Digital Audio Receivers To Lose Popularity

The U.S. market for digital audio receivers – devices which enable playback of PC-stored music content and streaming Internet audio on legacy analog home entertainment systems – is expected to growfrom less than 150,000 units in 2003 to almost to 2 million units by 2006. According to Digital Audio Receivers: Competitive Analysis & Forecasts, a new report from research consultancy TheDiffusion Group, the early market for digital audio receivers (DAR) such as NETGEAR’s MP101 and digital audio adapters (DAA) such as Apple’s Airport Express will enjoy rapid growth through 2006 andthen face a host of market challenges.

“While early optimism is warranted, it will be short-lived due to three specific factors,” says Dr. Predrag Filipovic, consulting analyst with The Diffusion Group. “First, rapid decreases in unit price – the margins on these units are very healthy but as PC and CE vendors enter the market, pricing pressure will be immense. Second, the move from stand-alone to embedded systems – support for digital audio streaming will soon no longer require a stand-alone device, instead becoming a feature embedded into other devices such as set-top boxes, PVRs, and media servers. Third, single-purpose evolves to multipurpose -audio-only digital receivers will be replaced by multipurpose digital media receivers that support both audio and video. Thus, we expect digital media receivers will take significant market share from audio-only digital receivers.”

Other key findings of the report include:

1. Almost 40% of home network owners are interested in digital audio receivers (DARs), but this interest is highly price contingent. Such an adoption rate would depend on how consumers perceive the price/performance ratio. For example, while a list price below $70 would be highly attractive it would come at the expense of usability.

2. Consumer adoption of DAR functionality (as opposed to stand-alone units) is expected to approach 50% of home network users once devices become available at appropriate price points (that is, no more than 20% above similar non-connected systems) and once mainstream consumers become familiar with the concept. However, such widespread consumer awareness is unlikely before 2007.

3. The adoption of digital audio adapters (DAAs – devices without direct user interface) is expected to lag behind stand-digital audio receivers for the next few years. But unlike DARs, demand for digital audio adapters is not expected to decline due to the inclusion of DAR functionality in other multipurpose devices. DAA adoption should remain below 5% of networked households in the next few years (but with more then one DAA per home possible) due to usage constraints (that is, everything will be tied to the PC) and expected slow adoption of UPnP control point devices.

The Diffusion Group’s latest report, Digital Audio Receivers: Competitive Analysis & Forecasts, includes an analysis of PC, CE, and network OEMs competing in the digital audio receiver space; an overview of consumer interest in digital media receivers; and unit and revenue forecasts for DARs and DAAs through 2010. The report can be purchased online at TDG’s website, www.tdgresearch.com.

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