One of the most important ingredients in setting up a movie theater experience in the home is recreating the impact of the big-screen in the living room. Fortunately, the consumer electronics industry has never been better equipped to deliver that part of the equation, and at a broad range of price options.

In 1998, the U.S. began to transition to digital television (DTV) broadcasting that today is presenting an impressive selection of high-definition television (HDTV) programs through broadcast, cable, satellite and pre-packaged video sources. Viewable on a special class of HDTV sets and monitors, these images offer vastly superior resolution to traditional analog sets. The majority of DTVs also add wide screens with 16:9 aspect ratios that are perfect for viewing those Cinemascope classics that have been cropped and chopped for years to fit the squarish 4:3 aspect ratio of traditional screens.

Initially, DTV prices were high, limiting sales to a handful of elite early adopters. But in recent years, strong competition, fostered by a pending government-mandate to end analog TV broadcasts, has helped drive the entry price for some DTVs to less than $1,000.

Today, virtually all big-screen TV sets and monitors (27-inches and larger) required for a home theater set-up are digital. Those home theater enthusiasts who may have bought a big-screen analog set a year or more ago, still can use those displays for the theater when adding new surround sound audio components, however, they may need a set-top digital-to-analog decoder box or a cable or satellite TV service to continue receiving TV signals when broadcasters stop sending analog signals on February 17, 2009. That was the date, signed into law early in 2006, mandating the end of analog terrestrial broadcasting.

TV Sales Accelerate
CEA market research forecasts that during 2006 the industry will sell more than 18.7 million DTV products, generating $23.2 billion in wholesale dollar volume. Sales of DTVs in 2005 totaled 12 million units. More than 15 percent of U.S. households had a DTV at the end of 2005, according to CEA estimates. That is expected to climb to 20 percent in 2006.

Digital TV Prices Decline
Since the launch of the DTV transition, the average price for a set has fallen dramatically. In 1998 the average DTV price was $3,147, while in 2005 the average selling price dropped to $1,410. This year, CEA expects the average DTV price to plummet to $1,245.

Percentage of Widescreen Sales Climb
In recent years, consumers have been casting their voting dollars for DTV displays that have widescreen 16:9 aspect ratios. By the end of 2005, some 79 percent of all DTVs sold had widescreen sizes.

Projection TV Loses Ground to Flat Panels
Pushed by the popularity of flat-panel televisions, projection televisions, which once represented the majority of DTV sales, dropped 11 percent to 3.1 million units in 2005 and are forecast to drop to 2.7 million units in 2006. Projection TV displays are available in two basic configurations. The most popular are one-piece, self-contained, rear projection systems with screen sizes ranging from 40-inches to 80-inches.

Alternatively, two-piece projection systems employ either front- or rear-firing projectors that can sit on small tables or floors, or are mounted permanently on ceilings to cast projected video images on separate video screens. These systems produce pictures of varying screen sizes, sometimes measuring larger than 100 inches. They are usually more expensive than rear projection TVs or CRT direct-view TVs, but entry-level prices have dropped significantly in the last two years.

Many rear-projection models come complete with built-in surround sound, multi-channel audio systems that create a home theater experience in one unit. Because rear-projection sets can be too large for some homes, manufacturers are producing slimmer cabinets. Sizes of some 40-inch models have been reduced so much that they are sold as table models.

In the past, TV projectors – front and rear – relied on a combination of three cathode ray tubes (CRTs) projecting images in the red, green and blue color spectrums to produce large full-color pictures when converged on the screen. Various alternatives further reduce size, eliminate problems related to the misalignment of the CRTs and produce brighter and sharper images.

Today, most front projectors, and many rear projection models, are based on tiny micro-display devices instead of bulky CRTs.

Micro-display Systems Pace Projection TV Growth
During the last three years, the biggest growth segment within the projection TV category has come from models driven by micro-display chips rather than bulkier CRT guns. These technologies allow for thinner cabinets and brighter pictures than CRT-based models. The primary technologies include digital light processors (DLP), liquid crystal displays (LCD), and liquid crystal on silicon (LCoS) integrated circuits. According to market researcher iSuppli, LCD-based models in 2006 are forecast to sell approximately 1.4 million units, followed by DLP at 1.2 million, LCoS at 180,000 and CRT at 273,000 units.

Front Projectors Pick up Pace
A growing segment of the high-end DTV home theater video display market is coming from front projectors. Once viewed strictly as options for the ultra elite, the category is shifting more to mainstream audio/video distribution channels as unit sizes and prices shrink.

One of the attractions of front projectors is the lack of space they take up in a family room or dedicated home theater area. Compact models can be mounted from ceilings and projection screens are designed to roll up after use, without compromising any floor space. Front projectors also offer a wide range of resolution levels from EDTV up to 1080p high-definition images that virtually duplicate movie theater quality.

According to research from the market research firm Quixel, U.S. consumer front projector sales exploded to 309,872 units in 2005. For 2006, the firm predicts unit sales will rise to 452,675 units. Front projector sales have been sparked by lower-priced units – some of which integrate other video devices like DVD players – targeted at families.

Consumers Line up for Flat-Panel TVs
From the beginning, consumers have fallen in love with new flat-panel TVs – including plasmas displays and LCD TVs – but exorbitant prices restricted sales to affluent early adopters. In recent years, improvements in mass-production techniques combined with an influx of new Asian brands have helped price tags drop dramatically. As a result, sales of both plasma and LCD TV products have ratcheted upward.

LCD TVs are offered in both analog (smaller screen products) and digital (generally starting at 17-inches up to 100 inches) configurations, produce enhanced or high-definition resolution, and measure 4-inches deep or less. Digital LCD TV sales during 2006 are forecast to rise 74 percent to 7.1 million units, according to CEA estimates.

Plasma TV sales also grew significantly in 2006 as manufacturers made dramatic price reductions in an effort to hold onto market share positions. Plasma TVs typically offer larger screen sizes at somewhat more affordable prices than very large screen LCD TVs. U.S. factory sales of plasma TVs grew 88 percent from 870,000 to 1.6 million units in 2005 and are expected to climb 77 percent to 2.9 million units in 2006, according to CEA estimates.

Factory dollar volume for plasma displays reached $3.6 billion in 2005 and is forecast to reach $5.3 billion in 2006. The average price of a plasma set is expected to decline from $2,048 in 2005 to $1,823 in 2006, says CEA.

Digital LCD TV factory dollar sales during 2005 totaled $3.2 billion and are forecast to reach $5.8 billion in 2006. Unit sales are expected to rise 7.1 million from 4 million in 2005, as the average price of an LCD TV set (analog and digital) climbs a dollar to $819, due to stepped up sales of larger screen sizes.

Analog TV Sales Squeezed
In 2006 home theater enthusiasts will be hard pressed to find an analog television with a screen size large enough to conform to CEA’s minimum home theater screen size. This is due to the acceleration of the FCC’s DTV tuner mandate, which as of March 1, 2006, required all sets measuring 24-35 inches to include digital tuners, making them digital television sets. Video Source Components Advance

For nearly a decade, big-screen television sales have enjoyed considerable growth, thanks to the tremendous popularity of DVD optical disc players.

These components for the first time offer video signal sources with as many as 480 lines of resolution, higher than signals available from TV broadcasts, cable systems or VCRs. The players also offer true 5.1-channel surround sound and the ability to play other disc formats, such as audio CDs.

A true hybrid technology, DVDs were designed to deliver digital quality pictures and surround sound to analog television sets and audio receivers. However, with the introduction of DTV sets and monitors, the digital signals these players decode from optical discs are being displayed in their full potential on high-scan video screens.

The strength of the DVD format remains, although the Digital Entertainment Group (DEG) and CEA both predict sales volumes to decline slightly in 2006.

A growing DVD trend comes from the sale of DVD recorders. As entry prices drop below $300, more consumers are purchasing video recorders that use optical discs instead of magnetic tape to produce pictures with higher resolution and to preserve those recordings for longer periods of time.

DVDs Near Ubiquity
When DVD-equipped PCs and videogame consoles are included, an estimated 89 million households (or more than 80 percent of U.S. TV households) had the capability to play a prerecorded DVD disc by the end of 2005, according to research company ICR Centris. That's a remarkable achievement for a product available in the U.S. only since March 1997.

More than 80 percent of these DVD households could play DVD movies in more than one room of the house, given their ownership of multiple DVD players, including DVD-equipped PCs and game consoles, TV/DVD combinations, battery-operated portable DVD players and DVD-equipped home-theater-in-a-box (HTiB) systems.

HTiBs package all of the audio-related components needed to create a surround sound experience into a single purchase. HTiBs incorporate speakers, surround sound decoder, amplification and, more often than not, a DVD player – everything but the TV.

Given the rapid adoption rate of DVD, it’s no wonder that DVD hardware sales slowed for the first time ever in 2005, when DEG determined that retail level unit sales dropped one percent to 36.7 million. That followed unit sales growth of ten percent in 2004, 34 percent in 2003, 50 percent in 2002 and 69 percent in 2001.

DVD sales gains were driven not just by the format’s superior picture and sound quality or by the format’s interactive features. Mass-market affordability also drove acceptance. Low-end DVD players are available at prices as low as $29 during special promotions. Prices are so affordable that 82 percent of U.S. homes owned at least one DVD player in January 2006, less than nine years after the first DVD player was sold, a CEA consumer survey shows. That’s up from just 25 percent in January 2002.

Despite the high penetration rate, CEA projects almost 22 million households will buy DVD players in 2006, and more than 80 percent of the households will be repeat buyers.

Over 1.6 Billion Sold
High hardware penetration rates, in turn, have stimulated DVD software sales. In the U.S., movie-studio shipments of DVD discs for sale or rent rose nine percent in 2005 to 1.66 billion units, DEG said. That follows a 48 percent gain in 2004, a 49 percent gain in 2003 and an 88 percent jump in 2002.

In addition, consumer spending to buy and rent DVDs rose 7.5 percent in 2005 to $22.8 billion, following a 32 percent gain in 2004, 39 percent in 2003 and 71 percent in 2002. DVD software sales are so strong that in 2005, they accounted for 94 percent of all consumer spending on home video software (VHS tapes and DVD combined). That’s up from the previous year’s 87 percent.

All told, the $22.8 billion spent by consumers on DVD software in 2005 easily exceeded the $8.8 billion that consumers spent that year on movie tickets, according to Nielsen EDI. Add in another $1.5 billion in VHS sales and rentals in 2005, and the gap between home video spending and movie-ticket sales grew wider.

VCR Sales Give way to DVD
For years, stereo VCR decks have been the main video source component in a home theater system, but DVD players are eroding that role. In 2006, VCR deck sales are expected to decline for the sixth consecutive year, this time hitting 826,000 units, dropping below the one million unit level. In 2006, virtually all deck sales will be stereo models, CEA reported, and most will be sold in combination units. Meanwhile, average unit pricing is expected to drop to $18 from $24 in 2005.

High-definition Optical Disc Formats Slated
Home theater enthusiasts will have the additional choice of two next-generation optical disc systems that will playback discs encoded with full high-definition content.

These new formats each propose to offer DVD-sized discs that will contain either 30 GB or 50 GB (depending on the format) of storage capacity to accommodate the massive data requirements of feature-length, high-definition movies, with room left over for multiple, advanced, multi-channel surround sound formats and a variety of interactive extras. Some proposed hybrid discs even will allow content producers to produce discs with both high-definition and standard-definition DVD versions of the same program on one disc.

Manufacturers and Hollywood studios said they expect to launch this year optical disc formats based on blue laser technologies, instead of the traditional red-laser systems that have powered DVD and CD players. Currently two competing systems, each based on short-wave length blue laser technology to read densely packed pit structures on DVD-sized optical discs, have been proposed. As each group made aggressive moves to line up Hollywood Studios and IT industry powers to pledge software support for their respective formats, it appeared that a full-fledged format war, akin to the early days of the BetaMax  battle was taking shape.

Blu-ray Disc Spec. Proposed for HDTV Recording
In early 2002, nine CE companies jointly established the basic specifications for a next-generation, large capacity, optical disc, video recording format that will be capable of recording and playing back, among other things, HDTV programming.

Called Blu-ray Disc (BD), the new format is similar to the DVD format in the size of the disc. The BD specification enables the recording, rewriting and play back of as many as 25 GBs of data on a single-sided, single-layer disc and 50 GBs on a dual-layer disc.

A typical single-layer pre-recorded BD-ROM disc will carry more than two hours of HDTV video or more than 13 hours of standard TV broadcasts (VHS/standard definition picture quality, 3.8 Mbps).

In addition, BD decks have been demonstrated using discs encoded in the 1080p (1920x1080) high-definition TV format, making it the first consumer playback device capable of outputting native 1080p signals to support new classes of 1080p flat-panel and micro-display rear projection HDTVs hitting the market.

The format is not backward compatible with current recordable DVDs, but it will be possible to use combination blue laser/red laser pickups to read prerecorded standard DVD-videos. Therefore, most Blu-ray recorders probably will be developed to read both Blu-ray and legacy DVD-video discs.

HD-DVD Offers low Start-up Costs
When first introduced by Toshiba and NEC in 2002, the HD-DVD (at the time called Advanced Optical Disc) was billed as a blue laser recordable disc format that was based in large part on the established DVD format. This would help assure backward compatibility of players with standard DVD discs. It also offered disc replicators the ability to upgrade to the new medium for lower cost and with less disruption than was possible with the rival Blu-ray Disc system.

The HD-DVD specification enables the recording, rewriting and play back of as much as 15 GBs of data on a single-sided, single-layer disc. Dual-layer HD-DVD discs will store as much as 30 GBs of data which can hold as much as eight hours of high-definition movie content, according to Toshiba.

Consumers also will benefit from a lower adoption cost for HD-DVD hardware. At the 2006 International CES, HD-DVD manufacturers unveiled some of the first players, with entry prices starting at less than $500. This was less than half the price of some of the first players announced for the rival Blu-ray Disc format.

HD Disc Surround
Because of disc capacities of 30 GB and 50 GB, respectively, the formats make room for soundtracks that promise to exceed the sound quality of the current 5.1- and 6.1-channel formats. That’s because the current formats are highly compressed, given a standard DVD’s far more limited data capacity.

Although the surround formats are new, you won’t have to replace your current 5.1-channel AV receiver or HTiB to enjoy HD discs in discrete multi-channel surround sound. That’s because HD-DVD and BD players will support multiple audio formats, including mandatory formats compatible with current Dolby Digital and DTS 5.1 home theater systems. At least one compatible format must be included on prerecorded discs, although the choice of formats used on each disc will be up to individual movie studios.

As a result, the soundtracks of HD discs will be playable in discrete 5.1-channel surround through the installed base of 5.1-, 6.1- and 7.1-channel home theater surround sound systems.

Some consumers, however, might have to invest in a new audio component if they want to hear the enhancements promised by many of the high-bit-rate surround sound formats also approved for use in HD disc players.

Some of the optional high-bit-rate formats will require the purchase of a new multi-channel surround sound decoder, which could be built into future AV receivers.

For other consumers, however, it might not be necessary to replace their current receivers to enjoy high-resolution surround — if future HD disc players incorporate built-in high-bit-rate decoders and 6.1- or 7.1-channel analog outputs. The outputs could be connected to receivers with 6.1- or 7.1-channel analog inputs.

Whatever the capabilities of future HD disc players, the consumer electronics industry is working to make the transition as seamless as possible for today’s home theater enthusiasts.

HD-DVD, BD Formats Gain Programming Support
Most of the major motion picture studios have pledged software support for either the  BD or HD-DVD formats, effectively splitting the content market. In 2005, several studios that pledged support for HD-DVD said they also would supply discs in the competing Blu-ray Disc format. As this was written, only Universal Studios had pledged support solely to HD-DVD.

First Players Hit the Market
Toshiba launched the first HD-DVD player in the U.S. this spring. Initial players, which sell for around $500, play back both DVD and HD-DVD media and output selectable digital resolution formats including 720p and 1080i. Early machines do not feature support for 1080p. Digital outputs include HDMI with HDCP and IEEE-1394 with DTCP and add Ethernet terminals for interactive applications. Support is offered for Dolby Digital and DTS surround sound formats and includes optical and coaxial digital audio outputs. In addition, Toshiba said it plans to introduce an HD-DVD recorder in 2006. HD-DVD also has the backing of IT powers Microsoft and Intel, giving the format built-in support in next-generation PCs.

Blu-ray Disc backers will follow close behind, with the first player expected to hit shelves later this year. Blu-ray models will support 1080p output resolution and will have the support of more Hollywood studios than HD-DVD. However, pricing of initial units is expected to start at around $1,000.

Both Camps Propose Dual-Format Discs
Backers of both formats have added dual-layer disc technologies that will allow content to be stored in one of the new blue-laser formats on one layer and in standard DVD format on the second layer at the same time. This could allow studios the option of producing discs that will play on both the new machines in high-definition, and in standard DVD players in standard resolution.Formats Face Obstacles

Beyond the issues related to a format war, both systems face a dramatically smaller audience than DVD players did at launch. Players and recorders in either camp are designed to appeal to owners of high-definition television sets, and at the end of 2005, total U.S. digital television sales since launch reached 34.5 million units, according to CEA estimates. In addition, starting at $500 to $1,000 each, the prices of early HD-DVD and Blu-ray Disc players will be considerably higher than progressive-scan DVD players.