MP3 Keeps Audio Alive In '05: CEA

By Joseph Palenchar On Jun 6 2005 - 6:00am

Portable MP3 players — Apple's iPods in particular — are keeping the audio industry going in 2005, CEA statistics show.

Factory-level portable audio sales grew at double-digit percentage rates during the first four months of the year, offsetting a sharp decline in home and car audio sales to push up industry sales through April by 17.5 percent to $2.6 billion. Monthly audio sales in April, however, fell for the first time in 2005, dropping 1.8 percent to $566.1 million, CEA said.

Solely because of MP3 sales, the industry could be headed for its second consecutive year of growth following three consecutive years of decline from 2001 through 2003. Sales in 2004 were up 14.5 percent following 2001-2003 declines of 5.9 percent, 9.3 percent and 7 percent, respectively.

Although industry audio sales are rising so far this year, the statistics point to an unsettling return to the declines that have plagued the component business since 1996, culminating in double-digit component declines during the 2001-2003 period before reversing its losses in 2004 with a sharp 16.2 percent gain. Cumulative sales this year also mark a return to the contraction that plagued the home systems business. Sales fell for three consecutive years before rising 8.2 percent in 2004.

CEA said this year's declining home sales reflect retailer overbuying in the first nine months of 2004. “The declines are a function of the comparison to perhaps 'overzealous' channel purchases this time last year,” said analyst Steve Koenig. “In the first three quarters of 2004,” he continued, “the channel bought heavily in audio.” The result was an inventory build-up, he said.

“Confirmation of this build-up came in September through December 2004, when receiver shipments showed double-digit declines year-over-year.” Usually, he said, “one would expect shipments to increase during the all-important Q4 period. We saw many 'fire sales' in the channel for receivers, especially low-end product, in Q4 — an attempt to burn off this excess inventory.”

As a result, “I think the shipment volumes we are seeing now are in line with demand. Demand is holding steady for home audio and climbing in the portable audio arena.”

Here's how the industry's core categories fared during April and the year-to-date:

Portable audio: A 57.1 gain in April sales, to $244.7 million, driven almost exclusively by MP3 portables, followed triple-digit gains in each of the prior three months to boost cumulative sales by 106.3 percent to $1.15 billion, CEA statistics show. The statistics include home radios.

So far this year, portable audio's growth has accelerated from 2004's full-year gain of 24.1 percent.

After-market autosound: Following two consecutive growth months, April's sales fell 14.7 percent to $166.4 million. Cumulative sales were off 3.6 percent to $802.8 million. Last year's sales were up 9.3 percent following a 2003 decline of 7.7 percent.

Home components: It could be 2003 all over again. Sales fell 24.2 percent in April to $61.7 million and by 13.3 percent for the year-to-date to $298.5 million. The declines mark a sharp turnaround from 2004, when sales surged by 16.1 percent to $1.14 billion following years of declines. The market contraction culminated in 2003's historic 18.3 percent drop to $981 million. The 2003 decline marked the first time that component sales dipped below the $1 billion mark since CEA began tracking them in 1985.

The component industry peaked in 1990 at $1.93 billion and has declined almost every year since then with the exception of slight blips upward in 1993, 1994, 1995 and 2000 and the double-digit gain of 2004.

Home system: Sales of all-in-one stereo systems and home theater in a box (HTiB) systems plummeted 35.4 percent in April to $93.3 million and by 26.9 percent for the year-to-date to $347.7 million.

Audio Sales, 2005 vs. 2004
(Factory sales, in millions)
April (Growth over '04)YTD (Growth over '04)
Portables1$244.7 (57.1%)$1,146.6 (106.3%)
Home components2$61.7 (-24.2%)$298.5 (-13.3%)
Home systems3$93.3 (-35.4%)$347.7 (-26.9%)
After-market autosound4$166.4 (-14.7%)$802.8 (-3.6%)
Total Audio$566.1 (-1.8%)$2,595.5 (17.5%)
1 Includes home radios
2 Electronics components and speakers
3 Shelf, rack and home theater in a box electronic/speaker systems
4 Includes all satellite radio
Source: Sonsumer Electronics Association, Arlington, Va. ©TWICE 2005

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