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2004: Retailing Changes, Satellite Radio Wars

2004 will always have an asterisk for me because it was the year that I began at TWICE and was formally initiated into the world of consumer electronics. At the time, while a self-proclaimed “gadget junkie,” it wasn’t until I started working here that I realized the industry was so far reaching, and fast moving.

Retail sales for the 2003 holidays were soft and it seemed as if 2004 might start with a whimper, rather than a bang —— International CES demonstrated that this wasn’t going to be the case. CES continued its trend of record-breaking attendance with 129,000 attendees.

Although retail sales would pinball around the entire year, getting hit especially hard during the hurricane season, TWICE would later report an 8 percent rise in CE sales for the top 100 dealers. Not surprisingly, Best Buy took home the No. 1 honors in TWICE’s 2004 Top 100, with reported sales of $19.5 billion for the prior calendar year. Total CE sales for 2003 had hit $106.6 billion.

It was certainly an ambitious year for many companies. Hewlett-Packard jumped on the iPod bandwagon with its own branded MP3 player, dove into the gaming PC market, unveiled the industry’s first PDA phone with Wi-Fi, entered the TV category, broadened its imaging product line and announced plans to build its CE product family — all within 12 measly months. Some of HP’s ambitions are still being pushed forward, while others (think iPod) have since faded away.

On the other hand, Best Buy, dropped a bomb that continues to reverberate: the retailing giant unveiled its customer centricity program, described as a change from a top/down management culture, to a bottom/up culture, where information on customers, merchandising and marketing ideas flow up to corporate.

Circuit City shut 19 stores in 12 states, dropped T-Mobile and launched an in-store shop with Verizon, and overhauled its online store.

Other companies that went back to the drawing board included Tweeter, which outlined a new business strategy, launching a plan that employed a redesigned store model and new marketing theme, including a new logo, to emphasize the chain’s new focus on custom installation and complete home theater solution selling. RadioShack announced a determined three-year strategic growth plan, CompUSA and Good Guys consolidated, and Office Depot introduced plans for a new format.

At the beginning of the year, Gateway announced its acquisition of eMachines, while Kmart and Sears — which had said it would exit seven CE categories in April — announced their proposed merger right before the holidays.

Filed under “nothing ever changes,” copyright infringement continued to be a thorn in content-providers’ sides; the start of the year saw FCC chairman Michael Powell appearing at CES to answer questions about copyright infringement vs. digital technology, and the CEA staged an Industry Forum at the end of the year that debated how to best protect the rights and movie and music copyright owners, without restricting the right of consumers to record. Now nearly two years later, the debate rages on and shows no indication of waning.

You can place the satellite radio war between XM and Sirius under that same file. The battle between the two companies continued to rage, as both fought to differentiate themselves by adding traffic and weather offerings, more channels, more availability and new products. XM proclaimed the arrival of Major League Baseball to its channels, while Sirius hailed the coming of radio shock jock Howard Stern.

The conflict between Blu-ray and HD DVD also continued on a divisive and unresolved track. TDK joined the Blu-ray bandwagon, becoming the first optical disc manufacturer to join the Blu-ray Disc Founders Group, and 20th Century Fox signed on as well. Not to be outdone, HD DVD wrangled commitments from four Hollywood studios — Paramount Pictures, Universal Pictures, New Line Cinema and Warner Bros. Studios.

More and more companies jumped on the VoIP bandwagon: Vonage added new hardware providers, and deals were inked by AT&T, StarNet and 8×8 As part of a VoIP strategy, Home networking gear maker Linksys announced deals with Verizon, Best Buy and Intel. Office Depot and VoiceGlo teamed up to offer a USB phone and VoIP service plan. Circuit City made its mark with the first national rollout of a VoIP product when it announced that it would sell Vonage’s self-installed VoIP kits. Until that point, only test marketing had been done by retailers.

Likewise, the march toward HDTV continued. What now seems to be if not old hat, than certainly expected, FOX Sports announced it would deliver its first full high-definition broadcasts in the third quarter of the year. Samsung and DirecTV teamed up to cross-promote Samsung’s HDTVs and DirecTV set-top boxes and standard- and high-definition TV services.

Signaling the end of its respective eras, Thomson closed its CRT picture tube production plant due to declining demand for tube televisions, and COMDEX — once one of the largest trade events in the world — was canceled.

It’s still too soon to take away a lot of meaningful analysis from 2004, or to determine whether the solutions put forth by companies and organizations will actually solve any of their problems. But considering the lightning speed at which the CE industry operates, it’s no surprise that some of these events still seem like ancient history when you read about them.