Monday, August 18, 2008

Dog Days of Summer (Dealerscope Article)

Dog Days of Summer Breed Some Prize Pets

Sean Murphy | Senior Account Manager, Market Research | CEA

August 01, 2008

By the time the dog days of summer truly settle in, discussion inexorably turns back to the weather: “Hot enough for ya?” On the other hand, the word on the street regarding the CE industry might invoke an opposite season: “How cold can we get?” Actually, we have not reached that point, but there are few who would argue that concerns about the economy and the housing market have taken some of the sizzle out of CE. Of course, there is plenty to remain optimistic about, with overall sales steady and the holidays just around the corner. With consumers less eager to hit the roads and beaches, the collective retreat indoors suggests new opportunity for the industry.

On the other hand, things have never been better in select categories: flat-panel televisions are on a tear, with sales exceeding even the most cheerful expectations. Unit shipments of flat-panel displays are already at 9.2 million through May, a 43-percent increase from the same period a year ago, while revenue is just under $8 billion, a 29 percent improvement from last year. This news serves not only as a silver lining for the overall industry, but also as a warning for dealers: the accelerated dominance of flat-panel televisions is in direct contrast to the declining fortunes of direct view and rear projection displays.

With the respective proliferation and reduction unfolding faster than expected, the foreseeable future for flat panels is quite encouraging (for more sales numbers on TVs, please turn to our stats section on page 48). Correspondingly, dealers should be admonished that the future has already happened and hopes of unloading old inventory might yield less than fruitful holiday tidings. Closer examination portrays a bleak landscape for old-school TV solutions: year-to-date shipments of rear projection televisions are down 71 percent through May, while flat panels (including plasma and LCD) are up 43 percent. The verdict is in, and it is unequivocal: the production and merchandising of large screen flat panels (LCDs in particular) is not only where the opportunity exists but might present the only way to remain relevant in this space.

More food for thought: 20 percent of DTV sets in 2007 were 1080p; by 2011, nearly 80 percent of sets will be 1080p. In sum, flat panels are pushing rear projection and CRT displays off the shelves and out of the sales channel, so dealers are advised to plan now for their fall assortments.The good news is certainly not restricted to the display arena. As the U.S. household penetration rate of flat-panel displays expands, it stands to reason that consumers, having optimized their viewing experience, will eventually seek to augment their audio environment.

Understandably, concerns linger that as the housing market goes, so goes certain CE markets, particularly home audio. The flat-panel explosion tends to confirm that, regardless of any economic apprehension, the appetite for consumption remains voracious. Indeed, as high-end TVs become increasingly ubiquitous and more HD/5.1 content is made available, consumers will turn to surround-sound solutions. Sound bars could be a sleeper here and provide an excellent solution for both consumers and dealers who are concerned about floor space and competitive price points. More importantly, CEA data finds sound bars showing growth in an otherwise declining category. Channel sources indicate that even turntables—only recently consigned to irrelevancy—are making a discernible, if modest, comeback. Is this a predictable retro resurgence or a positive harbinger for the entire home audio market? Likely, it is a bit of both, but the message is becoming unmistakable: perceptive dealers will do well to keep home audio in mind and focus on the areas where greatest opportunities await.§ion=Unknown&page=1

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