Dealers will have more HTiB flavors than ever to serve up in the second half, including more models with such step-up features as DVD/VCR combos, HDD music storage, two-speaker virtual surround and plasma-friendly designs.
Other step-up options will include a handful of the first networked HTiBs and a small but growing selection of systems equipped with DVD recorders.
Despite proliferating step-up options and continued rapid unit-sales growth, dollar volume might actually fall for the first time this year in six years, some suppliers said. They cited the market maturity of DVD-equipped HTiBs — whose proliferation and demand in recent years drove up average selling prices — and the proliferation of bottom-feeding $99 and $119 DVD-equipped systems. Todd Richardson, GM of Philips home entertainment networks, described the proliferation of $99 systems as a "flood."
In the second half, some suppliers expect major brands to jump on the $99 bandwagon, following the shipment of a $99 GE-brand system earlier this year. Previously, $99 systems were available only from less-widely-known brands marketed by importers.
"In 2004, the shift to DVD is over, and there will be a lot of sub-$120 systems with DVD, including [models from] major brands," said RCA's business development director Rich Phipps. The shift to DVD-equipped systems was responsible for 13 percent factory-level dollar growth in 2002 on a 21 percent unit-sales increase, he said. In 2003, dollar volume grew 7 percent on 30 percent unit growth. In 2004, however, RCA forecasts a 6 percent to 9 percent dollar-volume decline, to $870 to $900 million, despite unit growth of 20 percent to 32 percent, to 4.3 to 4.8 million units.
Philips's forecast is also cloudy. Richardson expects the year to end up about flat in dollars.
Nonetheless, CEA forecasts call for an 8.3 percent increase in dollar volume to $1.04 billion, on a 7.5 percent unit gain to 3.89 million units, following five consecutive years of unit and dollar gains.
Whatever the segment's overall volume, suppliers agree on what's hot, and that includes DVD/VCR combos whose unit sales in 2003 accounted for 5 percent of unit HTiB volume, RCA said. Share will hit 10 percent of unit sales in 2004, RCA contends.
Sales of HTiBs equipped with music-storage HDDs and networking capabilities will also gain visibility and post sales gains in the second half, largely due to Bose's summertime introduction of the technologies in multiple models. Previously, only RCA offered an HDD-equipped HTiB, and networked HTiBs are appearing only for the first time this year with introductions by Bose, Kenwood and Philips. Bose's models are designed to stream music from an HDD-equipped Lifestyle system to other Bose systems, while the Philips and Kenwood models are designed to stream audio and video content from a PC. Networked HTiBs that link up with PCs will start being significant factors only in 2006, RCA's Phipps contends.
Likewise, HTiBs with DVD recorders will be available from only a handful of suppliers in the second half, including Pioneer, JVC, Panasonic and Pixa. Philips will join them in early 2005. The first such model, from Panasonic, appeared in 2003.
What's not hot are component-based HTiBs packaged with component DVD players, suppliers said. Sales of those models are declining because of DVD's 50 percent penetration rate, said Marc Dever, product planning VP, Pioneer. During the first quarter of this year, he noted, factory-level component HTiBs without DVD accounted for 40 percent of unit HTiB sales, up from the previous year's 26 percent.