CEA Lowers CE Sales Expectations Through 2004

By Bob Gerson On Oct 13 2003 - 6:00am




Hopes for a significant industry factory sales bounce back this year, and a push to the historic $100 billion level next year, as expressed by the Consumer Electronics Association (CEA) last January, faded this summer. That's based on the just-released consensus results of an updated survey of members conducted by CEA.

The study's shift in outlook should come as no surprise, as it serves to confirm the sluggish sales reports being issued by leading consumer electronics manufacturers and retailers. It also reflects the view of some economists that the hoped-for economic recovery, and the accompanying boost in consumer spending, isn't likely to arrive until sometime in 2004.

CEA issued final figures for total industry sales in 2002 showing they came in at $93.9 billion, or essentially flat against those of the preceding year, compared with the forecasted 3.7 percent increase. For this year the CEA estimate is for sales of just under $95 billion, which would be up just 1.1 percent from last year, and down 4.6 percent from the January forecast.

For 2004, CEA dropped its sales sights by a full 6 percent, pegging factory revenue at $97.3 billion, up 3 percent, and moving the achievement of a $100 billion sales year back to 2005.

While the updated survey's by-category 2003 revenue declines from the January outlook were pretty much across the board, the biggest negative changes came in the two major electronic entertainment areas, video and audio. Where CEA's panel had expected a nearly flat year in video hardware sales for this year, the current outlook is for revenue of $18.2 billion. That is down 1.4 percent year-over-year, and is nearly 11 percent lower than originally forecast. The current forecast for 2004 is for a modest rise to $18.4 billion.

That dramatic drop apparently reflects the near-collapse in per-unit pricing of VCRs, DVD players and analog big-screen direct-view TV. The cumulative effect of 32-inch tube TVs retailing for less than $300, and $50 DVD players and stereo hi-fi VCRs given away as premiums to projection TV buyers, has deeply undercut the financial benefits being derived from big-ticket digital direct-view, flat-panel and projection sales.

In home and portable audio, the January survey had reflected expectations of a leveling off of the decline in demand and pricing on conventional home audio gear by predicting a 2003 sales slippage of just 2.9 percent. The new outlook is for overall sales to be off a whopping 18.1 percent to $4.19 billion this year, to be followed by a more tolerable 3 percent slippage to $4.06 billion next year, despite higher sales of MP3 players and home-theater-in-a-box packages.

While the new 2003 revenue forecasts for all other hardware categories also are down from the January, the changes are much less substantial and the sales trends are essentially unchanged.

For mobile electronics, sales this year are now seen slipping less than 1 percent, to just under $16 billion, and rising by 1.6 percent in 2004, to $16.2 billion. Sales of home information products (including PCs and accessories, phones and related equipment) are now expected to be up 0.6 percent to $32.6 billion this year, and hold at just below that level next year. Video game and software volume for 2003 is estimated at $12.5 billion this year, up 12 percent, and is forecast to grow 11 percent in 2004 to $13.8 billion.

Meanwhile, home security products are expected to rise 4.6 percent this year to $2.05 billion and 3.3 percent in 2004 to $2.12 billion.

Running counter to the trend for all other categories, accessories and blank media forecasts actually exceed those made in January. The overall category is seen with sales of $9.48 billion this year and $10.1 billion in 2004, reflecting respective increases of 8.2 and 6.7 percent. The big improvement stems from substantially higher than anticipated sales of blank computer media — presumably recordable CDs and DVDs — and continued growth in sales of batteries and general accessories.

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