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Digital Revolution Propels ’99 Video Sales

Paced again by runaway popularity in DVD video players and sustained demand in TV/VCR combos, the home video hardware market saw another growth year for factory dollars in 1999, as reflected in CEA’s latest survey of key members issued at the International Consumer Electronics show.

Dollar volume estimates for the overall video segment grew for the second consecutive year — following two years of declines — as digital products including DVD players, digital still cameras and home satellite systems sparked a resurgent interest in sophisticated home theater components.

The growth rate for the video segment hit 13.1 percent on factory sales of $16.8 billion. One year ago, the association had forecast a measly 1.2 percent increase in factory dollars for the segment.

Staying the conservative course, CEA sees modest growth (2.8 percent) for 2000, when it projects total video hardware sales of $17.2 billion. Category leaders in dollar volume growth are expected to include DVD players (44.4 percent), camcorders (13.3 percent), digital still cameras (11.2 percent), and set-top Internet devices (9.4 percent).

The DVD video player category continued to astound industry watchers with its explosive sales growth. Unit sales topped the 270 percent growth mark reaching 4 million players, while factory dollars climbed 161 percent over 1998 numbers to $1.1 billion. This came despite the fact that average retail tickets slid 29.5 percent from $390 to $275.

Projections for 2000 show DVD unit volume climbing from 4 million units to almost 6.6 million, on a 44.4 percent increase in factory dollars to $1.59 billion. Not surprisingly, the average player price is expected to drop another 12.4 percent to $241 per player.

Camcorders, fueled by technological advances and lower prices in digital models, registered a 51.1 percent increase in factory dollars and a 24.4 percent rise in unit sales. The improved performance of digital recording encouraged consumers to shell out 21.5 percent more in average unit pricing, making it one of only two categories to register an increase in average pricing last year.

This year, CEA sees demand rising 9.7 percent for units and 13.3 percent for factory value as prices stabilize somewhat with a 3.2 percent increase in average unit pricing.

Digital still cameras were second last year in unit volume growth, up 75.4 percent over 1998, while factory value surged 56.8 percent even as prices slid 10.7 percent. This year, CEA expects unit volume to grow to 2.7 million, for a factory value of $905 million.

Price erosion in color television continued to be worse than expected at 3.6 percent, while unit volume climbed 9.3 percent to nearly 29 million pieces. Factory dollars were up 5.4 percent to $9 billion.

The TV/VCR sub-category led all color TV areas, with a 36.6 percent growth rate to 4.3 million units and 23.7 percent growth in dollar volume over the previous year. CEA anticipates sales growing to 8.1 percent to $4.7 million in this year.

Projection television sales accelerated at a 14.5 percent rate for units and 2.4 percent in factory dollars after topping the 1 million unit year mark in 1998. Average unit pricing dipped 10.6 percent to $1,318 in the period. This year, CEA expects category unit sales to backslide 8.6 percent, to 1.1 million units, and drop 11.8 percent in factory value — presumably because consumers will be anticipating lower prices for new digital models. However, it should be pointed out that CEA originally forecast the category would decline in 1999.

Direct-view stereo sets registered a 6 percent increase in factory dollars in 1999 after CEA forecast a 0.3 percent decline a year ago. Unit volume grew 9.1 percent last year, although average retail tickets dipped 2.8 percent.

Industry sales of direct-to-home satellite systems climbed 34.1 percent in units and 29.6 percent in factory dollars, as record installations of new DBS systems outstripped the slow death of the big-dish C-band business. This year CEA sees satellite installations climbing 13.9 percent in units and 4.4 percent in factory dollars as the category breaks the 4.1 million unit level for the year.

Another growth category was the set-top Internet device, which grew 30.9 percent to reach 1.2 million units in 1999, although it was nearly dead in CEA’s forecasts last year. Factory dollars topped $192 million in the period. This year CEA forecast sales growing nearly 17 percent to 1.4 million units on $210 million in factory dollars, as terminals become enhanced with functions including hard drive recording.

Finally, the VCR deck category continued its amazing resurgence, as consumers continued to realize the incredible value it offered at prices never contemplated before. In 1999, unit sales increase 23 percent as factory dollar volume decreased 4.8 percent to $2.3 billion. That mix was almost evenly split between stereo models (11.3 million units) and mono (10.9 million). Average deck pricing dropped 22.6 percent to $103.

This year, CEA calls for unit volume leveling off, with just less than 2 percent growth as factory value dips another 7 percent and average deck pricing drops 8.7 percent to $94. Stereo model sales are expected to pull away from mono models, with Hi-Fi deck sales growing 5.4 percent as unit volume dips 1.7 percent for mono models. Factory value for the two segments will dip 2.9 percent and 14 percent, respectively.