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HD for the Holidays? - Broadcasting & Cable

HD for the Holidays?

CEA predicts modest consumer uptick, but others wonder
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Related: HD Special Report -- HD Can Still Sparkle...Even in This Economy

There will be a holiday gift-giving season in 2009 for consumer electronics after all, according to the Consumer Electronics Association (CEA), which is predicting a 3.5% increase in fourth-quarter sales of all electronics.

But some analysts believe that during this economic downturn, HD sales are slowing as the economy gets shakier. Sanford C. Bernstein's Craig Moffett notes HD sales fell 14% year-over-year in September—just when the Wall Street meltdown began. (See related story: Economy Not Spoiling Some New Yorkers' HD Appetite)

The CEA figure predicted in the 15th Annual CE Holiday Purchase Patterns study, released at the CEA Industry Forum in Las Vegas last month, is half of what the same report predicted for last year's holiday season. And it doesn't jibe with some grim reports from retailers. Circuit City recently announced that it was closing 155 stores, then filed for bankruptcy.

Even Best Buy is hurting. The chain two weeks ago predicted that comparable-store sales from November 2008 to February 2009 could decline by 5%-15%, and the retailer's tone was pessimistic.

“Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen,” said Brad Anderson, vice chairman and CEO of Best Buy, in a prepared statement for analysts. Added Brian Dunn, Best Buy's president and COO, “In 42 years of retailing, we've never seen such difficult times for the consumer.”

The CEA also reports economic concern from within the industry. It said 10% of its CEA Advisory Panel recently surveyed said, “Tightening credit had a severe negative impact on their business,” and 37% reported a “moderately negative impact.”

How that plays out for HD buyers is a good question. Penetration has jumped this year “because prices started to drop, and the urgency of the digital conversion in February 2009 is upon us,” says Maryann Baldwin, VP of Magid Media Futures.

In a September survey, Frank N. Magid Associates found 32% of U.S. homes have HD television, up from 20% in September 2007. Just six years ago, Magid found only 5% of U.S. homes had hi-def sets. The Leichtman Research Group last week estimated 40 million households have at least one HD set and said it expects that figure to double over the next four years.

The desire to buy is there: According to data from the CEA, among the top three holiday consumer-electronics gift wishes for adults, in rank order, are notebook or laptop computer, TV and mobile phone. For teens, the top three are computer, video-game console and portable MP3/digital media player. (Significantly, a new television doesn't even make the list.)

Gary Shapiro, CEA's president and CEO, made the organization's positive holiday spending prognosis while also acknowledging that current economic conditions make it “a time of great change...We are in the middle of an ocean that is rather turbulent.”

Shapiro says consumer electronics have some pluses in this frugal environment. For one, consumers increasingly believe that items like cellphones and HD televisions are necessities, not luxuries. Secondly, if consumers are going to stay home more to save money, spending on a new TV might not sound like a bad idea. And third, “We have the DTV transition, which is a hard cutoff date, this coming February, and [that] helps gets consumers into stores.”

As for what consumers plan to give as gifts this holiday season, video-game systems, digital cameras and portable MP3/digital media players are the top three categories in the consumer-electronics sector. As a potential gift, a television comes in at seventh place.

But HDTV is far from being forgotten by consumers. Among those expecting to buy a TV as a gift this season, 63% want an LCD flat panel, 45% want plasma and 54% want a 40-inch or larger display.

But you can't always get what you want. Overall holiday spending by consumers for all categories (gifts, greeting cards, decorations, etc.) will be down 14%, the CEA predicts. Consumers overwhelmingly blame an increased cost of living, concerns about the economy and the plain old “don't have the money” as three major reasons for their reasons to cut back. CEA's research concludes that consumers expect to pull back on their holiday spending this year by an average of 14%. Last year, the average consumer's total holiday expenditure was $1,671; this year, it is expected to be $1,437.

As for the next six months, consumers said they would be either cutting back or eliminating a variety of purchases, the top three being eating out at restaurants, vacations and furniture/home decor. The No. 4 “cutback” or “eliminate” purchase would be consumer electronics, with DVD/CD/digital downloads ranking sixth, cellphone subscriptions eighth and cable/satellite TV subscriptions ninth (see chart).

Reporting by TWICE Editor-in-Chief Steve Smith, TWICE reporter Colleen Bohen and B&C's Allison Romano. Compiled by B&C's P.J. Bednarski

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