Digital TV Sales Underscore Strong & Growing Market.

The Consumer Electronics Association (CEA) announced that February 2005 unit sales to dealers of direct view and rear projection digital television (DTV) products rose 43 percent over February 2004, showing continued strength in this key consumer electronics product category. CEA stated that February sales reached 342,060 units on dollar sales of $443 million. Year-to-date unit sales are up 14 percent over the first two months of 2004 and full year 2005 sales are expected to more than double the final 2004 total of 7.3 million units.

CEA also announced that total February 2005 sales of DTV products including monitors displays and integrated sets reached 498,554 units on dollar sales of $699.4 million, marking a 29 percent increase over combined sales in February 2004.

“Digital television, particularly HDTV (high-definition television) remains the fastest-growing segment of the consumer electronics industry, driven by strong consumer demand for flat-panel and rear-projection HDTV products,” said CEA President and CEO Gary Shapiro. “At the same time, however, the rate of growth is slower than we originally anticipated, due to a variety of factors.”

CEA is revising its full-year 2005 projections for DTV product sales to 15 million units from the previously announced 20 million. CEA explained the initial projection, issued earlier this year, overstated the full-year effect of the Federal Communications Commission’s (FCC) DTV Tuner Mandate and was based in part on what proved to be false assumptions that the cable and broadcast industries would support specific actions necessary to achieve aggressive sales growth in 2005.

“Quite frankly, we were wrong. Our ambitious DTV sales projection for the year was based on a belief that both the broadcast and cable industries would embrace actions that would greatly accelerate our nation’s transition to digital television,” said Shapiro. “While broadcasters and cable providers have made strides toward increasing programming and making infrastructure investments, both industries continue to throw up roadblocks that slow the transition. Specifically, the broadcast industry is opposing the establishment of a ”date certain” end to analog television broadcasts while the cable industry refuses to support and promote Digital Cable Ready (DCR) products. We see both of these as critical and necessary steps in order to reach 20 million unit sales this year and help ensure rapid consumer adoption of DTV.”

Shapiro noted that CEA has supported the effort of several key lawmakers, including Senator John McCain (R-AZ) and Congressman Joe Barton (R-TX), to accelerate the DTV transition by setting a specific cut off date for analog broadcasts. “A hard cut off date would eliminate any uncertainty for consumers and all parties involved in the transition and thus more effectively advance the move to DTV,” CEA has argued.

Shapiro also observed that in addition to opposing a hard deadline, the broadcasters also are fighting to slow the transition by blocking CEA’s petition before the FCC to accelerate the existing timetable for manufacturers to install digital tuners in all television sets offered for sale. CEA believes the accelerated deadline will expedite the transition and provide needed certainty in the marketplace. Specifically, CEA is requesting the FCC advance the deadline for manufacturers to include digital tuners in all televisions with screens sized 25- to 36-inches from July 1, 2006 to March 1, 2006. In exchange, the association is urging the Commission to eliminate the July 1, 2005 deadline that requires 50-percent of sets offered for sale in this size range include a digital tuner.

“The current 50 percent requirement is antithetical to the Commission’s goal of building marketplace demand for broadcast DTV receivers when applied to popular, 25- to 36-inch screen sizes,” said Shapiro. “Although initially conceived as a phase-in for the benefit of manufacturers and retailers, in reality it creates uncertainty in the marketplace for each group and slows the ramping-up of volume production necessary to bring costs down.”

CEA also based its 2005 sales forecast on the assumption that the cable industry would support and promote DCR products. These products provide access to digital HDTV programming and other premium channels without a set-top box and also include over-the-air DTV tuners. CEA believes the cable industry has not adequately promoted the availability of DCR sets, nor have they adequately supported the requisite CableCARD, the security device consumers must obtain from their cable provider in order to access content on their DCR products.

“More than seventy percent of U.S. households choose to receive their primary television signal via cable. Digital Cable Ready offers cable consumers a seamless transition to DTV while also driving up the ATSC tuner penetration rate,” Shapiro said. “As we have long said, cable operators must support DCR integrated television sets with adequate promotion and supplies of CableCARDS provided at a fair price in order to provide a seamless viewing experience for cable customers to access HDTV and DTV programming.”

Shapiro underscored that even with the reduced sales forecasts, sales projections for 2005 and beyond are extraordinarily strong. “Today, even as we concede we were overly ambitious with our original forecast, we celebrate the fact that consumers will flock to DTV in greater numbers than ever before. Our industry will sell more DTV products in this single year than we’ve sold in several past years combined. In fact, our revision still puts us ahead of where we thought we’d be just a year ago: In 2004, we forecast total 2005 sales would reach a mere 8.3 million sets.”