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issue: January 2003 APPLIANCE Magazine

2003 Association Forecasts - Consumer Electronics Association
CEA: Challenges Breed Opportunities

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by Gary Shapiro, president and CEO

In 2002, we celebrated the eighth decade of consumer electronics. As we look back, we have much to make us proud. Each year has brought new and innovative technologies and products. We have opened opportunities for people everywhere to have access to information and entertainment and to stay connected - making the world a better place. As an industry, we are raising the world's standard of living and increasing people's knowledge and their ability to communicate.

Of course, some years have been tougher than others and 2002 clearly was one of the toughest. Certainly, many consumer electronics companies have been affected by the economic downturn. In addition, a host of issues unique to the CE industry such as copyright concern, cable compatibility, lack of digital content, and broadband availability are challenging the industry daily.

Yet challenges create opportunities. The consumer technology market has a solid record of growth, and we have every reason to be optimistic going forward. Despite economic uncertainties, consumers are finding compelling reasons to upgrade from analog to new digital products.

As I write this, we forecast U.S. sales of consumer electronics products from manufacturers to dealers will reach U.S. $96 billion in 2002, on target to set a new annual sales record for the industry, and represent three percent growth over the 2001 total. We are one of a handful of industries that can make that statement. Consumer demand for digital video products, including game consoles and software, digital cameras and camcorders, digital televisions, and DVD players are expected to be strong sellers again this holiday season for retailers.

What's driving this growth? HDTV sales are surpassing projections, DVD decks are expected to hit 17.6 million on dollar sales of $2.5 billion in 2002, and digital cameras sales will climb to 8.9 million in 2002, a 38-percent increase over 2001. These are but a few of the CE products that are transforming the way we obtain entertainment and information, the way we stay in touch with loved ones and the way we work.

HDTV Rules

High definition television (HDTV) is a promising area for the CE industry. Americans love digital television! Although most prefer HDTV monitors, broadcasting and cable soon will be drivers of set sales. Americans are expected to buy 2.8 million units in 2002, surpassing our initial forecast of 2.1 million, with sales projected to reach 3.8 million in 2003. In fact, in our annual survey of consumers and their planned purchases for the holidays, HDTV was in the top six gifts consumers wanted. We are very confident about the roll out of HDTV; however, we do have some concerns about cable compatibility, a lack of quality programming and copy protection.

Our industry is in intense negotiations with the cable industry. The lack of a national "plug-and-play" standard for cable is the largest obstacle to the transition. With less than 13 percent of households relying on over-the-air reception for their primary TV signal, a successful DTV transition depends on the completion of a nationwide standard for sending HDTV programming over cable - known as cable 'plug-and-play' compatibility. I am optimistic that we will have a national, consumer-friendly plug-and-play standard by the time this article is published.

The FCC also should ensure that broadcasters meet their obligations to broadcast HDTV. While CBS and ABC broadcast most of their primetime lineup in high def, the other networks do not.

Copyright Challenges

Another obstacle for the industry is settling the copyright debate. We must balance the established, customary home recording rights of consumers and the ability of manufacturers to innovate against the piracy concerns of copyright owners. CEA strongly supports consumers' right to engage in private, non-commercial recording.

That's why we're supporting legislation introduced in the U.S. Congress by Representative Zoe Lofgren (D-CA) and another bill introduced by Representative Rick Boucher (D-VA). Both bills enjoy bi-partisan support and recognize that the balance between consumer and content owner rights does not need to change as technology transitions from analog to digital. Importantly, these bills mark the first time that legislation will detail consumers' fair use and home recording rights and place us on the offensive instead of the defensive.

Negotiations among the information technology, CE and movie industries continue and the imposition of further copy or retransmission controls may be inevitable. Our challenge is to try to move the discussions toward resolution while defending home recording and fair use rights.

Broadband Pipes

Broadband provides another considerable opportunity for the consumer technology industry. Just as plumbing, electricity, telephone, and cable have entered the home through pipes, dramatically altering our lifestyles, soon it will be common to access broadband technology. CEA is working on several initiatives to ensure that every American has access to affordable broadband services. By the end of 2002, at least 20 million homes will have a broadband connection.

Today, many consumers do not see the value of broadband because it is too expensive. As a member of the High Tech Broadband Coalition, CEA is urging the FCC to remove burdensome, outdated regulations that are hindering investment and limiting competition in high-speed Internet access. CEA also is asking the FCC to ensure that broadband service providers do not place unwarranted restrictions on consumers' ability to connect to devices and access applications and content over their broadband connections.

Where Do We Go?

Without question, challenges exist, but digital technology is providing more opportunities for growth than ever by enabling us to stay connected anytime, anywhere. Digital radio is available nationwide 24/7. HDTV is on display in many American homes. DVDs are hotter than ever. And with more than 1 billion wireless users expected by 2003, wireless devices are keeping more of us in touch with the office and home. Internet connectivity is essential for getting information and communicating. Home offices are growing as teleworking becomes more common. Similarly, home theaters are becoming more popular as the importance of family time increases.


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