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What’s Hot, What’s Not

TWICE: Which types of products, feature sets or price points drove audio electronics component sales in 2006 and will drive 2007 sales?

Bales: In 2006, A/V receivers with HDMI inputs and outputs plus video processing features such as deinterlacing, scaling and video conversion offered the need for fewer wires, easier connections and greater performance, especially in the $1,000-$1,500 price ranges. We saw basic HDMI pass-through connectivity in A/V receivers as low as $399 and nearly universal at $499. This trend should continue trickling down to lower price points quickly.

HDMI was the major reason for increased average prices in receivers during 2006. MP3 player connectivity, especially iPod, was another driving force in 2006 with nearly all top-tier receiver manufacturers offering iPod dock solutions.

Multiroom capabilities appear to be a feature in the above-$500 price range but may become more a standard feature than an actual functional feature. Auto calibration systems that included room-tuning microphones were also a driving force for receivers as low as $299 and were nearly standard for all receivers above $500.

While sound quality has taken a backseat to HDMI and iPod connectivity, as the new audio formats for high-definition video discs become readily available, we anticipate good old fashioned audio performance to become essential in the coming years.

2006 also saw the first real bids into network music “client” features becoming visible and viable, and this trend should become a major factor in the years to come.

While XM Satellite Radio in-home solutions were introduced, neither XM home antennas nor XM-ready attachment components showed large sales increases.

Bente: Certainly iPod and MP3 connectivity and higher performance video features such as HDMI connectivity and high-definition video up-scaling drove audio/video receiver and processor sales in 2006. Satellite radio compatibility in A/V receivers also became a hot ticket through the back half, as well as multiroom capability.

Because our product portfolio ranges from midrange (around $500 retail) to very high-end ($20,000 or more), we are acutely aware of the need to make certain that the customer’s entertainment experience is absolutely magical — and that the technology serves rather than dominates or confuses the user. As receivers and processors have become necessarily more feature-packed, we must make certain that aspects such as navigating menus and accessing features are smart, accurate and easy.

Wasek: HDMI has been a big factor in sales in 2006. As the shift to flat-panel displays continues, people are looking to also upgrade their audio equipment. Part of that decision is being able to offer simplified connectivity. HDMI will continue to be an important factor in 2007 along with the pursuit of 1,080p compatibility.

Streaming audio from the PC to the stereo is something to keep an eye on in 2007. Content management resides in the PC, so it seems to be the next logical step. Music servers (HDD) are another segment of the market to look at as well. While it’s a niche market now, it has the potential to be significant in the future.

TWICE: What features or price points drove component-speaker sales (excluding in-wall and in-ceiling speakers) in ’06?

Bente: Great design and high performance are what made it happen for us in 2006. While many customers were preoccupied with anything that had a flat form factor, the discerning customers bought what most naturally fit in their homes and complemented their interiors. Passive loudspeakers and active subwoofers continue to dominate our portfolio, as well as sales in the industry overall. Gimmicks abound, but most customers still judge by listening and, of course, looking.

Klipsch: As I mentioned earlier, flat-panel televisions are driving CE sales these days. Therefore, many people don’t want huge speakers that take away from these thin displays. In response, Klipsch and other speaker manufacturers are starting to develop more and more compact and/or hidden solutions.

However, going smaller is not without its problems. The challenge with low-depth products is that it’s very difficult to pull lifelike performance from them. Therefore, our industry has to continue to develop new technologies and approaches.

Cohn, Boston Acoustics: Speakers that complement the explosive growth in flat-panel television continue to dominate the growth in the category. While customers are focusing on application and style, allowing them to “customize” the look and sound of their space, they also demand high performance that will enhance the overall home theater experience.

TWICE: Which feature sets or price points in HTiBs and stereo systems proved popular in 2006 and will drive 2007 sales?

Bales: While home theater audio systems are beginning to show a trend toward higher price points, nearly 60 percent of all unit sales in the system category have been in the $299 price point and below. Common features include integrated subwoofer/receiver with a five-disc DVD player, high power (800 watts to 1,000 watts), portable audio connections via mini or USB, and digital sound processor technology to enhance compressed audio formats. A couple of manufacturers dominating the higher price points are only now beginning to offer network audio clients, satellite radio and iPod connectivity, as well as room calibration and surround sound via two-speaker configurations.

For 2007, we expect to see a trend toward higher price points that will be driven by HDMI, iPod, network audio clients and satellite radio connectivity. We also anticipate that the category volume will continue to be driven (over 50 percent) by entry-level (under $299) integrated receiver/subwoofer systems that deliver high power and possess a multi-DVD disc player.

Mintz: Entry-level and under-$200 HTIBs continued to be popular in 2006, driven mainly by high power outputs and connectivity/features like USB, HDMI and satellite radio ready. In 2007, this trend continues with the feature set being driven by 1,080i/1,080p up-scaling and iPod docking. The 2.1 systems will be driven by designs to match flat TVs and non-traditional form factors.

Wasek: The ability to upgrade or expand your HTiB or stereo system was key in 2006; i.e, the ability to add or delete additional source components, iPod compatibility, satellite radio and automatic acoustical setup features. They will become even more significant in 2007. As HD DVD and Blu-ray penetrate the marketplace, so then will the requests for components compatible with their audio capability and connectivity.