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It’s the day after Christmas so of course sales have started and whatever you thought you bought for a good price is suddenly available for a lot less, especially electronics. But this isn’t your normal after-Christmas sale, it’s after-Christmas during one of the worst economic recessions in decades, so prices are lower still. Add to this, at least in the U.S. market, the pending shutdown of analog broadcast TV in February and there ought to be a feeding frenzy of digital set buying. And there will be I’m sure. But it could be a lot better except for a missing link, one small bit of technology the lack of which is costing TV manufacturers billions in lost sales.

The consumer electronics industry is built on the idea of every few years getting us to throw away everything we own and replace it with something entirely new. In home audio the transition was 78/33/8-track/cassette/CD. In home video it was Beta/VHS/DVD/Blu-Ray. Each time we not only had to buy new equipment, we generally had to purchase again our audio and video libraries. And we did, much to the joy of the music and movie industries, though the jury is still out on Blu-Ray (more on that in a couple days).

Unlike automobiles, where there is a robust second-hand market, the consumer electronics food chain is simple and clean: whatever we invested in before is suddenly worthless. But for these technology transitions to be truly successful we ALL have to switch, which doesn’t always happen. Many people never owned an 8-track player, for example, or even a cassette deck, jumping straight from vinyl to CD. But that jump to CD’s, since it was an all-in 100 percent market transformation, was enough to power the audio business to record profits for more than a decade even without a lot of new hit songs. That’s how the Beatles still make $100+ million per year even though the group disbanded in 1970.

The goal, then, is a vinyl-to-CD type transformation. It happened exactly like that for VHS-to-DVD, much to the joy of Warren Lieberfarb. And there’s hope right now that a similar market upheaval will happen as digital TV sets replace analog.

Already there is good news for manufacturers on this front. Something unanticipated happened that has driven LCD and plasma TV sales higher than expected. The fact that these new sets are skinny and can be hung on a wall has changed the way we buy televisions, not just in the U.S. but globally.

There has for almost a century now been a space carved out in most American living rooms for a piece of consumer electronic furniture. Originally it was a console radio complete with gleaming wooden cabinetry. Later the radio was replaced with a TV of comparable size or larger. We positioned our furniture to help us see or hear better, changing the social dynamics of our living spaces. Rooms came to be sized with televisions in mind. And the biggest analog TV screen in my era were 21-23 inches measured diagonally, a size dictated both by the economics of glass blowing and by the maximum cabinet depth the manufacturers thought they could get away with.

Bigger sets were rare because they were expensive but also because they required bigger rooms. Projection sets went into American homes as a result, rather than into homes in Europe or Asia with their generally smaller rooms. And because the size of the market was limited in this way, so too were limited the economies of scale that could be enjoyed by the projection TV makers. Big sets were not only more expensive — they were a LOT more expensive.

Then along came plasma and then LCD displays, which could be hung on a wall taking no floor space at all. Wonder of wonder, when these TVs started selling in Japan most of the buyers were replacing smaller sets with ones that were substantially larger. You could put a honking-big TV in a tiny room if you liked – especially if it was a tight-grained 1080p set. Japanese customers started buying bigger sets, economies of scale began to kick-in so those sets got cheaper so people bought sets that were bigger still. The size effect happened everywhere, too. People the world over are buying bigger sets than ever because they can hang them on a wall.

While this is generally good news all around there is still a disconnect in the marketplace, which is to say a lost opportunity to take even more of our money. When projection sets cost $10,000 most of them were sold to people building home theaters. Now only about 7.5 percent of flat panel televisions are sold for home theaters, which means the market for Dolby 5.1 and 7.1 Surround Sound equipment is severely constrained with prices higher than they ought to be.

We mount a big 120 Hz. 1080p TV up on the wall having bought it for $1100 after Christmas, maybe connect it to a Blu-Ray player or an HD cable or satellite box, then sit down to watch The Dark Knight, listening to the audio through tinny little speakers. What’s wrong with this picture? Everything.

It’s not the money that keeps people from completing their home theaters — it’s the complexity. Ideally we should space-out the front speakers, add rear speakers and then a sub woofer, but this takes extra equipment and, especially, extra wiring. Sure the Geek Squad will install it all for you but that costs extra and limits market penetration. Besides, what if we move and have to rip it all out?

What’s missing here is a de facto wireless audio standard for televisions. Look on the back of any of these new TVs and you’ll find a forest of connections but none of the audio is wireless. There are RCA jacks, minijacks and optical, but no wireless. How much could it cost to add one more audio option? Not much – generally less than $10 in manufacturers’ cost.

Adding less than $10 to the cost of a TV, then, would make it dirt simple to have a home theater. Just buy compatible speaker systems, plug them in and sync them with the TV. The TV will figure out how many speakers and what type are connected and configure the sound output accordingly. There’s no need for wiring and no need for the Geek Squad, either, unless you want them to put the TV on your wall.

Edit — Some readers have pointed out that this could be accomplished just as easily through power line networking.  Maybe so.  If the price is the same I say go for it.  I don’t care.  Though a look at the HomePlug market suggests that the price WON’T be the same — it will be higher.  I don’t know why.  Now back to your regular programming…

If this simple change were to take place the cost of 5.1 and 7.1 audio equipment would drop and consumers could more easily enjoy the true potential of their new TVs. The result for the consumer electronics industry would be even more profound, though – a 50 percent increase in net profit per TV sale. That’s HUGE.

So why doesn’t it happen? That’s because these bozos, as they have shown us time after time, can’t bring themselves to agree on a new technical standard without first enjoying a bloodbath in the market.

There are chipsets available right now to achieve everything I have described. The one I am most familiar with comes from Eleven Engineering in Canada, maker of high-end wireless audio technology for customers like Bose. But there are alternatives to Eleven. All the consumer electronics industry has to do is choose one – ANY ONE.

Boom. We all would suddenly have an incentive to buy more and better stuff. The positive effect this would have on Blu-Ray, for example, should be obvious. It would help video gaming. Heck, it would help the entire economy as we all pump an extra $200 into home electronics – in this case electronics we can take with us next time we move.

Tags: christmas, consumer electronics, wireless audio

This entry was posted on Friday, December 26th, 2008 at 8:58 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.