Gadgets Galore : Electronics Show Won’t Bore but New Superstars Unlikely
For the folks who bring you TV sets, VCRs, compact disc players and hundreds of other products that fall under the heading of consumer electronics, 1992 opens with a frustrating paradox: never have there been so many exciting new electronics technologies on the horizon, and never has it been so difficult to bring the technologies to the consumer.
This paradox will be in evidence everywhere Thursday as manufacturers and retailers gather in Las Vegas for the 25th annual Consumer Electronics Show. The incredible power and versatility of new computer-based technologies will be on display in the form of a new digital audiotape format, an array of “multimedia” machines that marry the computer and the TV set and a host of other products ranging from wide-screen TVs to electronic musical instruments.
At the same time, the industry will be facing two harsh truths: 1991 was a terrible year, and all the potential slump-busting products are either still in development or remain too expensive for recession-ravaged consumers.
Sales of all consumer electronics products grew just 1% in 1991, to $35.5 billion, according to the Electronic Industries Assn., and growth for the coming year is expected to be only 2%. While that compares well with some other industries, it falls far short of the traditional 5% to 10% growth in consumer electronics.
“1991 was a very challenging year for everyone, and 1992 will be a challenging year as well,” says Ed Juge, director of market planning at Tandy Corp., parent company of the Radio Shack chain. “Consumer electronics tends to move on product cycles rather than the economy, and there haven’t been any exciting new products.”
Still, Juge and others in the industry are cautiously optimistic that some new products--especially digital audiotape machines--may catch fire soon enough to bring the industry out of its doldrums by year-end.
For retailers, urgent help is needed. The shakeout that has already claimed major names such as the Federated Group, Leo’s Stereo and Pacific Stereo is expected to continue. Even the healthy “superstore” chains such as Good Guys and Circuit City have seen their profits deteriorate as a result of ferocious price competition.
The major manufacturers--most of them Japanese--have also been suffering, although sheer size and greater flexibility in scaling back production renders them less vulnerable than the retailers. Once-invincible Sony Corp., projecting a 19% profit drop for 1991, will not be among the 1,533 exhibitors at this week’s show.
Yet there’s plenty of evidence that interesting and reasonably priced products can still attract buyers. Video game vendor Sega, for one, has capitalized on a new generation of technology to break Nintendo’s chokehold on the game business, and the lively battle between the companies should energize the entire market this year.
President Tom Kalinske says he’s expecting sales of Sega hardware and software products to double in 1992, to $1.5 billion, with the overall game market growing from $3 billion to $3.6 billion.
“Families can’t afford as many movies and vacations, so they’re looking for good home entertainment,” says Kalinske.
Similarly, fierce competition in the video camcorder business, where Matsushita has seized on a new version of the VHS format to challenge Sony’s popular 8-millimeter cameras, should help keep sales up this year, especially if prices begin dropping below the $800 mark.
And while shipments of traditional compact disc players will likely register a year-to-year decline in 1992 for the first time ever, according to Paul Gluckman, managing editor of Audio Week, a new breed of machine that plays both CDs and video laser discs is gaining popularity.
For much of the industry, though, the most promising opportunities are longer term. The biggest may be Philips’ new digital audiotape system, known as DCC, which appears poised to take its place alongside the compact disc as a mainstream music format.
First demonstrated at last year’s show, DCC--like the compact discs--uses the ones and zeros of computer code to record music, thus cutting distortion and making it possible to produce perfect tape-to-tape or disc-to-tape copies, although the quality is not quite as good as a CD. Digital quality will require buying new DCC tapes, but the machines themselves will also play conventional cassettes.
The first Philips DCC units will be available in volume in September at a price of about $700. And just as important in the tricky business of establishing a completely new audio format, DCC appears to have garnered broad support from other hardware manufacturers and record companies.
A number of major Japanese firms, including the Technics division of Matsushita, are expected to bring DCC machines to market soon after Philips, and some 500 prerecorded DCC tapes will be available by September.
“It’s a very exciting technology, and it seems to be picking up industry support very quickly,” said John F. Doyle, president of Verity Group, a consumer electronics consulting company in Diamond Bar.
DCC appears to have a significant jump on another new audio format, the Mini Disc system from Sony. Mini Disc, which features small, recordable discs and special technology that prevents skipping, is supposed to be available later this year, but few would be surprised if it didn’t appear until 1993.
Far less certain are prospects for various new “multimedia” systems, which play entertainment and education programs featuring pictures, graphics and sound. Philips’ compact-disc interactive (CDI), an $800 machine that plugs into a TV set, has sold fairly well since its introduction in October, retailers and analysts say, but it’s still not clear whether other manufacturers will provide vital support for the CDI standard.
Commodore’s similar CDTV system has also been a tough sell. Many in the industry believe that such machines will not gain acceptance among consumers until prices drop below $500--and by then, more powerful technologies may be available.
Recession Hurts Consumer Electronics The rate of growth in consumer electronics sales slowed dramatically last year and is expected to stay low in 1992. Source: Electronics Industries Assn.
