News

It's bad enough that the consumer electronics giants and small fry compete with each other. Increasingly, they are finding they must defend themselves against an onslaught from the personal computer industry which is eating away at the market share of traditional CE vendors.

Perhaps we should blame the Consumer Electronics Show (CES) in Las Vegas each year, where the PC companies watch across the aisle as the CE manufacturers reap relatively large margins on products that are often based on CPUs and hard drives. With declining revenues in the traditional PC industry, PC makers such as Apple, HP, Dell, Intel, and Gateway have realized the high revenue potential in the CE industry.

The impact of Apple's iPod is well known to Stereophile readers, and both Gateway and Dell have entered the portable audio market. HP stuck its toe in the CE stream a couple of years ago and now boasts around 150 products including its "Media Center PC," which it demonstrated at the most recent Home Entertainment Expo.

PC retailers have also made a move on the CE industry, as revealed by CompUSA's announcement last week that it will sell audio and video products, as well as its intention to acquire The Good Guys, the San Francisco-based chain of audio/video specialty stores.

Technology research firm ABI says that this is just a glimpse of the future for consumer electronics. ABI reports that traditional PC vendors are now generating about 20% of their revenue from selling CE products in the US alone. ABI's Vamsi Sistla says he expects "this attrition will continue to grow while the consumer continues to benefit with a much wider selection of vendors and brands."

ABI says that in some areas this new competition is also expected to affect the average prices of digital products, with overall prices dropping by 22%. ABI expects prices in some digital categories to drop 28% to 32% for the holiday season.

The researchers also note that most CE vendors are increasingly offering combination or "universal" products, combining features such as DVD-Video, PVR, DVD-Audio, SACD, and HDTV with computing power and multimedia networking. Sistla adds, "This centripetal force of gadget consolidation will pave the way for a whole new set of combination devices and platforms, erasing the clear distinction the CE industry has been making among stand-alone devices."