Home theater in a box

Discount Store News, Nov 17, 1997 by Laura Heller

Home. It may be one of the most significant trends to impact the retail industry in the 1990s -- a decade that has seen consumers spending more money on their homes than on themselves.

Sprinkle in a couple of current buzzwords like "solution center," "one-stop-shopping" and "time-starved consumers," and the result is new categories that combine several products and services.

The impact at retail has been significant. Home improvement centers are cropping up in strip malls everywhere, and houseware sales have risen at the expense of apparel.

Stores across the retail industry are incorporating instore solution centers for everything from home businesses to meals in minutes.

And in CE, small office/home office and home theater are helping to revitalize a sagging CE industry.

Riding that wave of popularity is the latest trend in home theater systems -- home theater in a box (HTIB), a quick, easy and low-priced way to bring theatrical sound into the living room.

Home theater is a popular concept in CE these days, and although it conjures up an image of lush Hollywood screening rooms complete with blue velvet armchairs and state of the art sound, home theater systems are no longer affordable only to the rich and famous.

When home theater systems first hit the consumer market in the early 1990s, they were a luxury indeed. And though a highend system can still cost upwards of $10,000, HTIB is revolutionizing the category.

Magnavox originally introduced HTIB in 1995, moderately priced between $399 and $599. Just a year later, most major CE manufacturers have an HTIB product on the market.

And the price points keep coming down, offering ease-of use in a packaged solution affordable at the mass level. Consumers can walk into their local discount store and buy a basic system for $199.99.

But what is home theater?

The title is ambiguous and generally refers to three elements: the system picture, source and sound.

The picture could range from an average-size TV to a large screen tube or projection unit.

Source refers to the delivery of the medium -- cable, VCR, laserdisc, direct satellite system or most recently DVD.

Sound is the method through which consumers can closely replicate theatrical sound systems in their own homes. Usually consisting of a receiver and at least five speakers, the audio component is leading the way in sales for the overall home theater category. The product simply adds the element of theatrical surround sound to the consumer's existing picture and source.

It assumes the possession of two commonly owned household items -- a TV and a source, either VCR, cable or satellite system. Home theater in a box boosts the sound quality by bringing Dolby sound into the home through speakers strategically placed throughout the room, mimicing the theatrical experience.

For example, RCA's home theater system, which Kmart has been promoting in its Big K circulars for $199.99, features a 120 watt Dolby ProLogic surround sound amplifier that includes a tuner for AM/FM Stereo reception, five speakers (for front, back and center) and a remote control.

If all these terms seem too technical and confusing, it's because they are. The relative simplicity of home theater in a box is the reason why it is the largest growth product in the audio category.

Home theater in a box was introduced to the market just over a year ago and quickly caught on with consumers hungry for a convenient, easy-to-understand packaged solution.

Tired of trying to make sense of woofers and tweeters, shoppers have been shunning audio products -- sales of home audio have languished in recent years. According to Jim Hirschberg of Intelect ASW Marketing Services, sales of compact disc players are down, and portable audio is stagnant.

"[HTIB] is driving a large share of the audio business right now," Hirschberg said. "It's one of the fastest growing categories."

"Home theater sound is keeping the audio business afloat," agreed Rick Bickford, senior buyer of home audio components, Best Buy. "It's a growth category."

Bickford believes the HTIB concept is right on target with what today's consumer wants.

"Complete solutions for home theater sound are delivering more consumer-friendly packages than former multiunit and a la carte systems," he said. "Products that address ease of operation and user-friendliness are becoming more and more [popular]."

According to the Consumer Electronics Manufacturers Association, sales of HTIB products hit $125 million year-to-date in mid-August. That represents more than a quarter of the total for audio home theater products. Overall, according to CEMA, home theater audio products -- including shelf systems and A/V receivers and speakers -- make up approximately 13% of total home theater sales. This is a 46% dollar increase in the second quarter, putting the category into profitable territory, said the association report.

CEMA estimates that sales of HTIB could reach $279 million in 1997, and could grow to $306 million in 1998.

Sell-through figures during the holiday selling season peaked at 42% last year, and then dropped to a steady 25% throughout 1997, according to Intelect's data. "But with the added [consumer] awareness this year, it's expected to do much better," Hirschberg said.