Not too long ago when some mentioned their home theater, it might have conjured up images of a mansion with a giant screening room and fancy cocktail parties. These days, many consumers who don't live in mansions envision a home theater setup on a somewhat smaller scale: a giant-screen high-definition television, booming surround sound, and a fancy entertainment console on which to display their goods.
But for the vast majority of consumers, the true home theater experience remains elusive. Retail experts cite a variety of reasons. Many people in the years before HDTV became the technology du jour already had purchased audio systems or home theater-in-a-box units and are loath to toss them out so quickly. Custom-built entertainment consoles cost plenty. And there's the expense that comes simply from purchasing a giant HD set, which can run anywhere from $2,000 to $10,000.
San Francisco attorney Todd Norris felt the bite of all these factors after recently moving into a new condo. He wanted to upgrade his four-year-old Sony (SNE) enhanced-definition set, get rid of his bookshelf audio system that had served him well for nearly a decade, and build a new center to house it all. "To do that cost a lot of money," he says. Norris eventually broke down and splurged on a new home theater.
Doing More to Manage Your Entertainment
It's those extra costs, and the rise of digital boom boxes for the ubiquitous Apple (AAPL) iPod and other MP3 players, that have contributed to declining fortunes for the home audio market. For the past two years, with the exception of a few bright spots, unit sales of audio components and speakers have been flat to lower for many manufacturers. Average selling prices of audio components have risen by up to 6%, as home systems do more to manage your entire entertainment setup through HD multimedia connections and other complicated wiring, rather than just play music.
But the category that had kept the market growing—home theater in a box—had peaked. These systems contain most or all of the necessary components, including speakers, a surround-sound receiver, and often a DVD/CD player.
The good news is that consumer electronics and furniture manufacturers are finally beginning to adapt to the new market dynamics. This year, they've begun to deliver devices and entertainment that satisfy the same aesthetic, less-is-more sensibility that is prompting people to buy flat-panel televisions. "People want the same minimalism that they are getting in flat-panel television," says analyst Ross Rubin at researcher NPD Group, which has tracked strong growth in in-wall speakers that hide the wires and all-in-one speaker systems that typically use only one or two wires.
Take Me to the Sound Bar
One of the biggest areas of growth in home audio is a device called a sound bar, or sound projector. It's a new take on the home theater in a box. Instead of the Dolby Digital five-speaker setup (center, two sides, and two rear) and subwoofer, these units are a single long bar and accompanying subwoofer that deliver simulated surround sound through digital technology.
One of the early pioneers of such technology is Yamaha, but it has been joined by a half-dozen others, including Boston Acoustics, Denon, Marantz, and Philips (PHG), thanks to an industry-leading 8% revenue growth rate for sound bars, according to NPD.
Sound bars, which cost between $400 and $1,600, typically do not include a DVD player (with the exception of Philips) and cannot offer the same device-handling features or deliver the massive sound of dedicated receivers and speakers. They are designed for their simplicity and to enhance the typically mediocre audio—and no surround sound—consumers get with built-in speakers for HD sets. "Without the audio, it's just watching TV," says Bob Weissburg, president of sales and marketing for D&M Holdings, which sells Denon, Marantz, and other audio products. "With sound bars, people can enjoy programming in the most simplistic way, without running wires and things of that sort."
Don't Forget About the Furniture
For those who won't mind a few wires, another big consideration is the type of furniture in your home. After buying a big-screen TV, many consumers are surprised it doesn't fit in their existing entertainment center. And many others hate the fact that their pretty flat-panel gets hidden away. It's a problem so common that there's a glut of used entertainment centers on the market that are nearly impossible to sell or even give away.
At the same time, the trend toward flat-panel sets represents opportunity for a number of furniture manufacturers and importers that are springing up to take advantage of the situation. Tom Ferrigno, president of San Mateo (Calif.)-based Prime Resource Entertainment Systems, has seen his business take off. The company creates traditional-looking cabinets, ranging from $900 to $2,500, which include a lift that stows or reveals a flat-panel television in seconds. "What we're seeing is that people, particularly women, want furniture that complements the room and the TV," Ferrigno says.
Furniture and audio makers expect business to take off even more in 2008, assuming falling average selling prices for large flat-panel televisions will leave more discretionary spending dollars for their products. For anyone looking for great sights and sound in the home, those extra dollars spent may be well worth it.