Despite Numbers, Home Market Will Chug Along

CEA's recent report, "U.S. Consumer Electronics Sales and Forecasts 2002-2007," is based on the sales predictions of mostly large consumer electronics manufacturers focusing on retail sales. Home technology integrators and custom AV installers sell more service-intensive product and to a more discerning customer base than retailers, the numbers and predictions can serve as a roadmap for general economic and consumer-spending trends. CEA acknowledges the economy is slowing in the second half of this year and will continue to ramp downwards into 2007.

While the technology sector will remain strong, a weakening labor market, low growth of worker wages and high gas prices could put a squeeze on consumer spending.

Most digital integrators we've spoken with recently said business continues to grow as their customers buy more high-def televisions, distributed audio, IT networking, competitively-priced home automation and control solutions, and wire and wired IT networking packages. Integrators also are selling more design, integration, and maintenance and monitoring services to make up for falling prices of home electronics. Here's a birds-eye view of CEA's sales predictions of some important home categories.

Products:

Large-screen flat panel T.V.s will continue to lead as the top-selling item with about $22 billion in sales this year, with a slight increase to $22.3 billion next year. You might as well say goodbye to analog TVs. Their demise is spelled out as the "tuner mandate," which requires any TV with an analog tuner to include a digital tuner, phases into the smaller screen TV market in 2009. Sinking prices on all flat-panel TVs is also greasing adoption. .

PCs: $19.7 billion this year, $19.7 billion this year, $20.3 next.

PC software: $5.3 billion and $5.5 billion Home Security Systems: $2.7 billion and $3.2 billion Laptop will drive the growth, especially as manufacturers continue to optimize them for optimal multi-media performance. The delayed release of Microsoft Vista should also boost sales. Falling prices in flat panels is fueling display upgrade sales, while the adoption of the broadband is sparking modem sales. All that adds up to make home IT th largest future sales segment, according to CEA.

DVD players/recorders: $2.6 billion in sales this year, $3.1 next.

So long VCRs. Growth in the DVD market returns this year spurred by a new breed of DVD recorders and high-def DVD players. Those numbers will get a boost next year when more HD-DVD and Blu-Ray devices are released (more than one million units are expected to be sold) and in 2008 when prices settle.

Set-top box PVRs and direct Broadcast (DBS) Recievers: $2.2 billion in sales this year, $2.4 billion next. The stand-alone PVR market is expected to decline as Windows Media Center-based PCs make their way into the home and cable providers offer PVR capabilities in their set-top boxes.

Separate Audio Components: $1.3 billion this year, $1.4 billion next.

The sale of Separate audio components will remain flat, as spending shifts to displays and MP3 players. But, and this is a big BUT, speakers will continue in growth, spurred by greater investment in multi-room audio systems and speaker upgrades.