Soundbar sales are poised to reach the $1 billion mark for the first time in the U.S. this year. So, now is as good a time as any to gauge the current state of the soundbar market--especially in terms of the category's effect on the overall audio market and CE retailers.
Soundbars couldn't have arrived at a better time. After all, they were designed to take advantage of the growing popularity of flat-panel TVs and the inherent weakness in the audio performance of those displays. Today's flat-panel TVs tend to have mediocre sound quality (at best) because manufacturers and consumers tend to be more concerned with video quality. Plus, the sets have become so thin that there's little room for any good audio components to be placed inside them. Soundbars are often an inexpensive way to resolve that issue.
Soundbar sales have been growing for several years, said NPD analyst Ben Arnold, who also pointed to their unique form factor as a reason for their ongoing popularity. "They're minimally intrusive in the living room," he said. Multichannel audio setups and all the wires that go along with them "can be a little bit daunting" at least to some consumers, but "my mother can install a soundbar," he said.
U.S. soundbar sales grew 13 percent year over year to about $880 million from November 2014 to October 2015, said Arnold. That, however, was down from the huge 34 percent increase in sales for the prior year. "We're seeing growth slow, but I think that's more of a consequence" of the fact that soundbar sales are now "creeping up closer to $1 billion," he said. Despite the slowdown in growth, there is still a "healthy level of demand" in the market for soundbars.
Although soundbars are often a fairly easy upsell for a good home theater salesperson, it seems likely that there will still remain a sizable percentage of the U.S. market buying flat-screen TVs who may not ever buy a soundbar, including customers who can't afford more than a bargain-bin TV and also many senior citizens. Although Arnold's mother may be able to install a soundbar, I tend to doubt that my 90-year-old mother living in Florida--or her many friends in her neighborhood --would be able to figure it out on their own or even want to.
However, Arnold believes soundbars have been a "net plus" for the CE industry. They are "bringing in a consumer that was not thinking about home theater before." And, while some home theater enthusiasts may switch from a multi-speaker HT system to a soundbar, they are at least remaining in the home theater market, he said. Soundbars have "grown the home theater pie" in general, he explained.
Plus, about 80 percent of soundbars now have Bluetooth functionality, making them an appealing option for mobile- and streaming-focused consumers. Soundbars have "pulled the non-enthusiast into the market--someone who was probably not in the market for" a home theater in a box (HTIB) or better home theater system, said Arnold. "That's where a lot of the growth initially was coming from," and "probably a lot of sales are still coming from those types of consumers."
However, the question of whether the popularity of soundbars has been an overall positive or negative trend for CE dealers varies depending on which retailer you talk to.
"A Mixed Blessing"
Yamaha's YSP-1 Digital Sound Projector, which won the Best of Show award for the January 2005 Consumer Electronics Show, was one of the first high-quality soundbars that retailer Bjorn's Audio Video in San Antonio, Texas, sold, recalled Bjorn Dybdahl, president and owner. The product was appealing, in part, because it represented a simple way to make TVs sound better, he said in a phone interview. It was also a product that, at about $1,500, was "priced in an area that made sense" for his business. Bjorn's did extremely well with the YSP-1 because, at that time, his sales staff could "take a customer not interested in total surround and move them to something that would make their TV sound better" but was not as expensive as a full audio surround system, Dybdahl explained.
Bjorn's now carries soundbar products from Bose, Definitive Technology, Denon, Samsung, Sony, and Zvox. However, the Sonos Playbar is, by far, the best-selling soundbar at Bjorn's now, said Dybdahl. Sales "just took off" because it offers "a lot of value for 700 bucks," he said, pointing out that customers can start with the Playbar and then build a complete wireless surround system with a powered subwoofer around it. The Playbar has become so popular that it has "hurt sales of other soundbars," he said.
Despite the success of the Playbar, Dybdahl said that he saw the soundbar category as a mixed blessing for his business overall. Soundbars have probably been a net plus for big-box stores because the speakers make it simple for their salespeople to "add something to make the TVs sound better," said Dybdahl. But the same can't necessarily be said for specialty retailers with strong sales staffs who "question the customer to find out what makes sense and don't take for granted that everybody would need a soundbar." Better salespeople can often sell customers a surround sound system with components instead, he said. "Today, I think, so many salespeople take the easy route. They want to sell a TV and then hopefully show them a product that will make the TV sound better, but they've got the fear of going to something that I'll call a lot better," he explained. Therefore, "I think, overall for us it probably--and I am going to underline probably--has hurt us more than helped us. ... I think a lot of money is left on the table" because customers are now just being shown soundbars by salespeople.
While audio sales at Bjorn's this year are "probably about flat" with 2014, he said that audio has been down for his business in recent years compared to how the category performed before the arrival of soundbars. Also, soundbars and wireless speakers in general are not making up entirely for the declining sales of other audio products because the pricing on these types of speakers tend to be lower than the pricing of separate speakers and other products that are part of a traditional surround sound system.
"Some customers get a soundbar thinking it sounds great, but don't realize what they're possibly missing with having a full-on 5.1 surround sound system," said Troy Trussell, a buyer at Bjorn's, adding that overall speaker and receiver sales have been hurt by soundbars. In most cases, the main thing that the soundbar consumer loses out on is the rear speakers, one of the key ingredient that makes one's home theater actually sound like a theater.
It also doesn't help that some of the TV manufacturers are giving away their soundbars for free or at "extreme" discounts when customers buy that same company's TVs, said Trussell. "That limits our ability to sell something else when a customer is already going to get" a soundbar for free. Trussell pointed to Samsung and Sony as two examples of that phenomenon. Sony often offers soundbars at a discount when bought with a TV, he said. Bjorn's, meanwhile, is carrying two Samsung soundbars: a lower-end product that is often given away to be competitive (the $229.99 HW-J450) and a curved soundbar (the $699.99 HW-J7500).
Samsung was the U.S. soundbar market share leader in dollars from November 2014 to October 2015--followed by, in order, Vizio, Bose, Sony, and LG, said NPD's Arnold. In units, Vizio was on top for the same period, followed by Samsung, Sony, LG, and iLive.
Clearly, the TV makers are benefiting more than most other CE manufacturers from the surging popularity of soundbars. Although Sony has long been a major audio player, the same can't be said for LG, Samsung, and Vizio. Soundbars are allowing those three companies to gain a greater foothold in the audio market. Conversely, most traditional audio companies aren't faring all that well in the soundbar category at this time, and several of them have either opted to exit the soundbar category or have never even bothered to enter it.
Samsung and LG, in particular, are "trying to make greater inroads elsewhere in audio" with wireless speakers and headphones, said Arnold. Their success with soundbars should help them to "better establish their brand in the audio space," he said.
One retailer I interviewed expressed skepticism about Samsung's soundbar dominance, despite NPD's sales data. The soundbar sales data is "flawed" because TV manufacturers like Samsung and LG "give them away with TVs," said Jim Kozicki, general manager and home audio buyer at Abt Electronics in Glenview, Illinois.
Abt's best-selling soundbar brand for the past three years has been Polk Audio, said Kozicki--followed by Sonos, Klipsch, Sony, and then Samsung. Klipsch didn't even have a soundbar about three years ago, and now the company has three of them, starting at about $399, which is kind of the sweet spot for soundbar sales, explained Kozicki, telling us that most of Abt's soundbar sales are in the $399 to $499 range.
Unlike Dybdahl, Kozicki sees soundbars as an overall positive. "What's happened is that the customer who used to purchase a home-theater-in-a-box" has largely moved over to the soundbar, he said. The HTIB business has "pretty much gone away as a result of the popularity of soundbars, just because the sound quality of HTIBs is not that much better than what you can get from a soundbar--and a soundbar is a simple solution," he said. "There's very little setup needed. It just hooks up to your TV, and it works. And so, from that convenience factor, people are gravitating away from doing an inexpensive five-speaker system and opting to go with a soundbar."
Kozicki went on to explain that soundbars give the customer who's dissatisfied with the sound quality of a flat-panel TV "an alternative than to just live with" that weak sound from the TV. That's the case even if you look at some of the inexpensive soundbars available from companies like Samsung and Yamaha. A consumer can get a "decent soundbar--and when I say decent, something that's going to sound better than the TV--for $200," he said. At that price, most customers "would much rather have better sound than have to struggle to hear the afternoon or evening news," he stated. Older consumers in their 60s and 70s have typically not cared about audio, but "now they almost need a soundbar because the audio coming out of the TVs is so poor that they just flat-out can't hear it. ... So now, instead of getting wireless headphones or something like that, which makes TV watching an anti-social activity, now they can buy a soundbar, hook it up, and be kind of back to where they were 15 years ago, when the TVs actually had good audio systems built into them," he said.
I would part ways with Kozicki only on the pricing at which soundbars can sound better than a flat-panel TV. Even the low-end Nakamichi-branded soundbars that can be bought at Sears for well under $100 sound better than the typical flat-panel TV speakers today. (By the way, that Nakamichi is not the same Japanese audio company that was a major player three decades ago. It's now instead yet another Chinese-owned company focusing on low-end products.)
Soundbars have "maybe cannibalized a little bit of the 5.1 separate market," said Kozicki, but Abt's audio sales have been "pretty much flat for probably the last five years." Somebody who spent $1,000 on a receiver and five speakers is now "gravitating toward soundbars, but they're probably gravitating toward a little bit better-quality soundbar, so I think there's a lot of trading of dollars," he explained.
Who Stands to Lose?
"The audio market has radically changed in the last five to six years, with the introduction of products" like those fielded by Sonos, said Kozicki. "No longer is it the 'in thing' for a consumer to have a rack of equipment with the receiver and a CD player and a cassette deck and a turntable and separate speakers and stuff like that. It's not how people live anymore. And so with the trading of dollars that's going on in the industry [and] the shift toward wireless audio, you're seeing a vast decline in the sales of audio separates."
After consistently growing in years past, the audio receiver has now been "consistently declining" over the past four to five years, said Kozicki. "And I'm not talking about declines of three to four percent. I'm talking declines of 15, 20, 25 percent" year over year, he said. The CE manufacturers that are "taking it on the chin the hardest are the manufacturers that are still solidly entrenched in the AV receiver business," including Denon and Onkyo, said Kozicki. Onkyo is "really the one that stands to lose the most," but it's been helped in recent years by having the number-one-selling AV receiver in the industry. Currently, that is the TX-NR646, which is selling very well for Abt, he added. Onkyo has been the "dominant player" in the $499-$549 part of the AV receiver market "for the better part of 10 years," he said. "That's kind of keeping them afloat, but they don't have the alternative products out there" like soundbars and Bluetooth speakers that the vast majority of consumers buying audio products are looking for now. (Onkyo declined to comment for this story.)
Yamaha, on the other hand, "stands to fare much better" because it understands the soundbar category and has also expanded into Wi-Fi multi-room and Bluetooth speakers, said Kozicki. Meanwhile, the "size of the pie for AV receivers continues to shrink," he said, predicting that "over time, you're going to see less and less players in that segment." Customers who still want an "immersive" movie theater experience in their home, however, will continue to buy receivers and speaker separates to achieve that, he predicted.
Although NPD's Arnold sees soundbars as an overall plus for the audio market, he also definitely believes they are cannibalizing sales of older audio categories. That's especially the case with consumers who are now buying some of the higher-end soundbars from companies like Bose and Sonos. "I have to think that soundbars, as they kind of move up and become more premium, do begin to engage a more enthusiast consumer, and that some of the declines in those more traditional, mature home theater product categories can be explained by the growth in soundbars, especially at that premium end," he said.
Sales data provided by NPD reflected the cannibalization that's happening. HTIB sales dollars tumbled 41 percent in the November 2014 to October 2015 period compared to a year earlier, while unit sales fell 32 percent, said Arnold. A year earlier, we saw a 38 percent decline in dollars and 30 percent decrease in units.
Receiver declines for the same period ending in October were considerably more modest, falling just three percent to about $300 million, while unit sales fell three percent also, said Arnold. The drop-offs were larger a year earlier, falling 12 percent in dollars and 13 percent in units. Arnold didn't have separate speaker sales data handy, but he guessed that the sales declines on those products were probably similar to what's happened with receivers--possibly a bit less because consumers can update existing receivers with new speakers.
While the soundbar cannibalization of premium audio products is "probably still in its early stages," Arnold said he could "envision a scenario where that does get worse."
At the same time, however, many millennials are entering the home theater market now through soundbars, and consumers are already adding soundbars to TVs in secondary rooms other than living rooms, said Arnold. It remains to be seen how much those trends will increase.
"Soundbars are a multi-headed Hydra," said Bob Cole, president of World Wide Stereo in Hatfield, Pennsylvania. "On the one hand, they service a customer's simple need--that is, better sound for a TV that sounds no better than an answering machine." Soundbars are introducing customers to "the idea that sound is good," and that is a good and important thing for the CE market. It also helps that manufacturers are making better soundbars that "actually sound good and, with the addition of a subwoofer, the customer begins to appreciate what the devices we sell can do for them," he said. "All of this leads to a conversation." Online retailers can follow up and tell customers that, if they're happy with the soundbar they bought for the bedroom, they can also have one for the family room, he said. "For brick and mortar, going to the next level beyond a soundbar is easy." In some cases, like the Sonos Playbar, it "becomes a Trojan Horse" and the "etiology for attaching a whole array of products."
Like it or not, soundbars are likely here to stay. "They are simply too good a solution for so many things, but they are also the gateway to selling sound again," said Cole. "And what's next -- music? People start asking if these things can play music. Sonos figured it out. Others will, too," he predicted.
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