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2006 International Consumer Electronics Show Report Print E-mail
by Roman Kikta    Fri, Jan 13, 2006, 11:16 PM

Thomas Palamides of the Canadian Consulate provides an excellent summary report and collection of industry statistics from the 2006 Consumer Electronics Show held in Las Vegas.  Thank you Tom!  -- Roman

2006 International Consumer Electronics Show Report by: Thomas Palamides

This year's Consumer Electronics Show may be summarized by three simple acronyms: Play, Record and Replay. P.L.A.Y. may be synonymous with - Preferred Listener And Youth. R.E.C.O.R.D may be defined as - Remember the Effects of Commodization or Resign in Defeat. R.E.P.L.A.Y may stand for - Real Envious Positions Lie Ahead Yonder.  For 2005, sales of consumer electronics products in the United States reached $USD 125 billion. Continued industry growth projects U.S. sales to hit $ USD 161 billion by 2009. With such widespread appeal more than 140,000 participants, from 110 countries, flooded into the vast 1.5 million square feet of exhibit space at the world's largest annual tradeshow in consumer electronics.

Though CES offers a first-look at many new, and innovative, electronic products for the home, car and individual, this report will focus on the direction of television viewership, television policy as it relates technology, enabling technical standards behind the digital audio and video industry, and the audio/video installation industry.

Unless otherwise mentioned, sources for all statistics in this report are by the Consumer Electronics Association Market Research Group. Data was gathered from a group of thirty-eight global firms in consumer electronics, digital photography, electronic manufacturing and computer hardware industries.

TV viewership and the future of digital television

The U.S. House of Representatives has set February 17, 2009 as the transition date for all television broadcasters to change from analog to digital transmission. Television executives could not be more ecstatic with Nielsen Media Research reporting that the average American home watched more television in 2005 than any previous season, tuning in, on average, eight hours and eleven minutes per day. This is more than a 12 percent increase from a decade ago.

For the consumer, this implies technology change, additional costs and additional features. For the advertiser, this suggests mass market advertising remains entrenched with broadcast television, though the Internet is experiencing an "uptick" in advertising dollars, and mobile is captivating preferred customers and the youth so as to provide ancillary market channels for advertisers.

Total Digital TV Sets & Displays:

2004 - 8,287,000 units, $10.4 USD billion in sales, $USD1,257 average price.
2006p - 18,700,000 units, $23.3 USD billion in sales, $USD1,245 average price.

Flat Panel LCD Displays:

2004 - 1,842,000 units, $1,579 USD billion in sales, $USD 857 average price.
2006p - 7,116,000 units, $5,831 USD billion in sales, $USD 819 average price.

Plasma Panel Displays:

2004 - 870,000 units, $2,347 USD billion in sales, $USD 2,698 average price.
2006p - 2,908,000 units, $5,302 USD billion in sales, $USD 1,823 average price.

On display at this year's show was a Samsung's102 inch HD plasma screen. The world's largest!
With the aforementioned market projections rumors have circulated that manufacturers are having a difficult time in filling the channel with products. For instance, Philips Electronics recently stated that manufacturing is running a full capacity just to meet today's demand.  Over the next several quarters expect only minimal price erosion in the display market considering this high demand.
For the consumer, all large sets manufactured now, and in the future, must include a V-chip. This is an in-home censor technology that parents may use to regulate what their children's television viewing. The average consumer will have difficultly understanding the various ratings: Eight different television ratings, six different age acceptability codes for video games, and a five-step motion picture ratings system. If someone can figure out how to simplify the process for the consumer a real envious position may lie ahead yonder.

Digital Music Devices

On downloading digital files Apple Corporation leads. Over the last three years the company has done a masterful job in bringing the iTunes service and iPod (now in its 5th generation) to the masses. In fact, some analysts still suggest much growth remains. Apple recently announced that it has sold more than forty-two million iPod digital music players and video players worldwide, including fourteen million in the fourth quarter 2005. The company's iTunes music store has now sold 850 million downloads and commands 83 percent of the legal music download market. Where does this leave Microsoft's PlaysForSure program for portable digital media players (PMP) that was launched in 2004? Isn't it all about brand? With, of course, more than just a little push from content.

Worldwide, IDC is predicting that PMP shipments will grow to six million units in 2009 from 377,000 in 2005. IDC also forecasts that U.S. portable digital audio player unit shipments will grow to 59.1 million units by 2009 from 23.7 million units in 2004.

MP3 Players:

2004 - 7,126,000 units, $USD 1,289 billion in sales, $USD 181 average price.
2006p - 27,667,000 units, $USD 4,420 billion in sales, $USD 160 average price.

High Performance Audio and Video
Higher grade product offerings limit the commodization of consumer products. All consumer electronic companies understand this and attempt to differentiate their products, not on price, but by features.

In the high performance, home theatre type environment, a surround sound experience is typically achieved using 5.1 channel signal processing. To take advantage of this richer audio environment several audio technologies have emerged in recent years.  It may not be fair to compare Super Audio Compact Disc (SACD) to Digital Versatile Disc Audio (DVD-Audio), but the CD music industry is in a major technology transition period. The packaged music industry, concomitant with the CD/DVD hardware retailers are beginning to bite  their fingernails. On the content side, Sony states that there have been an average of 250 new SACD titles released each quarter since September 2003, and http://www.sa-cd.net lists 3,500 titles. The SACD standard is well established in Japan and throughout Europe .

For the non-techie listener, one drawback of both SACD and DVD-Audio is that in order to enjoy the full effects of multi-channel audio six separate RCA audio cables have to be connected from the player to the external audio inputs. Though FireWire-based interfaces offered by some
vendors, promise to alleviate the connectivity conundrum, there needs to be more plug-n-play capabilities across the industry. Sony has included SACD capabilities in its Play Station 3, due to launch in March 2006.

Until recently, offered as a U.S. -only product, was a new standard called the DualDisc (two-channel stereo, DVD-Audio and pre-ripped AAC and WMA files, and plenty of DVD video and Web-connected content.) One side of the disc is standard CD and the other side offers DVD content. Though it is a much more video-centric technology, it has recently reached its first anniversary in the marketplace, and may revolutionize the industry. Sony BMG estimates that there were approximately 200 Dual Disc titles release in the U.S by the end of 2005.

BluRay and HD-DVD continue to battle to be the next generation storable medium for video. BluRay can hold up to 40 GB of data, a few GBs more than HD-DVD, and is backward compatible with existing DVD formats. However, SACD was not included in the BluRay technical specifications. Sony suggests that 80 percent of Hollywood studios are behind BluRay, and so are 88 percent of electronic companies, and several leading gaming companies. The HD-DVD standard, however, is begin lead by Toshiba, and since no uniform consensus between the two standards has been reached, it may be here to stay.

The argument between BluRay and HD-DVD may be less about manufacturing costs, software editing tools, support of various codex, image quality and digital rights management, than royalties for the winner of this multi-billion dollar market. Given the fact that the global transition from play-only DVD players, to DVD recorders is well underway, the consumer may be the ultimate judge.
Eventually, consumers of digital media players will want to experience a richer "surround sound" environment. Is it possible to imagine a variety of business opportunities emerging from such a broad user base?

Audio/Video Installation Industry

The desire for the U.S. family to own leading edge consumer electronics has been a boon for the custom Audio/Video installation industry. But now, mega distributors have entered the market and profit margins are beginning to erode. In addition some decline in installation quality has occurred, mainly as a result of the lack of trained professional installers. Customer dealers have to align themselves with established companies that have financial longevity. In a non-price driven industry people look for ease-of-use, aesthetics and custom fit. In the years to come, it will be interesting to see the affect of brand named consumer electronics, as well as no-name brands, on first-tier suppliers and market innovation.

Home Theater-in-a-Box:

2004 - 4,702,000 units, $USD 931 million in sales, $USD198 average price.
2006p - 3,592,000 units, $USD 680 million in sales, $USD189 average price.

DVD Recorders:

2004 - 802,000 units, $USD 217 million in sales, $USD 271 average price.
2006p - 1,117,000 units, $USD 183 million in sales, $USD 164 average price.

Total Set-Top Boxes:

2004 - 17,577,000 units, $USD 2,355 billion in sales, $USD 134 average price.
2006p - 22,529,000 units, $USD 2,782 billion in sales, $USD 123 average price.

Personal Video Recorders (PVRs):

2004 - 1,647,000 units, $USD 459 million in sales, $USD 279 average price.
2006p - 5,538,000 units, $USD 1,280 billion in sales, $USD 231 average price.

What's it mean to Entrepreneurs:

This report has outlined several consumer market segments in which start-up businesses can participate. As an entrepreneur, small firm, or new entrant to an emerging market, it is difficult to go up against a major consumer brand. However, often times the dominant market player looks for innovation from a smaller company.

Moreover, several significant trends are underway within the consumer electronic industries which are forecast to continue and broaden. This report briefly discussed just a few. Positioning one's company to work in harmony with the market forces may bring one to an envious position.

Conclusion:

The U.S. economy continues to be highly dependent on consumer confidence. People send money on what makes them feel good. This certainly includes the purchasing of consumer electronics. The statistics outlined in this report suggest robust growth to continue across the industry, but the age-old problem of "product simplicity" continues. Should product designers, policy makers and consumers, who are so interdependent, try to understand the others' role in this global industry, many undiscovered business opportunities may surface.

More information regarding the 2006 International CES may be found at: http://www.cesweb.org

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