Sales Figures Suggest Industry Remains Recession-Proof - Twice

Sales Figures Suggest Industry Remains Recession-Proof

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The time, if I recall correctly, was early in 1982, and things weren't good on the economic front. Consumer confidence was in the toilet, along with much of the stock market, and earnings reports for the year just ended were something of a mixed bag.

But even so, at the 1982 Winter CES, the industry reported that sales to dealers of direct-view color TVs, projection TVs, home VCRs and color cameras for portable VCRs (we didn't yet have camcorders) all set new record annual highs.

That prompted a declaration that has served as something of a rallying point for consumer electronics ever since. It came from Jack Sauter, then executive VP for RCA Consumer Electronics. "This industry," Sauter avowed, and speaking mainly for video hardware, "is recession-proof."

And so it seems to have been ever since as the market demand has continued to grow in good times and in bad. In fact, the video industry itself has more or less exploded. While newer products, including TV/VCRs, camcorders and DVD players have contributed mightily to the sales dollar expansion, last year's direct-view color TV sales were double those of 20 years ago, VCR sales were higher by a factor of 20 and projection TVs by tenfold.

Well, here we are today. Consumer confidence is down, stocks are back in the toilet and earnings reports are, to be nice about it, depressing. Everyone is hesitant to use the "R" word, but if this isn't a recessionary period, it's the closest to it you can get without falling over the edge. And it has been going on since October.

So does the Sauter Law of Consumer Electronics continue to hold? The answer is easily found in the first quarter sales of video hardware as reported by the Consumer Electronics Association and posted regularly in the TWICE Video Sales Scorecard.

Through the first quarter of this year, while interest rates were still too high and the stock market was dropping like a rock, sales of direct-view color TVs were running at an annualized rate of better than 24 million, which would at least equal the highest full-year sales total on record. The annualized selling rate for TV/VCR combinations was a record 5.2 million. Camcorders posted a selling rate of more than 6 million, also a new high, and as for DVD players, they appeared to be on the road to a 12 million- to 14 million-unit sales year, or about double the sales of 2000.

It does seem, however, that VCRs have saturated out to the point where even plunging pricing can't generate growth. Sales for the quarter were down 22 percent from the same period last year. But even so, the indicated annual selling rate was 19 million. That, if sustained, would make 2001 the third-biggest sales year for VCRs. That's hardly a trip to Disasterville.

Now we come to my favorite statistical aberration, projection TV sales. CEA's figures show that through the first quarter, sales-to-dealers of analog-only projection TVs were down some 17 percent to about 252,000 for an annualized indicated selling rate of less than 1.2 million. That would be a three-year low.

But the CEA figures are only about half the projection TV sales story. CEA recently announced that projection models accounted for 77 percent of the 234,600 digital TV receivers and displays sold in the first quarter, or about 188,000 units. Adding that to projection's analog sales total boosts overall projection sales to some 440,000 units and pumps up the annualized selling rate to better than 2 million.

So all and all, it appears that Sauter's Law held up well during the current economic slump, at least in terms of consumer demand. The unfortunate other side of this otherwise shiny coin is pricing. I for one am frankly staggered by VCR retail pricing.

Going back farther than I really care to remember, I recall confidently telling someone that VCR prices will not collapse the way those on other consumer electronics products had. VCRs, I authoritatively explained, were more akin to a major appliance than they were to a TV or radio, as they were highly complex, high-precision mechanical devices. Sure you could replace hundreds of TV parts with an IC, but the costs involved in machining and assembling the rotating head and tape transport of a VCR would put the same kind of floor under VCR prices as you find under appliances.

How a four-head remote stereo hi-fi VCR with front and rear A/V jacks can retail for less than $100 is beyond my ken. At least camcorder pricing is reasonably stable, so maybe I'm not totally clueless.

But in fact it is the incredible bargains the industry offers that helps keep unit volume, if not dollar volume, on the rise. Another big factor is the replacement demand that provides the industry's safety net. In good times and in bad it seems, consumers take advantage of the value of our video and audio products, and so keep the industry recession-proof.

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