Home Audio Sales on the Rise

According to a recent Consumer Electronics Association's (CEA) press release, "CE Industry to Surpass $174 billion in 2010, Reach Record High by 2011," sales forecasts are far more optimistic than had been expected. While the figures aren't easily translatable to the high-end market (which the CEA identifies as "high-performance audio"), some consumer-electronic (CE) trends give cause for qualified optimism, and provide clues as to which products may prove most profitable for manufacturers and dealers.

At the start of 2010, the CEA predicted that total CE revenues would be down 7.8%, and that the industry's rate of growth would slow to 0.3%. In actuality, thanks to strong holiday-season sales at the end of 2009, the actual drop in revenues was 6.5%, or nearly $170 billion in total US factory-to-dealer sales.

The CEA now expects CE products to generate total US factory sales of $174 billion for 2010, yielding an annual growth rate of 3%—hardly the doom-and-gloom scenario predicted by many. (Source: U.S. Consumer Electronics Sales and Forecasts 2006–2011, CEA, July 22, 2010.)

A second market-research report from the CEA, the 12th Annual Household CE Ownership and Market Potential Study (May 2010), indicates that average CE household spending was $1380, an increase of 12% over 2009. Women spent an average of $631, and men $969. The biggest group of spenders was those aged 25–34, while people older than 55 tended to spend the least. The biggest spenders were families with children, and households with incomes exceeding $75,000.

While HDTVs and digital cameras top the list of products households intend to purchase in 2010, large CE spenders in particular plan to focus on smartphones, notebook computers (and spinoffs), and HDTVs. While 23% of households may be banking on a new HDTV or digital camera, a solid 18% are looking at a Blu-ray player, portable MP3/digital media player, or docking station. The CEA projects that, by the end of 2011, 59% of households will own paired speakers (front, side, or rear), 51% an iPod or other MP3/digital audio player, 43% a docking station for an MP3 or other portable digital player, and 41% at least one subwoofer.

After reporting on and interpreting the data, Sean Murphy, the CEA's Senior Account Manager, Market Research, spoke with Stereophile by phone. "With relative confidence, based on what we're seeing and hearing, I think there is cause for optimism," he said. "We've been hearing doom and gloom for several years. Almost every category was down, and home audio was feeling the effects of the massive migration to digital files and earbuds—a cheaper solution for audio. If you were computer-savvy, you could convert your entire home library for free.

"My personal opinion is that the demographic for speakers and CD players and boutique products will continue. There's always a demographic that wants those things. But for the short run, the so-called lower-level, Best Buy receivers are up, and we didn't see that six months ago. It stands to reason that, after virtually everyone has gotten an MP3 player and flat-panel TV that they are probably satisfied with, they're now ready to augment their audio."

In addition to Murphy's analysis, the data point to several products whose relatively strong sales are of great interest to the High End: MP3/digital audio players, which continue to proliferate in households; and Blu-ray players, which seem to be driving strong sales of home-theaters-in-boxes. These imply great sales potential in several categories. The first is the iPod dock, either standalone (eg, Wadia's 170i iPod dock, which bypasses the iPod's built-in DAC; and their 171i, which turns an iPod or iPhone into a high-end media server), or built into existing products such as integrated amplifiers, CD players, DACs, and self-powered computer speakers.

The second category is multiformat players that include Blu-ray. Products such as the Oppo Digital BDP-83 and 83SE, upgrades to same, and spinoffs from Ayre Acoustics and Theta Digital come to mind. With Naxos poised to begin releasing high-resolution audio recordings on Blu-ray, the format's popularity should definitely increase in some segments of the high-end market.

The third category is media servers, USB and FireWire DACs, and USB- FireWire-to-S/PDIF links that allow audiophile-level playback of digital files.

It's important to note that most of the 74 manufacturers that contributed data for the CEA's forecast are not high-end companies. Even those that do cater to audiophiles, including Marantz, Monster, Polk Audio, Audio Technica, Sony, and Thiel, also produce mass-market and home-theater products. Nonetheless, the data are useful as indicators of which areas may prove most profitable for manufacturers and dealers whose main focus is high-end audio.