Like music formats, traditional home audio components are changing with the times, and sales are changing for the better as a result.

The most popular types of components are speakers and AM/FM receivers, which today are equipped with five or more amplifier channels and surround sound decoders to deliver home theater surround sound. Other traditional components include CD players and changers, analog cassette decks, turntables, separate AM/FM tuners, A/V preamplifier/surround processors and amplifiers. 

 

Component Comeback:

By far, the core components in the component category are AM/FM receivers and speakers, and they’ve evolved to include performance-enhancing digital technologies, simplified home theater setup and cosmetically appealing designs that integrate with a home’s decor. In another sign of change, surround sound-decoding AM/FM receivers are turning into the central hubs of HDTV-based home theaters and custom-installed distributed audio systems, which deliver music with in-wall and in-ceiling speakers installed throughout the house.

New types of audio components, meantime, have joined their more traditional counterparts. The newest types include satellite-radio tuners and networked digital receivers, which capture music from a networked PC in the bedroom or home office for playback through a high-quality stereo system in the living room or family room.

Partly as a result of the component evolution, factory-level component-audio sales surged in 2004 by an estimated 16.2 percent to $1.14 billion following years of declines that culminated in 2003’s historic 18.3 percent drop to $981 million, CEA statistics show. Since the industry’s 1990 peak of $1.93 billion, component sales have declined almost every year with the exception of slight blips upward in 1993, 1994, 1995 and 2000. The 2003 decline marked the first time that component sales dipped below the $1 billion mark since CEA began tracking them in 1985.

Marketers also attribute components’ resurgence to renewed interest by retailers in aggressively merchandising home audio components as a high-performance alternative to lower price, lower profit home-theater-in-box (HTiB) systems. That trend coincided with what CEA analyst Sean Wargo called consumers’ growing tendency to invest more in home theater audio now that many of them have upgraded the video portion of their home theater systems with DVD, HDTV and PVRs (personal video recorders that record and store TV programs on hard disk drives).

Components’ resurgence has been limited largely to electronics devices such as receivers, and that encouraged at least three companies to launch their first receivers in 2005.

Charting Changes:
With component sales having fallen for so many years, many component-audio suppliers were spurred on to make necessary changes that give consumers more compelling reasons to upgrade from lower-price HTiB systems. The changes have produced:  

 

*Receivers, Single/Multi play CD players, total home speakers, cassette decks, amps and equalizers, other separates Source: CEA Market Research, 1/05

•  Receivers that have morphed into the central hub of a home entertainment system. These receivers simplify the integration of TV sets with multiple video sources, including over-air and cable HDTV tuners, DVRs, satellite-TV tuners and DVD players. Most of these receivers simplify home theater setup by reducing the number of video-cable connections in home theaters that include multiple video sources and an A/V receiver. Many of these receivers accept multiple types of video cables (from a VCR’s composite-video output, a DVD player’s S-video output and a high-definition TV tuner’s component-video output), then “upconvert” or “transcode” the composite and S-video signals to component video. All video signals then are routed to a single HD-capable component-video output. From the back of the receiver, consumers connect one component-video cable to the HDTV set instead of multiple cables. In 2004, one company launched the industry’s first receiver to upconvert multiple video inputs to a digital HDMI (High Definition Multimedia Interface) output. At least four other companies planned in 2005 to offer comparably equipped receivers.

•  Receivers that upgrade the video performance of a home theater system. At least three suppliers planned in 2005 to offer receivers with sophisticated video processors that turn a standard-definition digital-video source into a high-definition spectacle. The video source can be a DVD player or standard-definition digital-cable or satellite signal. Select receivers from at least three other suppliers enhance standard-definition video. Expect more receivers of this kind in the future.

•  Receivers that serve as the control center for a custom-installed distributed-audio system. Such receivers reduce the cost and complexity of installing distributed-audio systems, which distribute music to in-wall and in-ceiling speakers throughout the house. Such models start at around $900 but reach up to $6,999 for more sophisticated installations.

•  Receivers and speakers that automatically adjust frequency response to suit a room’s acoustics. These products incorporate advanced digital signal processing (DSP) to compensate automatically for the frequency-response peaks and dips caused by a room’s acoustic characteristics and by speaker placement within the room. A room’s size, shape, furniture and window treatments distort sound by exaggerating some frequencies and muffling others. Receivers with room-acoustics compensation will start at around $300 in 2005.

•  Receivers that network with PCs and broadband modems. These receivers use Ethernet, USB, or wireless connections to stream music from a PC’s hard drive or from Internet radio stations through a home hi-fi system. Receivers with wireless connections were expected to start as low as $349 in 2005 as shown by the list price for JVC’s RX-D301S/302B model.

•  Devices that resist obsolescence. These high-end components can be upgraded with the installation of a new circuit card, a download of new software, or both to add future digital surround formats, new types of A/V inputs, satellite-radio tuners or reception of digital AM and FM broadcasts. In 2004, the first card-based receivers went on sale from at least two brands, joining select card-based pre-amp/processors. In 2005, at least two more brands launched their first receivers with modular upgrades.

Appearances Count:

Cosmetic appeal has grown increasingly critical to the success of component audio because of the rising economic influence of women, according to a CEA report entitled Five Consumers to Watch. “Women have a major influence in the purchase decision for consumer technologies within the household – 46 percent of women believe they have the most influence in their households, while another 42 percent believe they have equal influence with others,” the January 2004 report said.

To tap into such demand, component suppliers are offering a selection of stylish, diminutive audio electronics and slender speakers that don’t overwhelm a consumer’s living space. Many are designed to look at home with wall-hanging or pedestal-mount flat-panel video displays.

Simplify, Simplify:
Components that simplify the operation and set-up of home theater systems also have increased components’ appeal. To simplify home-theater-audio set-up, more receivers and HTiBs in 2005 will include virtual surround technologies that simulate five-speaker surround sound through two front speakers. Likewise, at least two companies in 2005 will offer a single front speaker that incorporates advanced electronics to deliver five-speaker surround. At least one company will offer an HTiB system with such a speaker. These virtual surround technologies eliminate the need to run wires around the room to surround speakers.

Also to simplify surround-system set-up, suppliers in 2005 will deliver DVD-receivers that combine two previously separate components to simplify set-up. Expect the first receiver with a built-in DVD recorder.

Consumer interest in simplicity is evident in CEA’s Five Consumers to Watch study. “When buying consumer technology, consumers generally want products that are ready to work as soon as possible,” the association said based on a 1,000-person survey. “A full 90 percent like technology to be ‘ready to go’ without a lot of setup or customizing.”

The study determined that when consumers buy entertainment products such as TVs, “priorities include great video/audio quality and minimizing wires and connections.” The study also found that 61 percent of consumers place a high priority on décor-friendly CE products that don’t take up a lot of space and don’t overwhelm a room.

Simplicity’s Appeal:
The majority of home-audio purchasers, however, take their quest for simplicity to the next level. They opt to buy compact all-in-one music systems or home-theater-in-a-box (HTiB) systems instead of shopping for separate audio components.

 

Source: CEA Market Research, 1/05

Music systems, diminutive enough to fit on a desk or shelf, package a pair of small speakers with one or two modules that incorporate all system electronics. The electronics include AM/FM tuner, amplifier, CD player and, in many cases, a cassette deck. A growing number of music systems also integrate DVD-Video players, DVD-Audio players and playback of CDs encoded with MP3 files.

HTiB systems, which are usually larger, add additional speakers and surround sound decoding to deliver home theater surround sound. In most cases, they come with a DVD player, and select models incorporate DVD-Audio, SACD or “universal” DVD-Audio/SACD players.

HTiB and music-system solutions appeal increasingly to consumers who lack the time to shop for separate components, are intimidated by too many choices, or don’t have the time or patience to connect a tangle of cables among multiple components.

As a result, factory-level sales of audio systems -- music systems and HTiBs combined -- have exceeded component sales since 1997. In 2004, systems’ share of home audio sales hit a record 62 percent, CEA statistics show. The numbers exclude small table radios and clock radios. 

Consolidation, Diversification:
Whatever the reasons for the component contraction, many component-audio suppliers have tried in recent years to recoup lost revenue by diversifying into video products – mainly DVD players, big-screen projection TVs and flat-panel plasma TVs.

The diversification positions the companies as a complete source for all of the audio and video products needed to build a home theater system.

At the same time, many audio electronics suppliers have diversified into speakers, and many speaker companies have diversified into electronics. In 2003 and 2004, many home-speaker companies entered the HTiB market.

Market conditions also have forced some audio suppliers to consolidate by merging their factories and back-office functions while retaining their individual brand names and separate sales and marketing staffs.

 

Source: CEA Market Research, 1/05

 

Home Speaker Evolution:

Component speakers are changing to stay relevant in a challenging market.

Like the first speaker ever invented, today's home audio speakers vibrate air molecules to reproduce music and movie sound-tracks. Today's models, however, differ in many ways from the hi-fi speakers of previous generations. In recent years, speaker suppliers have improved the aesthetics of their products, reduced their footprints and enhanced their performance with new designs and, on occasion, a dash of digital signal processing.

Better sounding, visually appealing speakers overcome some consumers’ objections to filling up a living room with multiple speakers to enjoy surround sound.

 

Plasma­TV Speakers:
The push for appealing design has inspired the speaker industry to dramatically increase the selection of high-performance flat speakers that can be hung on a wall or mounted on pedestals next to flat-panel TVs and a growing number of shallow-depth rear-projection TVs. The speakers are as graceful and slim as their companion displays.

The enhanced styling, suppliers contend, will help eliminate aesthetic objections from consumers who are attracted to flat-panel displays as much for their striking cosmetics as for their picture quality.

Visual appeal also is the calling card of new component speakers that incorporate DSP, surround sound decoding and amplification to deliver five-channel surround sound out of a single front speaker enclosure. These speakers, available in 2005 at prices starting about $1,500 replace multiple speakers that would otherwise clutter up a room.

Where it Began:
The need to design decor-friendly speakers was recognized as far back as 1954, when Acoustic Research engineer Edgar Villchur developed the home audio industry’s first acoustic suspension speaker, the AR-1. It was small enough to sit on a bookshelf but could deliver big-speaker bass. It drove the hi-fi industry into the mainstream, freeing consumers of the need to plunk a pair of refrigerator-size speakers in their living rooms to hear life-like music.

In the late 1950s, Paul Weathers developed and marketed the first consumer subwoofer/satellite system, a configuration allowing for a pair of small, unobtrusive stereo speakers and a larger, hideaway subwoofer that delivered low-bass sound. Today, the sub/sat configuration is an industry standard.

Fast Forward:

Also for today's style-conscious consumers, suppliers have developed floor-standing speakers whose profiles have been narrowed by replacing a single large woofer with multiple small woofers stacked vertically. Also to improve visual appeal, suppliers have turned to materials other than wood – such as extruded aluminum and molded vinyl – to build curvaceous models differentiated from their square competitors.

No matter how cool the speakers might look, some consumers want their speakers out of sight, and for that reason, suppliers have introduced speakers designed specifically for placement in cabinets, often behind acoustically transparent cloth panels. These speakers feature “boundary-compensation” switches, designed in part to flatten out the midbass-frequency response “bump” that occurs when speakers are placed in A/V cabinets. Some of these speakers are three-way models with a tweeter/ midrange baffle that can be rotated to allow for vertical or horizontal placement in a cabinet without degrading sound quality.

Digital Enhancements:
Some manufacturers are taking speaker technology a step farther by offering powered speakers that incorporate digital crossovers, digital equalization and other digital signal processing (DSP) techniques to compensate for inherent speaker-design limitations that can’t be overcome by mechanical means.

A small-but-growing number of speaker suppliers also use DSP to compensate for the peaks and dips in frequency response caused by less-than-ideal speaker placement and by a particular room’s acoustic characteristics.

DSP-equipped speakers even allow for more flexible speaker placement. You can “electronically move” speakers to deliver the stereo sweet spot to your favorite listening position without physically moving the speakers into unappealing locations.

In another bow to the digital age, some speaker manufacturers are extending frequency response well out beyond the typical 20 KHz range, citing the demands of the DVD-Audio and SACD formats.

Subwoofers Sing:
To deliver the deepest bass notes, reduce distortion at higher frequencies and pump up sound-system volume and dynamic range, a stand-alone amplified subwoofer is the way to go. Also called powered or active subwoofers, these speakers reproduce only the lowest bass frequencies. Usually cube-shaped and low-profile, they can be tucked away in an inconspicuous location because their low-bass sounds can't be localized. The sound simply blends in with the midbass, midrange and high frequency sounds produced by “satellite” speakers elsewhere in a room.

Often, consumers mate stand-alone subwoofers with unobtrusive pint-size mini speakers. Very often, a powered subwoofer is packaged with two speakers to simplify the decision-making process for consumers.

Speaker Packages:
Other types of speaker packages bundle a powered subwoofer with five to six satellite speakers to provide all the speakers needed in a home theater system. A properly designed home theater speaker system ensures that all of your speakers are sonically matched, often through the use of identical drivers and crossovers. Sonic matching is critical to producing realistic surround sound. With properly matched speakers, the roar of a jet won’t turn into the buzz of bumble bee as it flies from speaker to speaker.

Surround Receivers:
To power their home theater speakers, owners of component-based surround sound systems usually opt for a surround sound receiver.

Almost every receiver built today incorporates surround sound decoding and multi-channel amplifiers to recreate movie-theater surround sound. The receivers have become increasingly sophisticated yet increasingly affordable.

By 2003, 5.1-channel Dolby Digital and DTS 5.1-channel surround sound became a standard feature in almost every receiver available. In 2005, new 6.1-channel surround technology will appear in receivers priced below $200.

The 6.1 technologies, called Dolby Digital EX and DTS Extended Surround (ES), appear on select DVD movie discs. They add a back-center channel to 5.1-channel home theater system, enabling moviemakers to place sound effects behind you, not just to the sides and front. The technologies allow for true "fly-over" and "fly-around" effects. Jets not only whiz by you, but they can do a full 360-degree spin around your head.

Waning Technologies:
Other types of audio components include CD players and changers, CD recorders and MiniDisc recorders, but the best years of their lives are behind them.

The CD format was launched in Japan in 1982 to free us from the bandwidth-constrained analog-music formats of the day. It’s an unmitigated success. By January 2005, 57 percent of all U.S. households owned a component CD player (excluding CD-equipped all-one-one music systems), CEA statistics show. Component-CD penetration, however, has been stuck at 57 percent since June 2000, in part because of the growing sales of affordable DVD players that play music CDs. Consumer demand for compact all-in-one music systems also makes a separate CD player unnecessary.

As a result, sales of component CD players have largely dried up. Sales of home audio CD-recorders also have shriveled, largely due to the popularity of using a PC to "burn" music.

 

Source: CEA Market Research, 1/05