Digital Home Holiday Shopping List

Several factors are fueling that hunger. One of the main drivers—a top product category on consumers' wish lists—are flat-panel TVs. According to integrators, dramatic price drops are causing consumers to not only upgrade living room sets but to buy additional units for different rooms in the house.

"We're selling lots of wired and wireless LCD TVs, especially 23- and 26-inch sets that are going into kitchens and even bathrooms," said Randy Presley, general manager of Eric Grundelman's Cool AV in Mesquite, Texas, adding that the company already has exceeded last year's sales. "We're also selling a lot of universal remotes with [LCD TVs] for people who are looking to clean up."

Using the TV as the center of the digital home now gives integrators the opportunity to sell more components such as wired and wireless network infrastructures, a variety of remotes, PC media extenders, gaming consoles, home control systems and iPod integrations, as well as extended warranties. The increase of PC-based home networks also is giving integrators the opportunity to sell lower-margin products and prevent their customers from shopping at big-box retailers. The product sales also open up many service opportunities, including installation, calibration and optimization of networked components.

Integrators such as Presley said they're so busy around this time of year that they barely get a chance to think about the holidays. "I've been doing so much freaking out over business that I haven't even planned for Thanksgiving," he said. "My mother keeps calling me to ask me if she's invited for dinner."

Gerry Lynch, CEO of System Seven, a Topsfield, Mass.-based integrator, issues a "no vacation" policy to employees each November and December. Most customers with a project in the works want everything installed by the start of the holiday season, he said.

Around this time, Lynch said he makes sure to take advantage of the different sales incentives some vendors roll out. During the past few weeks, he's been calling on customers and pushing new Panasonic plasma displays, which come with a free five-year warranty until the end of the year. System Seven will hold the TVs for customers whose homes aren't yet ready for the installation.

"It's such a crazy rush," Lynch said, referring to business generated by price drops and other incentives. "We're basically taking advantage of any promotions, price breaks, extended warranties and rebates." While TVs rule across the board as the hot holiday item, integrators also name a surprisingly varied list of other products, which proves just how pervasive technology and networked products are becoming in the home.

Jennifer Jones, a home theater designer at Tangora Technologies, Delmar, N.Y., has sold several Slingboxes, a device by Sling Media that allows users to watch their local cable channels from a remote laptop or PDA.

Tangora also is using the boxes as a cost-effective way for clients to remotely view IP-based security cameras.

"That's something you can do really cheaply by modulating it over an open cable channel," she said, adding that Tangora recently integrated the solution for a client who spends a lot of time in Japan and wants to keep tabs on his New York home. "We also just installed one for a retiree who wants to watch New York Giants [football] games but can't get them on cable in Florida."

In cases like that, Tangora will install a media adapter on the local PC, which streams the program onto a large flat panel. "It's a lot more enjoyable than watching the game on your laptop screen," Jones said.

Integrating iPods into distributed audio solutions also has turned into a big market, especially around the holiday season. Jones and others said they've had great success with iPod connectivity and control solutions, such as Niles iWare, SpeakerCraft's Mode and Nuvo's iPod dock. "Those are huge," she said.

Integrators and independent retailers looking for an iPod solution are banking on sales of Microsoft's new Zune, a portable multimedia device for viewing, playing, sharing and storing digital video, photo and music files.

"There's really nothing out there now that touches iPod. Apple keeps its channel so limited that you don't have access to it unless you're a big-volume player," said Fred Whitten, a buyer at FutureTronics, a high-end electronics and PC-related retailer with stores in Dallas and Orlando, Fla. FutureTronics' customers have been inquiring about Zune, which arrived on the shelves in mid-November.

"To have a strong competitive product gives us a leg up, especially if there are a lot of accessories available. There's a huge market for those," he said.

Michael Schwab, vice president of purchasing at D&H Distributing, Harrisburg, Pa., one of the only broadline distributors to carry Zune—as well as Microsoft's XBox 360, which along with Sony's PlayStation 3 promise to be hot this holiday—said Zune is just one example of how low-margin consumer electronics can fit well into a more complex, integrated solution.

"I see this as more than just a stand-alone device," Schwab said. "It's a conduit within the digital home platform that Microsoft is trying to drive into the market. You'll be able to use [Zune] as an IP-enabled mobile device, pulling content off the Web through your complete network."

Richard Buchanan, vice president of marketing at Sling Media, said more integrators are installing Slingboxes, which range from $179 to $250, even though they have low margins and are aimed at the retail market. Sling is thinking of developing a box geared to the professional install market, which could be rack-mountable and include higher-value features such as a built-in power supply and a cooling unit, he said.

"Most CEDIA guys aren't thrilled about selling a $250 product," he said. "But there are a lot of things we can do to satisfy that market. We believe there's a real opportunity there."

Other hot-selling holiday products coming out of D&H, which also sells Slingboxes, include wireless gaming components, digital SLR cameras, Linksys networking gear, Windows XP with Vista upgrades, and high-performance system components, such as Nvidia's GeForce 8800 graphics processor, Schwab said.

Custom system component sales are being driven by demand for revved-up gaming systems. "So many people look to us to install gaming solutions," said John Goldenne, president of Digital Home Technologies, an integrator in Palatine, Ill., who usually includes a large-panel display and PC in the sale. "We're seeing a lot more men in their 40s and 50s getting into it."

This year the Consumer Electronics Association projects holiday gift spending on consumer electronics to hit about $22 billion, or $185 per household, a 27 percent increase over last year. Overall, spending on consumer electronics throughout 2006 is up by 15 percent over last year.

Consumers stand to buy fewer electronics this holiday season but likely will spend more on each purchase, with a growing amount of dollars going toward installation and integration services.

"Through our research, we're seeing a strong demand for value-added services, such as consultation, pre- and post-sales support [and] installation," said Sean Wargo, CEA's senior industry analyst.