• VCR sales to plummet to less than one million units in 2006.
• Average deck pricing to dip to just $18.
• Dual-deck VCR/DVD-recorders building popularity.

The video cassette recorder (VCR) category, which once stood as the windfall of the consumer electronics industry in the Seventies and Eighties, will near its last days in 2006 as consumers continue to adopt digital devices including DVD players and recorders, and hard-drive based digital video recorders. Further signaling the end of the category is the FCC’s digital tuner mandate, which will require all products that normally carry analog NTSC tuners to also include digital ATSC tuners by March 1, 2007. This requirement, which will add additional cost to a fading category, is likely to spell the end for most remaining VCR models, except digital models and those built into combination products.

VCR Sales Plunge
The VCR category hit its peak in 2000, with sales of 23 million combined decks, TV/VCRs and camcorders, according to CEA records, and has been on the decline since. According to CEA reports, sales of VCR decks plummeted 39.8 percent to 1.36 million units in 2005, and are expected to drop another 37 percent to 826,000 units in 2006. According to CEA, the average selling price for a VCR deck will decline in 2006 from $24 to $18.

VCR Breakdown
The vanishing market for VCRs dramatically has reduced the variety of decks and feature options available to consumers in stand-alone decks planned for 2006. Virtually all VCRs sold today are stereo, four-head models that conform to the VHS videocassette standard. This standard calls for half-inch magnetic tape encased in easy-to-load cassettes. Today, many VCRs are sold in combination systems ranging from dual-deck VCRs, to VCR/DVD players, VCR/DVD recorders and three-way VCR/DVD/digital video recorders (DVRs).

VCR/DVD Players, VCR/DVD Recorder Combination Decks Grow
A growing trend to combine VCR decks with DVD players or DVD recorders helped bring some life to the dying VCR category. The dual-deck configurations were popular among households with limited set-top or cabinet space and helped to preserve the life of old video cassette libraries, even as DVDs take the country by storm. VCR/DVD recorders, meanwhile, have proven popular as a tool to enable consumers to transfer their home videos on VHS tape over to newer and more long-lasting DVD media.

Features and Functions
Optional step-up features today include variable slow and fast motion, reception of non-scrambled cable channels, expanded programmability and on-screen function display. The most sophisticated units add auto-record programming systems, automatic clock setting, jog and shuttle dials that more precisely control the fast-forwarding and rewinding functions. Some high-end decks add flying erase heads to make clean scene transitions when editing from another deck or camcorder.

Other common features include the use of 19-micron video heads that produce better quality recordings in the slower extended play mode, super high-speed fast-forward and rewind mechanisms and automatic tape-speed controllers that slow down a tape in the standard mode if a tape is running out during a recording.

D-VHS Decks Offer HD Recording Option
In 1998 one company delivered the industry's first D-VHS VCR capable of recording HDTV signals delivered by terrestrial digital broadcasters. Lack of copy protection for the product, however, limited its availability, and eventually forced its removal from the market.

In 2001, a second attempt was made by Mitsubishi and JVC to market HDTV-level D-VHS recorders. This time both decks incorporated a digital copy protection system called digital transmission content protection (DTCP) in conjunction with IEEE-1394 digital connectors. The combination enabled content producers to restrict illicit duplication of copyrighted material shipped over the digital ports.

D-Theater D-VHS Arrives
In 2002, JVC introduced a new packaged HD media copy protection system, called D-Theater, in a D-VHS deck, and used it to enlist commitments from four Hollywood studios to produce HDTV D-VHS pre-recorded software. D-Theater is an option to the D-VHS standard for North America and is a media-based security system, unlike other proposed systems that are used as gatekeepers on digital interfaces. JVC's D-VHS HD VCR with D-Theater uses analog component outputs to link to an HDTV monitor.

D-Theater incorporates a new proprietary encryption system to prevent the unauthorized duplication of “high value content”, such as feature films. Only D-Theater-equipped machines can play back D-Theater-encoded cassettes. A D-Theater logo is used to identify D-Theater hardware and software.

The 44-GB capacity of a D-VHS tape makes it possible to fit an entire feature-length HDTV movie recording at 28 Mbps on a single cassette. Most D-VHS decks also play and record in analog VHS and Super-VHS formats.

VCR Decks Factory Sales
Year	Unit Sales(Thousands)	Dollar Sales(Millions)	Average Unit Price
2001	14,910	$ 1,058	$67
2002	13,538	$    826	$60
2003	6,416	$    407	$52
2004	2,267	$    130	$38
2005	1,365	$      79	$24
2006(p)	826	$      44	$18

Source:  CEA Market Research