Electronics home theater discount

In an otherwise dismal picture for consumer electronics in '97, home-theater-in-a-box systems provide one bright spot in the gloaming.

With prices tumbling in the mass market and new features added to pique consumer interest, sales of home theater, or surround-sound box systems provide one reason for optimism while CE chains await the next wave in '98, DVD.

RCA projects sales of at least 900,000 home-theater-in-a-box systems this year and possibly as many as 1 million. Helping to drive sales: Unit vices have tumbled to as low as $200 to $250 from upwards of $1,000 when they first hit the market three years ago.

Sales figures are difficult to come by because industrywide sources, such as the Consumer Electronics Manufacturers Association, have only recently begun to differentiate sales of home theater box systems from those of other home audio equipment. said Jim Koeftler, senior audio buyer for Best Buy, Minneapolis. However, by analyzing various sources, Koeftler estimates total retail sales this year of about $337 million, based on unit sales of 900,000 at an average of $375. He expects a unit increase of 15% to 20% for '97.

A home theater box typically includes a Dolby Pro-Logic AM/FM receiver, which processes the sound, dividing it among five speakers and a sub-woofer in higher-priced boxes to add the thundering bass sound.

Home theater boxes are compatible with DVD, which can play an entire movie on one disc and provide a major step-up in sound quality from a video tape or TV broadcast. Higher-end home theater systems step up to Dolby Digital (or AC3) systems, which split the sound digitally six ways.

For the first six months of '96, sales of all home theater equipment, including at least 25-in. TVs, hi-fi/stereo VCRs and laser disc players, grew 7% to $3.4 billion, according to CEMA estimates. In '95, about 11 million homes had home theater systems, a 150% increase from '94.

Responding to increased sales, Best Buy set up last September a 16-linear-ft. selection of home theater boxes, moving them off endcap. They included a Magnavox Dolby Pro-Logic with five speakers but no sub-woofer $299; a Pioneer with a passive sub-woofer, $399; and an Aiwa with Dolby Pro-Logic AM/FM receiver and five speakers $499.

Customers seem to be more satisfied with $399 and $499 boxes, Koeftler told DSN. "We have stayed out of the low-end $199 boxes," he said. "We've heard from other retailers that returns are high."

Margins for boxes run in the upper 20% range, he said.

Rick Jones, general manager for Tops Appliances, Edison, N.J., also is bullish on home theater box systems. "It's a consistently growing category," he said. "I expect to double my business in '97." Jones expects further growth in '98 though perhaps at a lesser rate.

Tops carries six models of box systems from RCA, Sony, Pioneer and JVC at price points of $299, $399, $499, $599 and $699--and does well at the $600 range.

Tops also is taking on a new Sony system at $1,000 that features a sub-woofer built into the cabinetry and tower speakers. Tops displays each box system in a separate kiosk in both audio and video departments. Each kiosk has 10 or 12 pieces, plus a system that is ready to play.

"Tops is conically active," Jones said, and high ceilings allow customers to crank up the volume without raising the roof. Margins are close to those of rack and shelf audio systems, he added.

The Big Three discounters each carry three home theater boxes. Target Greatland in Menlo Park, N.J., carries two boxes at $499.99, an Aiwa (200 watts) and a Magnavox box that includes six speakers and a seven-CD changer. Target also carries an Aiwa box at $299.99. Its CE department was promoting an extended warranty plan: $29.95 for a three-year warranty on a $200 purchase.

Wal-Mart, North Brunswick N.J., hit three price points: an Emerson box without AM/FM receiver, $199.96; a Magnavox with a passive (non-powered) sub-woofer, $299.99; and a Sony STRD565SS set without a sub-woofer, $369.96.

Kmart in West Long Branch, N.J., set an everyday price of $379.99 on the Sony STRD565SS box but put it on ad March 9 at $322.99. An RCA SP9900 box was on ad for $239.99, against $279.99 everyday, and an entry-level Zenith box (without AM/FM receiver) was $186.99 on ad, down from $219.99 everyday.

In the same New Jersey/New York market, Nobody Beats the Wiz was featuring in its weekly circular the Sony STRD600SS home theater box at $399.88, down from $499.88. It also cut $100 from the $1,298.88 everyday price of a Technic home theater box with 400 watts and a 110+1 disc CD jukebox changer.

Parsippany, N.J.-based Emerson, will begin shipping in May its HT 300, a $249 box (including an AM/FM tuner), said Barry Light, director of marketing.

Among the RCA boxes, the 9900 model at $299 sells best, said Bob Garcia, vp, product development for Thomson Consumer Electronics RCA, Indianapolis, Ind. Other boxes are priced at $399 and $499 and include sub-woofers.

What is driving the home theater market is that it enables homeowners to listen to their TVs the way they are meant to sound he said. "It brings listening quality up to the viewing quality."