Optimism Runs High At Las Vegas Consumer Electronics Show
Friday January 9, 5:23 pm ET
By Mark Boslet, Of DOW JONES NEWSWIRES
LAS VEGAS (Dow Jones)--The belief that a new era of digital entertainment is finally on the consumer horizon has fueled a broad sense of optimism at the Consumer Electronics Show this week.
But exactly how soon a wave of product sales will turn these upbeat feelings into expanding revenue and profits is a matter of less agreement. Many say accelerated growth could still be another year or more away.
The show has clearly given electronics companies a sense of anticipation. The Consumer Electronics Association forecast last week that sales across the industry will grow 5% to $101 billion in 2004, a noticeable improvement over the 2% growth in 2003 and the best performance in four years.
Sales of new flat-screen and projection televisions, a key component of the transformation from analog entertainment to digital, will rise significantly faster, growing 33%. Prices for the products will continue to fall.
There is a huge new wave coming, predicts Sony Corp. (NYSE:SNE - News) President and Chief Operating Officer Kunitake Ando. There's also fierce competition building as computer and consumer electronics companies target the same market.
This year's show offers plenty of interesting gadgetry. Digital cameras have shrunk to palm size and plasma screens now span up to 60 inches. DVD recorders boast wireless, instead of wired, connections to other devices, and set-top boxes for TVs come with recordable hard drives for saving programming.
Sony captivated the show's imagination with four synchronized dancing robots, an experimental design referred to as Qrio. The nearly 3-foot, plastic-skinned models have 38 internal motors, get up if they fall down and perform a series of complex steps in unison.
Sony also displayed a wireless 12-inch LCD television monitor that can be carried around the home or even to the backyard.
Panasonic turned heads when it said it expects to have high-speed home- networking technology available for the first quarter of 2005 to work over a home's electrical wires and outlet plugs. At 170 megabits a second, the speed would be adequate for multiple streams of high-definition TV, the company said.
Sanyo Electric Co. showed off a slim cellular phone that can receive digital TV. The product also is not expected before 2005.
Analysts say consumers are eager for digital entertainment. An October study conducted in the U.S. by the NPD Group found an increasing number of consumers who were interested in installing home networks were motivated by the prospect of sharing movies, music and photos.
This next wave of buyers will have bigger expectations than earlier home network users, who put up with the complexities of the equipment to share printers and Internet connections, said Stephen Baker, director of industry analysis.
These greater expectations will confront the industry with a challenge that is receiving too little attention today. The installation of new digital products needs to be simplified, and, to do so, standards are required. But the industry has yet to set standards for connecting devices together, as well as among the competing formats for high-definition television and DVD recording.
"The real issue is how do we get there," said Louis Burns, a vice president at Intel Corp. (NasdaqNM:INTC - News) . The consumer will benefit from expanded choices "if we can figure out how to collaborate before we compete."
Even without standards, new opportunities are coming. Choong Hoon Kim, chief executive of Daewoo Electronics Co. (QD-DWE), said the real growth in sales is a year away. The move to digital will be driven by the television as the volume of digital broadcasts increases, he said.
In the interim, Kim said he's excited by the growth prospects for digital TVs and recordable DVDs.
"It's going to be the access to content" that sparks the market, agreed Christopher Morgan, a sales and marketing vice president at Hewlett-Packard Co. (NYSE:HPQ - News; HPQ). Entertainment is going to be a big opportunity in 12 to 18 months, he said.
The hottest products in 2003 - digital cameras, MP3 players, movie jukeboxes and home network gateways - should continue to be big in 2004, said Scott Reedy, a vice president at Buy.com Inc. But so should personal video recorders that are replacing VHS recorders and are beginning to include DVD recorders, he said. During the year, DVD writers should increase in speed, making them more attractive as well.
Many believe personal computer companies will have an advantage in the coming battle because they know the digital marketplace better by having built computers. They also are eager to exploit their knowledge. During a keynote address, Microsoft Corp. (NasdaqNM:MSFT - News) Chairman Bill Gates unveiled products to connect his company's Windows Media Center software for the PC to televisions and the company's Xbox game machine.
"The home is going digital," Gates said. And "it's an incredibly competitive environment."
But the belief in the PC company's advantage is not unanimous. "To me, it's not really a given that we should be betting on the PC being the center of the universe in home entertainment," said Michael Katz, a senior vice president at Booz Allen Hamilton (News - Websites) . Big-screen TVs and the stereo are where people go to be entertained, he said.
Like other observers, Katz is convinced the digital home is going to be a massive opportunity for the industry. "When it catches on, it's going to be a hockey stick" sales chart, he said, with revenue shooting up rapidly.
-By Mark Boslet, Dow Jones Newswires; 650-496-1366; mark.boslet@dowjones.com
