Trends 
• Digital TV sales pace video industry growth.
• DTV adoption rates to explode as government forces TV manufacturing course.
• DVD players continue to strong after hitting growth peak.
• DVD recorder sales begin to click as prices drop.

In many ways the growth of the digital television (DTV) industry has paralleled the launch of color television, which celebrated its 50th anniversary in 2004.

Like the first color televisions, sales of digital televisions began somewhat sluggishly in 1998, due to high initial prices, sparse programming choices and consumer confusion over the new technology. But now entering the seventh year of the DTV transition, market acceptance is poised to leapfrog the adoption path paved by color TV with a projected annual sales course that will top 20 million units by the end of the year, according to CEA market forecasts.

Unlike color TV, the digital transition is being pushed aggressively by a series of government mandates and deadlines for broadcasters and consumer electronics manufacturers, which is accelerating the adoption rate of digital TV products and services ahead of natural market demand.

As the economy rebounded in 2004, consumers found waves of flat-panel televisions under new Asian brands, offering new low price points, which have encouraged more consumers to adopt televisions often costing hundreds of dollars more than the sets they are replacing. Meanwhile, established television brands used their core manufacturing strengths to develop DTV products with new levels of picture and sound performance, sophisticated styling designs and ever-declining prices.

This trend has sparked a consumer adoption course that is building momentum on a daily basis. Wholesale revenue from all video products sold in 2004 rose 12.4 percent to $21.7 billion over 2003 levels. CEA is forecasting that to rise 20.5 percent to $26.1 billion in 2005, as digital products become even more entrenched.

The benefits to adopters of more advanced digital displays with high-definition resolution include crystal clear pictures, multi-channel surround sound and wide picture frames that resemble movie theater screens. Additionally, many viewers are taking advantage of an ability to personalize the viewing experience with new interactive peripheral products that give greater control over programming and even tap into the Internet.

Sales of digital televisions in 2005 will be impacted largely by outside influences. On July 1, 2005, the Federal Communications Commission (FCC) has mandated digital TV tuners be included in all displays measuring 36-inches and larger and in half of allTVs measuring 24-35 inches. This will force DTV capabilities into the core of the television business. Manufacturers, as a result, are producing new classes of lower priced standard definition televisions (SDTVs) with integrated digital tuners to cater to the millions of consumers who will need to replace televisions in 2005, but don’t necessarily care if their sets are capable of high-definition resolution.

Meanwhile, other analog video categories – such as non-stereo VCRs – continue to disappear through the immense popularity of DVD players, and in late 2005, a new generation of high-definition optical disc players is scheduled to arrive on U.S. retail shelves.

In 2005, the DTV category will be the lead growth segment in the video industry, a projection supported by the following recent developments:

• CEA forecasts DTV factory revenue to climb to more than $17.6 billion by the end of 2005, while DTV product sales climb to more 20.2 million units, as smaller, lower-priced DTVs replace traditional analog models.

• New display technologies are boosting DTV growth, with sales of plasma TV projected to reach 1.4 million units on $3.5 billion in factory dollars. LCD TV sales are expected to climb to 3.8 million units, on factory sales of more than $3 billion.

• The DVD category has peaked, but sales remain strong, with wholesale dollar volume for standalone component players predicted to rise slightly to $2.5 billion in 2005, as unit sales dip to 21.7 million, according to CEA forecasts.

• DVD recorders are expected to add to momentum gained in 2005, behind lower pricing, sustained advertising and promotions, and a growing consumer desire to find a digital replacement to the VCR.