Baby Boomers have been the driving force behind both the audiophile business and most of the two-decade long rise in popularity of home theater. Economically for Boomers there have been far more good times than bad, with recessions feeling more like speed bumps on the road to wealth or even just conspicuous consumption. Ground breaking technologies like VHS, 5.1 surround sound, Compact Disc, satellite TV, DVD-Video, HDTVs and the Internet made making an investment in new AV equipment even in a down economy often more important than saving for a rainy day. Consistently rising home values during Baby Boomers adult lives only made it easier and easier to invest in adding home theaters, distributed audio and flat HDTV-based systems to our homes. With equity to spare (or to spend) who could resist the temptation of watching a Sunday football game on a $20,000 50 inch plasma?
Things are quite different for the younger children of Baby Boomers (Generation Y) as the world suffers through the worst economic downturn since the Great Depression in the United States during the 1930s.
Generation X (young adults in their 30s today like myself) saw a red-hot job market in the late 1990s with the tech and dotcom boom. Perks for our demographically smaller generation included allowing us to bring our dogs to work, noon-time foosball lessons and signing bonuses of as much as $20,000 paired with equity that if you were lucky, converted into stock that could go from nothing to millions overnight. We partied like it was 1999 and then we let the elevator bring us down as that hit song ended abruptly by mid-2000.
Generation Y has never experienced a truly robust economy. They know a post 9-11 world filled with wars and debt (and the bad guy still hiding in a hole in Pakistan). They know the Internet. They know student loan debt. They know that their parents' 401k retirements are worth a lot less than before, but they don't know if they will ever find a company willing to match them dollar for dollar. Generation Y is amazingly productive even when they spend a few hours a day of company time on Facebook or Twitter talking about what was in their burrito at lunch. Yet in an economy where 13 states currently have over 10 percent unemployment - Generation Y is struggling to find any work whatsoever. At the same time, there are now older (Xer and Boomers) candidates in the job market with a lot more experience and a very different work ethic willing to work for practically anything - especially if the job comes with benefits.
While Boomers and Gen-Xers have bought their fair share of consumer electronics in their lifetimes - there is a massive statistical problem facing the future of AV, home theater and electronics which is: Generation Y is the largest generation ever, yet they don't have the buying power of the last two generations. Some suggest that Generation Y just needs some time to come into their own and that argument holds some weight. As they get older, have children and ultimately buy homes - they will buy more consumer electronics. At the same time, Generation Y looks at intellectual property very differently than Gen X and Baby Boomers. They don't know a world without an iPod, the Internet and/or peer-to-peer file "sharing" (some say stealing), which has affected their view on value, especially when it comes to high end luxury items. Apple products speak to them. Text messaging is more addictive than a blazing rock of crack in a glass pipe. But will that 65 inch LED backlit LCD HDTV with a 7.1 audiophile surround sound rig be as much of a must have for Generation Y as it was for Boomers and Xers? If Generation Y as a whole can't get their careers on track in the next few years in an increasingly global workplace - don't count on the high end ever being the same again. Good enough is never a term a Baby Boomer muttered while shopping for a new tube preamp. Big enough was never a term that a Gen Xer used when shopping for a new plasma for his house when using his equity loan to fund the purchase. Gen Yers look at watching movies on iPhones and listening through ear buds as "good enough." Perhaps in the next five years when they own homes and make more money without the fear of losing their jobs - they will change their outlook.
Fear of Unemployment Is As Bad As Unemployment Itself
Through my wife, I know a 27 year old young man who lives in Orange County, California. He is employed with a major hotel chain and has more than five years experience doing everything from valet parking to being the night General Manager. He has a degree from a prominent California private university that brings him $800 a month in student loan debt. His job today, which is a good one, is to price hotel rooms for more than seven business and luxury properties in the Anaheim area for which he is paid $52,000 a year. By no means is he unemployed; however fear of unemployment is a factor in every dollar he spends. His department used to consist of 12 full-time employees. Today it is down to two people with his boss saying in December - the work of 12 people is likely going to be for one person to do with the other one on the unemployment line.
This young man works his butt off as he knows his parents can't support him with a safety net at 27. Today he now has roommates to lower his living expenses. He works project work, bar-backs and other tasks to make money on the side. He limits his dating because dinner out in Orange County can be quite costly. He doesn't pay for Internet but "borrows" it from a nearby neighbor who doesn't have a password lock on their network. His 160,000 mile Mitsubishi Eclipse is giving up the ghost in ways that would send 27 year old Boomers and Xers flocking to a car lot and driving home with something nice and shiny. And for AV gear - my friend loves it but if he wants the home theater experience, he comes over for dinner and a movie at my house, as Playstation 3 on a standard definition television is the most he can justify. A trip to Best Buy or even used gear he says is too risky when he could be weeks away from losing his income - and those student loans never really go away. He does pay extra into his debt when he makes some extra money.
It's easy and popular to jump to gloom and doom predictions in today's economy. Each and every one of us (in all generations) are feeling the pain on so many levels. However things aren't quite as bad as they seem. The Dow is currently up in 2009 - pushing or passing 10,000 depending on the day. The economy grew at meaningful levels in the third quarter. Housing prices in 20 key markets are showing signs of settling but this recovery will not be as fast or as satisfying as any of us want. The biggest generation since the Baby Boomers is being taught not to spend - especially on luxury goods, just as The Greatest Generation learned to save for a rainy day thanks to the Great Depression.
Retailers specializing in selling specialty audio-video, home theater and home automation need to start studying how Generation Y is vastly different than Boomers and Xers. Wireless is big. Bluetooth sells. And until there are prolonged times of economic boom that teach Generation Y that it's OK to splurge - value is going to be "job one" with every system sold. The days of loading a home up with $250,000 of Crestron might have been a solid sale to a dotcom CEO fresh after an IPO but as a whole, Generation Y isn't going to be as flamboyant with their money without being truly wowed.
The good news with Generation Y is that they love music more than any generation before them. 220,000,000 iPods and iPhones sold (and counting) only hammers that point home. They love the AV experience of video games that pack both HD video and perhaps better-than-Hollywood surround sound. Could this audience be sold home theater gear in large numbers? You're damn right they can. It just will be under new rules, with new tastes and new buying habits.