PC speakers are now a real multimedia device.
Up until just a couple of years ago these speakers were found primarily attached to desktop, and to a lesser extent notebook computers, but with the huge popularity of console gaming and portable digital audio players, vendors are designing these products for use in living rooms and college dorms. Finding new applications for these 2.1 and 5.1-channel speaker systems has grown in importance as a revenue generator for speaker makers who have seen sales tail off as PC sales have slowed.
"PC penetration now is very high and still the backbone of the category, but so many other [digital] products need audio," said Mark Kapsky, Altec Lansing's marketing director.
He added that digital products are experiencing an uptick in sales in an otherwise slow computer market, so it makes perfect sense to design products to connect to them.
Wells Brimhall, product manager for Labtec/Logitech's speakers, does not expect any radical changes in the category in 2003. With 5.1 channel surround sound speakers now taking over consumers' sweet spot from less expensive 2.1 channel systems, Brimhall expects next year to bring more of the same.
"5.1 is the best type for us because it is used by both movies and games," he said.
In addition, as consumers become interested in placing multimedia speakers in other rooms outside the home office for audio, gaming and home theater use the speaker designs must be more adaptable so they will perform in this diverse environment. This is an area upon which Altec is concentrating.
In recognition of the fact that multimedia speakers are appealing to PC and console gamers, Logitech now ships a console game adapter with all its speaker kits. This includes its newest models, the Z-680 and Z-640 introduced at the end of October, and older models that originally were not so equipped.
Philips Sound Solutions, a division of Philips Electronics, is also counting on 5.1-channel sound to boosts sales of its speakers and sound cards, said Scott McNeese, manager of Philips' Digital Audio Lab. He said, that few games in 2003, outside of Doom 3, will be pure 5.1-channel, the fact that sound cards can interpolate 2.1-channel sound to surround sound is important for the PC speaker business.
Now that these new areas have been identified, the struggle for vendors is to work with the retailers to properly merchandise these products.
Kapsky said since Altec will not be showing any new products at CES, it will concentrate on showing retailers what it feels is the proper way to sell speakers. He pointed to how well the home theater and car audio categories are developed at retail, while multimedia speakers tend to be left to their own devices off in a corner.
"At the show we want to give retailers a feel for how to merchandise this category. We want them to think of it in a broader sense," he said.
Jim Klabunbe, marketing manager for category newcomer Telex, a long-time maker of PC headphones and microphones, said in the company's first ever CES booth it will demo its new 5.1 surround sound system on games and DVD movies. This plan is indicative of the market itself.
"We expect to see more cross over products this year for both the PC and game consoles," he said, adding the lack of 5.1-channel games on the market will mean these speakers could find more use as home theater systems. To reinforce this idea Telex's booth is in the show's home theater section.
Another plus in selling to the console gamers and MP3 customer is it will allow vendors to maintain their price points. Even high-end PC speakers historically were priced at about $99, but in the past 18 months this changed as consumers demanded higher-quality models for gaming and audio.
The most interesting impact these developments have had is to boost the average selling price of multimedia speakers. Prior to 2002 the high-end of the category topped out with $199 products, but the introduction of five-speaker systems designed to take advantage of MP3 audio and game sound effects has led to upper echelon products selling for $399.
"The higher price points will continue and we will see more companies exploring this segment," said Kapsky, "even though units sales were down a bit revenue grew [industrywide] 1 percent and in 2003 ASP should go up 10 percent."
Brimhall said the addition of higher-priced systems is not effecting sales of the commodity, lower-end products where $20 models can be found, but has added an entire new level.
"We've reached a point in this market where price has been pushed down as far as possible," he said.