Did you take ECON 101 or microeconomics in college? I don't blame you if you didn't--or just don't remember anything you learned. For many of us, college is a distant memory. What I remember is lesson on the supply-versus-demand curve. When prices go down, demand is supposed to go up. In most cases, this is pretty much economic law; but, in today's specialty consumer electronics world, that's not always the case.
VIZIO was (and still is) a disruptive company in the world of video. The company excelled at finding ways to lower profit margins to razor-thin levels (at times reportedly less than 10 percent) and bring sexy, flat HDTVs to an all-new retail distribution chain. VIZIO's success can be measured in billions, even if the $2,000,000,000 deal with LeEco fell apart last year. Because of VIZIO, millions more consumers bought flat HDTVs, thanks to lower prices and more access through warehouse stores and the Internet. Traditional AV stores that need to work with better margins suffered, and hundreds of regional chains, custom installers, and brick-and-mortar stores closed their doors. Historic industry leaders in video like Sony and Samsung took years to effectively react to the VIZIO effect, suffering failures like the rebirth of 3D along the way. Today Sony, Samsung, and LG have differentiated their products and adapted to the value propositions to meet the needs of both higher-end users and "Joe America" users who, even on a low income, can get a pretty damn good 55-inch UHD TV. In the case of video, lower price has truly created more demand across the board, and the market has stabilized from the upheaval of the mid-2000s.
The specialty audio market hasn't seemed to react in the same way in terms of supply and demand. Audio products have seen drastic improvements in the last 10 years or so. Speakers are more nicely built and more efficient in terms of power use, they come in more designer colors and finishes, and they often cost less--yet specialty speakers and even high-performance electronics aren't booming. Consumers can get more speaker for their dollar than ever before, but that doesn't necessarily mean that they actually buy more speakers ... or even spend as much as they did in the past. One could argue that technology has changed for the mainstream audio consumer: with the rise of smart phones as music players and new form factors like soundbars and Sonos-like networked speaker systems, people have just moved away from traditional speakers. But there are other influencing factors, too.
For one thing, at the truly high end of the market, prices haven't really dropped like you see in the more mainstream consumer electronics category. The aspirational high-end audio products are still pretty darn expensive when compared with other luxury goods. Another factor may be fear of another housing market collapse like in 2009. On the coasts, U.S. real estate has recovered a lot more quickly than in the middle of the country, and there still is no direct correlation between having a big home theater, a screening room, or even a "smart home" and getting any more money in resale today. Younger buyers tend to love the new technology; however, much like putting a big swimming pool in your backyard, the act of making your house into a smart home might not be as as profitable as redoing kitchens, bathrooms, and landscaping on a large scale.
Demographics might be another key factor in why the specialty audio market isn't booming like other technologies in 2018. This industry was born with the Baby Boomers in the late 1960s and early 1970s. Think back to that scene in Boogie Nights when Don Cheadle's character, Buck, is trying to upsell his client on better audio components. Back in the 1970s, a happening stereo system was as much a status symbol as owning a muscle or luxury car. Today, a tricky pair of headphones, a super-slick laptop, a tablet, a "wearable," or even a $1,200 iPhone X is what gives the younger set status. Even those crappy, ear-killing Apple earbuds became iconic back in the early days of the iPod. Everyone knew what you were listening to at the bus stop or en route to class or at the gym. And you didn't have to spend much money to get that level of tech status.
Boomers are still big fans of specialty audio, as you can see at any of these regional audiophile shows like AXPONA, Rocky Mountain Audio Fest, and others--but how long can the market be sustained by consumers who are almost exclusively male and aged in their mid-60s and above. Human hearing doesn't stay perfect your whole life; at some point in the process, your $10,000 audiophile preamp might just be good enough to last you. It's probably built well enough to do so.
The distribution chain has changed most radically in the specialty audio business in the past 10 to 15 years. Big-box stores like Best Buy and Magnolia represent literally the only chain that can deliver products on a national basis with the same basic presentation that highlights high-performance AV. Other national chains like Circuit City, Tweeter, and Ultimate Electronics have gone enthusiastically belly-up with no meaningful new national chains to replace them. Too many of the remaining audiophile salons push esoteric technologies that don't always blend into a modern, technology-forward home.
Custom-installation firms remain popular, as they are able to create solution-based systems that meet budgets that sometimes even can be buried into mortgages--which many home owners, especially remodelers, love. CI guys often don't "floor" gear or have active demonstrations in order to save on nasty overhead, but at the same time they don't really nurture aspirational AV purchases like traditional brick-and-mortar stores did in the past.
Internet retailers have removed the dealer margin (in part) to offer consumers shipped-direct products that are high quality and often with very high value. They make one of the strongest cases for why people don't have to spend more today. The online guys, especially Amazon, have made the stereo store your listening room, and that's a big change. Warehouse stores also provide a low-support but low-priced way to get suitable sound and picture into one's house at formerly unthinkably low prices.
Will specialty audio stabilize in the marketplace the way video seemingly has? Through what channels do you buy your audio and video today and why? What inspires you to make AV purchases? Where will you likely be making your next AV investment? Let us know below in the Comments section below.
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� The 22 Immutable Laws of New-School Audio/Video at HomeTheaterReview.com.