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Digital Audio Receivers: Is 2003 The Year?

Multiple elements are coming together that could accelerate brick-and-mortar sales of digital audio receivers in 2003, suppliers say.

The component-audio-style devices let consumers remotely access MP3 files stored on their PC’s hard drive and play them through a home stereo system situated in another room. The devices also play Internet radio stations accessed via the PC’s modem.

Growing consumer awareness of home networking, the continuing broadband rollout, a growing selection of devices, the first models from mainstream consumer electronics brands, expected lower prices, and growing visibility in brick-and-mortar stores could help turn around lackluster sales at retail stores, suppliers contend.

Word of mouth is also adding to traction, as more consumers see the devices in action at their friends’ homes, making concrete a concept that is admittedly difficult to explain, one supplier noted.

The incorporation of affordable wireless networking into the devices will also help sales by simplifying installation, suppliers added.

Few players: Only a handful of receivers, which lack hard drives for local storage, have been available since 2000, and the majority of sales have been through Internet retailers, supplier said. The suppliers included Motorola, SONICblue, Turtle Beach and Gateway, which OEM’d its model from Turtle Beach.

SONICblue and Gateway have since exited the market; but this year, multiple companies will vie to replace them. The newcomers include Barix, cd3o, Linksys, Sony and Thomson. Netgear and Philips are also developing their first models. And suppliers Motorola and Turtle Beach plan second-generation models with lower prices and extra features.

The target audience consists of digital audio enthusiasts with large PC-based music collections and Internet audio listeners, and although their numbers are growing, the de-vices haven’t yet achieved much traction in retail stores, suppliers admit. Nonetheless, they’re optimistic that will change this year, in part because “retailers are approaching it right this time,” said Seth Dotterer, Turtle Beach marketing director. “They’re creating departments for this type of thing,” rather than displaying it under glass, he explained.

Venue shuffle: Dotterer also said he believes most CE retailers will place digital music sections within their audio departments, which are already configured for music demos.

Richard Phipps, Thomson’s business development director, has already seen the devices “going more and more into new digital audio sections,” where MP3 portables and digital receivers are displayed. The sections are generally within audio departments, he said.

Evan Groat, senior marketing manager for Motorola’s broadband communications sector, contends that audio departments are the best place to display the products.

“Where does the demographic of people most attached to audio go? The audio department,” he said.

An additional display in the computer department is “a nice bonus,” he added, because it fits in with Motorola’s mission to “educate consumers to buy cable modems to enhance the experience of other devices,” including digital audio receivers.

Some retailers, however, are still struggling with such issues as which buyer should be responsible for the products and where they’ll be displayed, Groat noted. “Is it an audio product, a home-network/PC peripheral, or a broadband product?” he asked. At least one major chain has separate buyers for broadband and for PC peripherals, he said.

Good signs: Despite some lingering confusion by retailers, Groat said, “There are a lot of good signs” pointing to higher growth in 2003. For one thing, “home network awareness is helping consumers understand these devices,” he said. Before, the concept was difficult for many consumers to grasp.

As more suppliers enter the market, Groat added, larger retailers will take interest because a greater selection creates a product category that in turn generates more awareness by retailers, as well as consumers.

Another plus in 2003 is that prices for devices with a menu system allowing for remote selection of songs by genre, artist and playlist will dip below $200 this year from opening prices of about $259.

Thomson went a step farther in recent months by launching a $100 wireless receiver with remote song access. Although consumers can’t view a menu to select songs by name or genre, they can use the supplied handheld remote to control on/off, volume, track up/down, and playlist selection from playlists created on the PC.

Lower priced receivers at $79 to $99, Groat said, have basically been “sound-card extensions,” which don’t allow remote access to music.

Another factor restraining sales has been the limited audience of “people with a PC full of music and online music aficionados,” said Thomson’s Phipps. “Many of these consumers are dorm-room dwellers without another room to stream music.”

The market will pick up, however, “as music-download services become more mainstream, and college students move on to other dwellings,” he said.