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Home Theater Owners Put Equal Emphasis on Sound and Video Quality, Finds CEA Study (27/10/2006)

Total Market Opportunity for Home Theaters to Reach $8 Billion

Approximately one third of home theater owners plan to purchase a new component for their primary TV room or home theater system during the next year, according to research from the Consumer Electronics Association (CEA(R)).

Total investment among home theater owners for the coming year is expected to be around $1,700 per household finds the CEA study Home Theater Opportunities. In addition, non-owner households plan to invest an average of $1,400 in home theater technologies during the same year. CEA classifies a home theater system as including at least a 34-inch display, a VCR or DVD player, a surround sound receiver/processor and at least four speakers.

The study also found that consumers have already made significant investments in their existing home theater systems with a strong emphasis on displays. More than half of planned household investment will be spent on the display alone. Displays also topped the list of purchase plans, with half of consumers wanting to improve their TV first.

"The high interest in displays leads many to wonder if there is opportunity left for the other components of a home theater system, such as audio. But the survey results show, when it comes to home theaters, sound and video quality are almost equally important to the majority of consumers," said CEA Director of Industry Analysis Sean Wargo. "As a result, investments in displays may just be the first round in a larger investment in the home entertainment system."

The percentage of consumers placing high importance on sound quality (80 percent) very narrowly falls short of those saying the same about video quality (84 percent) but when matched head-to-head, the vast majority (83 percent) put them on equal footing. Consumer budgets and CEA's shipment data demonstrate a skew toward displays and video components for now, however.

"Many in the industry speculate that new display technologies, such as high-definition and flat panel, create a gap between the sound and video quality of the average home theater. But this is yet another opportunity for retailers, who could piggyback on the high demand for displays and help the consumer to balance out their spending," said Wargo.

Delving further the study profiles current home theater system owners and breaks down the types of systems into three categories: entry level, move-up and custom home theater systems. Entry level home theater systems are by far the vast majority of the installed base with the average total cost not exceeding $3,500. Move-up home theater systems likely consist of separately purchased audio components such as a receiver, amplifier or speaker separates. Many in the industry consider custom home theaters to be the true home theater system since it often involves a dedicated space that has been designed, built and installed by a professional. All hardware components are hooked up on an A/V rack and connected to a high-end display or projector. Installation services vary by level.

"As the levels imply, there are a series of opportunities within the home theater market. The first is certainly getting the consumer to look beyond the speakers within their TV set to an entry level system. From there the upgrade opportunities build on one another as consumers upgrade," said Wargo. "Moving the consumer through these stages, with progressive investments in their home theater represents the true opportunity for the current marketplace."

"Home Theater Opportunities" (September 2006) was fielded in July 2006. It was designed and formulated by CEA Market Research, the most comprehensive source of sales data, forecasts, consumer research and historical trends for the consumer electronics industry. Please cite any information to the Consumer Electronics Association (CEA(R)). The complete study is available free to CEA member companies. Non-members may purchase the study for $499

www.CE.org