To expand home audio’s appeal, suppliers have developed extensive lines of all-in-one stereo systems that consist of speakers and audio electronics bundled together to simplify the purchasing decision. Systems are the way to go if you don't have time to shop for separate components or are intimidated by the thought of choosing properly matched components.

Audio systems come in two types: home-theater-in-a-box (HTiB) systems, which reproduce music and home theater surround sound, and compact stereo systems, which generally reproduce music in stereo.

King of the Thrill
By any measure, audio systems have been a resounding success. Factory-level dollar sales of HTiBs and compact stereo systems will exceed sales of separate audio components for the tenth consecutive year in 2006, according to CEA statistics. In 2005, system volume exceeded $1.34 billion, edging out component-audio volume of $1.14 billion. As a result, system sales accounted for 54 percent of total 2005 factory-level home audio sales, excluding clock radios and table radios, CEA said.

Despite consumer preference for simple solutions, system sales fell in 2005 because of the industry’s maturity, rapidly declining prices and new home entertainment options that have grown to include videogames, PCs and hundreds of cable- and satellite-TV channels.

 The growing use of music-laden PCs by the young also helped drive down sales of compact stereo systems. (See Audio Overview section.) In fact, household penetration of compact stereo systems (and now-unavailable floorstanding versions called rack systems) fell in January 2006 to 38 percent from the prior January’s 40 percent. Compact/rack penetration peaked at 43 percent in January 2001 and 2002.

Numbers Game
Given consumer’s shifting demands, total systems sales (compacts and HTiBs combined) fell 26.7 percent at the factory level to $1.34 billion in 2005 on a unit-sales decline of 15.2 percent to 9.82 million units, CEA statistics show

CEA found double-digit percentage declines in both categories. Compact sales fell 32 percent in dollars to $611.9 million on a unit-sales decline of 13 percent to 6.01 million. HTiBs posted their second consecutive annual decline, this time falling 22 percent in dollars to $730 million on a unit-sales decline of 19 percent to 3.81 million units. Dollar sales fell faster than unit sales in both categories because of falling average prices.

Compact-system sales are well below their peak of $1.78 billion in 2000. HTiB sales peaked in 2003 at $961 million following five consecutive years of growth. CEA forecasts another year of decline in 2006 for both categories.

What Systems Do 
Each type of system generally serves a different purpose in the home, and they’ve evolved to keep pace with changing technologies and lifestyles.      

Often called shelf systems, compact, shelf, two-channel stereo systems fall into two categories -- minisystems and microsystems -- depending on their size. Either type is small enough to sit on a shelf or table, but some vertically oriented models can be hung on a wall like a flat-panel TV. Compact systems combine a CD player or changer, AM/FM tuner, amplifier and, in some cases, a cassette deck, into one or two chassis that in turn are wired to a speaker pair. They range in price from well under $100 to almost $1,599.    
The smallest compact systems, called microsystems, often use sophisticated styling and performance to maintain their appeal. Many feature furniture-grade wood cabinets for use in offices, home offices and bedrooms. Others design elements include vertically oriented models. Some are mountable on the wall.

For the digital generation, some of the newest compact systems:

-Connect via high-speed USB cable to a nearby PC, turning them into higher power PC-speaker systems that sound better than typical PC speakers,

-Rip CDs in MP3 format, then transfer the MP3 files to connected headphone portables that store music in flash memory,

-Use USB host ports to control connected flash-memory MP3 players and reproduce the players’ songs through the systems’ speakers, and

-Feature DVD-Video playback, turning them into tabletop home theater systems suited for secondary rooms such as bedrooms.

In 2005, only one company offered a satellite-radio-ready compact stereo system, which controls a connected palm-size component with an integrated satellite-radio tuner and antenna. In 2006, at least three companies will offer such systems. Two of them will offer models that control an outboard XM Satellite Radio tuner/antenna. One will offer a model controlling a Sirius antenna/tuner combination.

Compact systems can serve as the hub of a multi-room audio system. At least one compact stereo system model available since late 2005 wirelessly streams music from its internal hard disk drive (HDD) to compact systems in other rooms. What’s more, listeners in six rooms can listen to different songs simultaneously from the server.

HTiB systems come with all of the audio electronics and speakers needed to deliver home theater surround sound. At least five full-range speakers included in the package reproduce the front-left, center, front-right, left-surround and right-surround channels of a DVD-movie soundtrack. A subwoofer speaker, dedicated to reproducing the lowest bass frequencies, also is included.

All feature surround sound decoding, typically in the Dolby Digital and DTS 5.1-channel formats but increasingly in the Dolby Digital EX and DTS ES 6.1-channel formats. The latter add a center-back channel to 5.1-channel home theater system, surrounding you with speakers and enabling moviemakers to place sound effects behind you, not just to the sides and front. Jets not only whiz by you, but they can do a full 360-degree spin around your head.

More often than not, the systems also include a DVD player or changer, providing all the components of a home theater system but the TV. Some low-powered HTiBs with DVD players sell for less than $99.

HTiB systems come in three basic types. One type consists of a component A/V receiver, five satellite speakers, a powered subwoofer and sometimes a separate DVD-Video player. Another type integrates the receiver and DVD player into a single component called a DVD-receiver. A third type moves all amplification and most electronics into the subwoofer enclosure, allowing for a diminutive main control unit.

The vast majority of HTiBs come with stand-alone DVD player or integrated DVD-receiver, according to NPD Group, which tracks sales through online and brick-and-mortar retailers.

HTiBs Evolve to Fit In
Like compact stereo systems, HTiBs are evolving to reverse their fortunes. Household penetration grew in January 2006 by three percentage points to 36 percent over the year-ago period, but CEA’s forecast for the third consecutive year of decline in 2006 has suppliers racing for solutions to reignite sales growth.

Growth may have hit a wall, however, because consumers without home theater systems might simply not have room layouts that accommodate five or more speakers in the spots needed to deliver surround sound to its fullest potential. Many consumers also harbor aesthetic objections to cluttering a room up with five or more speakers or stringing speaker cables around the room.

Those conclusions are supported by CEA’s Five Consumers To Watch survey, which found that consumers want products that are easy to set up and don’t visually overpower a room. A total of 61 percent of consumers put a high priority on décor-friendly products that don’t take up a lot of space, and 74 percent want systems with as few wires and connections as possible, CEA found.

With these preferences in mind, HTiB suppliers are delivering surround sound through two speakers instead of five or six. These systems use virtual surround technologies to delivering five-speaker surround sound through only two or three front speakers, eliminating surround-channel speakers that would otherwise be placed on each side of the main seating position. In 2006, more than a half-dozen suppliers planned to offer such systems at prices expected to start at around $449.

Many of these systems rely on combination front/surround speakers that use angled drivers and digital signal processing (DSP) to project surround information to the left and right of viewers.

HTiB suppliers also are delivering surround sound through one speaker enclosure. Taking the two-speaker surround-sound concept a step farther, at least two companies in 2006 are packing five speakers into a single TV-top enclosure to deliver surround sound. The systems, starting at around $359, are ideal for small living rooms as well as for secondary rooms such as bedrooms.

The companies use angled drivers and digital surround processing to deliver surround effects. One of the companies reduces the number of components to two: a set-top enclosure with all speakers, amplifier and surround processor, and a separate floorstanding subwoofer. Just supply your own DVD player and TV. Another company offers three-piece systems featuring one set-top speaker enclosure, a separate amplifier/surround processor and a separate subwoofer.

A third company throws everything into one box: speakers, DVD/CD player, digital HD Radio AM/FM tuner, amplifier and controls for an outboard XM Satellite tuner/antenna combination. This product, however, delivers movie soundtracks only in stereo.

HTiB suppliers are offering wireless surround speakers. These HTiBs use wireless radio-frequency (RF) technology in lieu of speaker cables to stream sound from the system’s main unit to surround speakers on the other side of the living room.

At least eight companies plan to offer wireless-surround systems in 2006 at prices starting at about $299. For select “wireless-ready” HTiBs, consumers can buy wireless kits to cut the surround-speaker cord. The kits start at around $149, and wireless-ready HTiBs start at about $199.

HTiB suppliers are unleashing systems that cosmetically blend in with popular flat-panel plasma and LCD displays. Their main units are slender and unobtrusive, and their similarly slim speakers often can be mounted on the wall next to flat-panel displays.

HTiB suppliers are minimizing back-panel video-cable connections to the TV. Setting up an HTiB often requires the connection of multiple types of video cables from video source components to an HTiB, and multiple video cables from the HTiB to the TV. There’s a composite-video cable for a VCR, an S-video cable for the DVD player, and perhaps a component-video cable or digital HDMI (High Definition Multimedia Interface) cable for a high-definition (HD) digital cable box or satellite-TV tuner. Now, through a process called upconversion (or transcoding), video signals from multiple sources can be routed from the HTiB to the TV through the single video cable that delivers the best performance for all video sources.

HTiBs Pack in the Features
Nowadays, consumers get much more than a simple home theater when they buy an HTiB. In 2006, consumers will enjoy a greater selection of:

-Satellite-ready HTiBs that control small, optional satellite-radio tuners. Prices will start at about $249. In 2006, the number of suppliers offering satellite-ready HTiBs will grow to at least seven, up from one in 2005.

-Systems that connect to MP3 portables to play back the portables’ music and control song selection via the system’s front-panel controls and remote and user interface appearing on the system’s front- panel display or on a connected TV. Some control flash-memory MP3 players; others control flash-memory and hard-disk MP3 players. They’ll be available from at least five suppliers in 2006 at prices expected to start around $249.

-Systems with USB host ports to connect to digital cameras, video-storing portable media players (PMPs), and USB flash drives to reproduce digital images and, in many cases, video on a connected TV screen. At least five companies will offer this capability at prices starting at about $249.

-Systems that play back PC-stored audio and video files burned to CD. The files include compressed-music formats such as MP3 and Windows Media Audio (WMA). Many also display digital photos stored on CDs and PC-stored video burned to CDs.

Select HTiBs also feature multi-channel DVD-Audio players, SACD players or universal players that play both multi-channel-music formats. Some HTiBs also feature DVD-recorders, combination VCRs/DVD players and hard-disk-drive digital video recorders (DVRs).