Hot products for the holidays

TVs will top many wish lists, but music players, notebook PCs and even satellite radio receivers won't be far behind. The scoop on holiday sales Photos: Most-wanted gizmos

John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
John G. Spooner
12 min read
Forget the Old Spice and yellow polka dot necktie, son. This holiday season, Dad's eyeing a flat-screen television.

While PCs and peripherals such as MP3 players have traditionally topped tech wish lists, this year retailers are expecting some changes, thanks to fast-falling prices on new TV technology. Flat-panel displays can now be had for $1,500 to $1,800, making them more competitive than ever with laptops and other computer gadgets.


What's new:
With prices for televisions dropping, advanced sets including plasma-screen TVs and LCD TVs are expected to top wish lists this holiday season.

Bottom line:
The shopping season's upon us, and analysts are predicting strong sales and revenue growth for this year's popular electronics devices. Advanced televisions, digital cameras and MP3 players expected to garner triple-digital revenue and unit sales gains.

More stories on holiday sales

"If you've got $1,500, are you going to buy a new TV or a PC? This is the first year we're likely to see some (people) trading between those two categories," said Steve Baker, an analyst with NPD Group, which tracks retail sales of electronics. "I think we're starting to see the tail end of the great notebook revolution."

TVs and PCs, of course, won't be the only thing on consumers' minds when they set their alarms and venture out early the day after Thanksgiving. That frenzied Friday--also known as Black Friday by retailers in the United States--marks the start of the holiday shopping season.

But no matter when they start their sprees, consumers' appetites for music, television and video games--as well as for digital photos and PCs--are expected to propel sales of those products higher this year. Analysts and retailers expect notebooks, MP3 players and digital cameras, along with televisions, home networking equipment and even satellite radio receivers to be hot sellers, delivering higher revenue and unit sales numbers during the 2004 holiday season.

The Consumer Electronics Association expects U.S. holiday spending on electronics to increase 5 percent this year, putting the industry on track for annual sales of $108.8 billion.

Overall, holiday retail sales are expected to reach $219.9 billion this year, up 4.5 percent from 2003, a forecast by the National Retail Federation shows. The NRF figure includes general merchandise, clothing and furniture, as well as sporting goods, books, music and electronics. All told, sales in November and December represent nearly 23 percent of retail sales, the federation says.

Analysts say that electronics typically represent about 15 percent of the overall holiday take. That would put 2004 holiday season sales of electronics at retail at somewhere around $30 billion.

Gadgets are "becoming more compatible, more mobile, easier to use and more aesthetic, and every year the technology becomes more affordable," said Michael Linton, vice president of consumer and brand marketing at retailer Best Buy.

Best Buy, he said, is "cautiously optimistic" about the holiday season.

Baker predicted that advanced televisions, digital cameras and MP3 players could garner triple-digital revenue and unit sales gains this year, while satellite radio receivers could see high-double-digit increases in both as well.

Notebooks PCs are likely to see a boost of 20 percent to 30 percent in units and revenue this year. Desktops are likely to remain relatively flat, Baker added. Home networking gear could rise 10 percent to 20 percent in units and revenue as people attempt to begin sharing files between electronics devices in their homes.

Hewlett-Packard, which recently entered two of the hottest markets around, music players and TV sets, is counting on another trend--customization--to give it an edge. The company sells a "tattoo" kit for users who want to create and print designs for their iPods, and the company is selling as many of the kits as it can produce, said John Solomon, vice president for HP's Consumer Imaging and Printing Business Unit. A package of 10 tattoo sheets costs about $15.

Attuned to TVs
The most baffling category for consumers this holiday season will probably be televisions. Competing technologies, as well as the transition from analog to digital programming, have consumers wondering whether this is the year to get a new set. Falling prices on thin sets with huge screens will likely motivate many consumers to take the leap.

Old-style televisions with cathode ray tubes still offer better picture quality and significantly lower prices and make up a majority of the market. But they don't have the sex appeal of flat-screen or projection sets.

Research firm IDC recently conducted a survey of 1,200 consumers in the market for a television this holiday season and found that only 10 percent were looking at CRT televisions, while more than 80 percent said screen size was most important to them. Many were looking for sets that are 30 inches and above and are willing to spend an average of $1,950.

Those size requirements are more likely to be filled by flat screen and projection televisions than CRTs, according to IDC analyst Bob O'Donnell.

Opening prices on 42-inch plasma screen TVs--which had been in the $3,000 to $5,000 range earlier this year--will easily reach down into the $1,500 to $2,000 range this holiday season. At the same time, good prices on LCD TVs, whose screens range up to about 30 inches, will be in the $1,000 to $1,500 range, while 50-inch or larger rear-projection TVs go for around $3,000, according to data from retail tracker NPD Techworld.

Prices fell this year due to increased competition between technologies and manufacturers. Still, profit margins have been fat enough to draw the attention of PC makers such as Gateway, HP and Dell, which are preparing for the gift-giving season. Plasma continues to be the most popular technology for flat screens because of its bigger sizes and lower prices compared to LCD. The most popular size for large flat-panel sizes is 42 inches, which is the sweet spot for plasma makers. However, LCD and other technologies are catching up and will be price competitive in certain sizes.

Rear-projection televisions and enhanced-definition (ED) plasma televisions will be the more popular types of sets, O'Donnell said.

Fewer bargains
on the Web

Retailers aren't likely to
promote online sales
aggressively in the
fourth quarter.

"Would people prefer high definition to enhanced definition? Yes, but ED is cheaper," O'Donnell said.

Enhanced-definition sets offer better resolution than standard-definition sets, but ED's still not as good as high definition. They also don't support full-resolution HD programming, which many broadcasters will use in the future.

The coming year will see LCD TV screen sizes get larger, some hitting 55 inches or more, and picture quality for plasma improve to match LCD. All the technologies will also benefit from an increase in high-definition programming.

Cameras on the cheap
Many consumers may have visions of flat-screen TVs dancing through their heads, but a recent survey by the Consumer Electronics Association, ChangeWave Research and Best Buy all point to digital cameras being more in line with the budgets of those doing the giving. Twenty-two percent of consumers surveyed by ChangeWave said they expected to give someone a camera this year. That's more than any other category.

"There's a lot of interest in digital photography among consumers," HP's Solomon said. "What's different this year is good-quality cameras that are easy to use and nice to own are available at $300."

The average consumer will spend $200 to $300 on a camera, said Chris Chute, digital-imaging analyst for researcher IDC, and that buys a lot more than it used to. Brand-name cameras with resolutions of 5 megapixels--enough for large prints--can now be snapped up for $300, putting camera makers in a bit of a pickle.

"We're really running out of features and megapixels to pack into a consumer camera," Chute said. "A lot of vendors are going to be scratching their heads about how they're going to keep prices afloat over the next year."

Changes in cameras this year include a slew of single-lens reflex (SLR) models that allow photographers to swap lenses. Once expensive specialist tools for professional photographers, SLRs are now made by nearly every major camera manufacturer for well under $1,000.

For point-and-shoot photographers, camera makers are experimenting with models that do double-duty, such as Olympus' new hybrid music player and camera and DSC-M1, which combines video and still photography,

The SLRs appeal to a smaller but growing segment of serious hobbyists, Chute said, but hybrid devices and those with novel configurations appeal to a more limited market and may scare off retailers. "Dealers have to sell these things, so they tend to be pretty conservative with what they promote," he said.

Photography bundles that pair a camera and a printer are also likely to be popular this year, particularly for newcomers to digital photography, Solomon said. For its part, HP will offer the bundles at prices ranging from about $200 to $500.

Deals on desktop PCs
Meanwhile, the growing interest in televisions and continued attention to notebooks might mean flat sales for desktop PCs this year. It could also make for good deals.

Some shoppers will be lucky enough to scoop up "door buster" deals that bundle desktop PCs and monitors for well under $500 or offer a notebook PC for less than $800. However, the prices that deliver customers the most bang for their buck will continue largely unchanged, at between $500 and $800 for a desktop and $1,000 and $1,200 for a notebook, analysts and PC makers said.

Although prices haven't changed much from 2003, time has brought higher-performing processors, larger hard drives and speedier CD-burners. Many sub-$800 desktops also now sport DVD burners. Thus, consumers who are willing to spend even $600 for a desktop PC or $1,000 for a notebook will find that money buys an awful lot of computer these days, said Chuck May, vice president of desktops and displays Gateway.

"We're seeing tremendous traction in the $499 to $599 price band" for desktop PCs, May said. "Large hard drives and more memory are driving that. People are less concerned with processor speeds. Even in our entry-level products, we've got multi-format optical drives (combination CD burner/DVD-ROM drives) at prices down to $499."

A relatively good deal for a basic desktop would include an Intel Pentium 4 or AMD Athlon XP processor, 256MB of RAM, a 60GB or 80GB hard drive, some combination of CD burner and DVD drives, and a 17-inch CRT monitor for about $500 after rebates. A similar desktop with a 15-inch flat panel and possibly 512MB of RAM might go for $600, after rebates.

However, consumers have increasingly turned to notebook PCs of late, May acknowledged.

"They're portable and they have many of the features that you want, (including) combo drives," he said.

Still, May advises customers to look closely at other factors, including the weight and battery life of the model they're considering. Svelte notebooks can cost more, but they pack competitive features such as 15-inch screens, CD burners and plenty of memory and hard drive space into lighter-weight chassis. Plus, they also often extend battery life by using bigger batteries and more energy-efficient processors.

"I think when you run a $599 notebook (sale) you're going to sell them no matter what you do," May said. However, "some will realize that for a couple hundred more, I can get double the battery life in a machine that's a couple of pounds lighter."

A basic notebook will offer an Intel Celeron or AMD Athlon XP-M, along with a 15-inch screen, 256MB of RAM, a combination CD-burner/DVD-ROM drive and about a 60GB hard drive for approximately $1,000 (or possibly as little as $800 if rebates are applied).

Looking online couldn't hurt. Big name manufacturers including Dell, Gateway and HP are already offering a slew of price discounts, mail-in rebates, "free" component upgrades, and free shipping on their consumer-oriented desktops and notebooks for those willing to buy direct.

Music players: A must-have
Apple Computer, meanwhile, continues to rock consumers' houses with its tiny, hard drive-based iPod MP3 player.

"Obviously they're going to sell millions this Christmas," Baker said. But "we expect to see pretty strong sales across the board for hard drive-based players."

That means the rest of the field, including Archos, iRiver, Digital Networks, Creative and Sony (which recently said it would add MP3 support to its digital audio devices) all are gazing at good sales prospects for the holidays.

Hard drive players break down into two basic categories, with the smallest starting between about $200 and $250. Apple's 4GB iPod Mini and Archos' Gmini 200, with 20GB, cost $249.

Consumers probably won't see much aggressive pricing in this category, given that the dominant player, Apple, is unlikely to cut prices on its iPods before the holidays (and those tiny hard drives the company uses are still relatively expensive and scarce). Deals as low as about $149 may pop up on some miniature players, but they aren't likely to last long, Baker noted.

Larger-size players that offer between 20GB and 60GB typically sell for $200 to $600. Apple's 20GB iPod starts at $299, while its latest 40GB and 60GB editions, dubbed iPod Photo, come with color screens for $499 and $599.

Dell and Gateway are also pitching MP3 players direct to customers. Dell is offering two Dell DJ players--including a miniature 5GB DJ5 and a larger 20GB DJ20--for $199 and $249, respectively. Gateway's MP3 Photo Jukebox is a $249 miniature player with a color screen.

At the same time, much lower prices can be found on MP3 players that use flash memory to store files. These players are also typically smaller than their hard drive-based brethren, although they can't store as many tunes. Good deals will serve up 256MB flash MP3 players for well under $100, Baker said.

Entertainment: Game on
Video game companies typically count on holiday sales to generate at least 60 percent of annual revenue, and with a slew of blockbuster game releases drawing crowds, 2004 should be more bottom-heavy than ever.

"It's shaping up as one of the biggest holiday seasons in memory as far as having a lot titles you know are going to sell really well," said David Cole, president of DFC Intelligence. "The game consoles are at a point in their life cycle where you have a locked-in consumer base that knows what they want, and all the publishers have to do is deliver."

Marquee titles include "Halo 2" for the Xbox, "Grand Theft Auto: San Andreas" for the PlayStation 2 and "Half-Life 2" for PCs.

Nintendo got into the game this week with the North American launch of the DS, a dual-screen, wireless-equipped handheld game player meant to expand a market the company already dominates with its Game Boy franchise.

Holiday shoppers are even likely to find a few good deals in the video game aisles. Along with the usual bundles, in which hardware makers package their console with a few games, game publishers have tweaked their pricing strategies.

The biggest move came early this month, when Electronic Arts announced a $20 price cut for three of its top-selling sports titles, including perennial football hit "Madden NFL." The cuts were seen as a defensive move against gains by rival Sega's budget-priced ESPN line of sports games.

At home with wireless tech
If you're more concerned with getting your tunes into the kitchen than dragging them on the train to work, home networks quite literally provide the backbone for consumers' aspirations of connecting to and transferring files between PCs, TVs and other electronic devices.

The equipment needed to set up a wired or wireless network is inexpensive. A basic wireless router, supporting Wi-Fi 802.11b or 802.11g standards, can create a wireless home network that allows devices to swap files and share an Internet connection for under $50. More elaborate, higher-speed routers should sell for between $50 and $100 or more this year.

"There's still a lot of demand for the product" category, Baker said. "It fits in really well with other trends that are going on...in some ways it's the prep for that stuff."

Satellite radio: Voices from above Satellite radio gear is also expected to enjoy a holiday sales nudge, thanks in part to shock jock Howard Stern's plans to defect to Sirius, one of two subscription satellite services offering dozens of channels of music and talk. Stern will make the jump in January 2006. The CEA expects annual sales of satellite radio receivers to increase 78 percent in 2004, to hit 1.3 million units and $94 million in revenue.

Still, setting up a car or home for satellite is somewhat expensive and tricky, requiring a satellite receiver and separate adapter kits for cars and homes.

Basic receivers for each service start at about $100 each. Home and car stereo adapter kits add another $50. Another option? Purchasing a boombox route, which provides speakers and a spot for the receiver to plug in for prices starting at about $100.

Once you've got the equipment, Sirius and XM Satellite Radio, charge it's $10 a month and $13 a month, respectively, for their services.