Home theater, video steals the show

DSN Retailing Today, March 14, 2005

The home theater category has been dominated by pricey new display technology, leaving little left over for complementary audio pieces. Consumers are spending more on TVs and less on high-quality audio components, a situation that's not likely to change in the near future, thanks to the popularity and affordability of all-in-one home theater packages.

The average selling price for home theater in a box (HTIB) was $200 in 2004, down from $265 the year before according to the Consumer Electronics Association. And although unit sales increased by 1.25 million units to 4.87 million, total dollar sales jumped by only $10 million to $971 million from the prior year.

"What's driving this is display upgrade," points out CEA analyst Sean Wargo. "Certainly people are spending more than they ever have in the past on the video portion of home theater," agreed Stephen Baker, director of industry analysis for the NPD Group.

With flat panel displays capturing consumers' attention and a large share of their home entertainment budgets, specialty retailers have either relinquished the audio add-ons to discounters or stocked up on inexpensive HTIB packages, giving up the margin that goes with higher-end components.

"Smart retailers are working with customers to make sure they're spending the right mix of dollars on the display and audio," said Wargo. By identifying a customer's total budget first, retailers can more pointedly steer that customer toward a higher-quality, higher-priced audio system.