectivity for access to streaming services, and possible connectivity to their smartphones.

For the past two years, Pioneer has more than doubled our market share due to our quick introduction of new technologies such as HD Audio Decoding and HDMI 1.4a for 3D compatibility. Pioneer has [also] led the way in appealing to consumers who are passionate about their Apple lifestyle.

To drive growth in 2011, we are looking at ways to expand our Apple connectivity even further. We also believe that more and more consumers will look to build a connected home with home networking and home automation features.

Additionally, the popularity of the iPad has helped create more consumer interest in home-theater control and whole home automation. App-based control is really a hot topic when looking for receivers that control and provide easier setup.

Mark Casavant, Klipsch: Component audio sales in 2010 have stabilized since 2009. 2011 should remain stable as consumer spending gradually recovers. However, we don’t consider component audio sales as robust. The economy certainly has had its effect, but consumers’ discretionary dollars have been funneled to new flat panel televisions and mobile devices. Fortunately, outof- the-box audio quality for these products is severely lacking as these products become smaller and slimmer.

TWICE: Is two-channel stereo listening through components undergoing a revival?

Sumner: We are seeing some increase in two-channel components. We hope that some nostalgia for a time when people actually sat and listened to music will drive some quality two-channel sound. And we have some hope for that trend on these shores as we are seeing that behavior happening in Europe and seeing growth there.

Baron: Two-channel is at the foundation of our business and remains a solid profit generator for our category. However, each year it becomes easier to add high-performance multichannel audio to even the most basic and compact systems, and at affordable prices. We find that our SurroundBar models are especially popular among end users who are looking for something more than simple two-channel audio but would rather not set up a full 5.1 speaker array.

Weissburg: The two-channel market has grown nicely for us with increased demand for integrated amplifiers, separate components, CD players, turntables and even phono cartridges. Many people are rediscovering their music again and reconnecting with great sound. I see this trend continuing for the foreseeable future. The passion for music and the experience that only a great sound system can provide exists in every generation. As more dealers promote twochannel audio, it will continue to grow.

Johnston: We have experienced some improvement in our two-channel system sales but not enough to call it a revival yet. Our specialty retailers have redirected their efforts from lowermargin flat panels to two-channel audio systems by converting demo rooms to re-engage with this category. Some have reported success and more importantly feel like they are teaching a new generation what quality sound is all about.

Casavant: Music listening in general is easier today through, for example, portable/mobile devices and music streaming services. Access to content has never been easier, so the trends show increasing consumption. This leads to more music product sales from headphones to speakers. Two-channel audio is everywhere, from whole house to headphones, so, yes, we anticipate more demand in 2011.
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