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2006 Sales Outlook
The home and portable audio industries have played some sour notes in recent years while struggling to adapt to changing technologies and consumer lifestyles. Due largely to the MP3-driven resurgence in portable audio sales, however, the music is sounding sweeter.
Combined factory-level sales of home and portable audio grew for the second consecutive year in 2005 following three consecutive years of decline that pushed 2003 sales down to levels not seen since the mid-1980s, CEA statistics show. The forecast for 2006 is positive.
Home audio includes components such as A/V receivers, amplifiers and separately sold speakers. It also includes all-in-one compact stereo systems, home-theater-in-a-box (HTiB) systems and home radios, including clock radios and high-fidelity single-chassis tabletop radios and tabletop CD/radios.
Portable audio includes MP3-type headphone stereos, CD- and cassette-based headphone stereos, boomboxes and handheld recorders.
Broken Records
In 2005, combined home/portable sales grew an estimated 40 percent to an historic high of $7.68 billion. An unprecedented 16 percent decline in factory-level home audio sales to $2.68 billion was more than offset by a 119 percent rise in portable sales to an all-time high of $5 billion, easily exceeding the previous record of $2.8 billion set in 1994, CEA statistics show.
Surging portable sales in 2005 also drove up the greater audio industry, including aftermarket car stereo, to an historic $10.1 billion, easily exceeding the record set in 2000 at $8.59 billion.
In an unprecedented shift, U.S. factory-level sales of portable audio products exceeded home audio equipment sales for the first time in history in 2005. Portables also outsold combined home and aftermarket car audio sales for the first time.
In 2006, CEA projects a six percent rise in combined home and portable sales despite a continued decline in home audio sales, which are projected to fall about six percent. Portable sales, again driven by compressed-music portables, will rise a projected 13 percent.
Compressed-music Expands Market
The sole driving force behind rising portable audio sales is the compressed-music (MP3-type) headphone portable, whose factory-level dollar volume almost tripled in 2005, CEA statistics show.
In 2005, MP3 headphone stereo sales grew an estimated 228 percent at the factory level to $4.23 billion following 204 percent growth in 2004, CEA said. Growth of almost 20 percent is projected in 2006.
Sales of portables incorporating such legacy technologies as cassette and CD, on the other hand, continued to implode. As a result, headphone MP3 players accounted for the majority of portable audio dollar sales for the second consecutive year in 2005, according to the latest CEA statistics. In fact, MP3 players accounted for 85 percent of portable audio’s $5 billion volume in 2005, CEA statistics show. In 2006, MP3’s share is projected to expand again.
Market Maturity
Sales of cassette and CD portables have been falling for years, in part because of rapidly declining prices but also because of declining unit demand. Factory-level dollar sales of CD- and cassette-equipped headphone portables fell for the fourth consecutive year in 2005 and will fall again in 2006, CEA projections show
MP3, however, isn’t the sole reason for the decline of legacy portable technologies; market maturity is another reason. By January 2006, 53 percent of households owned a headphone CD player, up from 40 percent in January 2003, according to a CEA consumer survey. The number of households owning a CD boombox likewise rose to 54 percent by January 2006, up from 52 percent in January 2003.
Likewise, home audio’s temples are graying. In January 2006, 36 percent of U.S. households were cranking up HTiBs, up from 28 percent in January 2003. All-in-one stereo systems could be heard in 38 percent of households in January 2006, down from 43 percent in January 2002, because of growing consumer preference for HTiBs, which double as stereo systems.
As for component home CD players, which ushered in the digital music era in 1983 in the U.S., their household penetration is shrinking as consumers replace older models with DVD-Video players, which also play audio CDs. Component CD penetration fell to 55 percent in January 2006 after having held steady at 57 percent since June 2000.
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