February 1, 2010

CES Analysis: Retrenchment and Herd Mentality
Plus: A Few Things to Look Forward To and Hopes for the Future

Chapter 1: High-End Problems and Retrenchment

"Are you kidding? If I do that, I’ll be right out of business, just like [blank] and [blank]."

I withhold the companies’ names because both are still in business, if barely. But the story is instructive. I was talking with one of the heads of a major maker of high-end, two-channel audio components that was exhibiting at the 2010 Consumer Electronics Show, and casually told him that I wished his company would make a home-theater processor.

"I’d have to put three engineers on the payroll," he explained, "and even if they were working full-time on nothing else, I still couldn’t keep up with the changes. Plus, I’d have to charge $25,000 for the piece, and how many would I sell?"

I didn’t know. Three?

"Exactly."

The new owner of another major high-end brand was kvetching about what it’s taking to move his renowned surround processor into the current environment: "We promised an upgrade path forever. But when I bought this company, I didn’t know that a freelance engineer owned the design. He’s asking for a fortune to give us the design of our own product! And trying to make sure that the original owners can get an upgrade path is nearly impossible. So the market is passing by, my original owners are clamoring for a new product, and I’m stuck."

Others were sticking their heads in the sand. I overheard this masterpiece of denial and rationalization: "Our customers are really more interested in sound, so we concentrated on the best sound. If video switching becomes more important, they can always buy an external video processor -- but at least they’ll know they have great sound."

How about new sonic offerings from THX, Audyssey, Dolby, and DTS?

The solution most makers of high-end electronics came to was to retrench into niche markets of the home-stereo marketplace. Like trying to get a piece of the alluring growth market in vinyl -- turntables were everywhere! Or trying to find novel ways to morph digital signals into analog sound. Amplifier manufacturers had all sorts of new technology. Other companies offered power regulators that cost more than the wiring for my whole house. Products for Wall Street bankers keen on blowing their entire bonuses on home-theater systems were everywhere, prompting at least one person (me) to wonder aloud how so many companies can chase so few ultrarich customers.

This always happens during periods of financial retrenchment: CEOs decide to flee upscale. Wouldn’t you rather make $10,000 on one unit than $1 on each of 10,000 units? The problem is that all the other CEOs have the same idea. Which brings us to . . .

Chapter 2: The Herd Mentality and the Avatar Effect

Flash back to The Graduate and the career advice Ben Braddock received: "Plastics." Well, someone is whispering in the ears of the R&D folks of companies large and small. Besides the hurried rush to the high end of the pricing pyramid, a few other signs of the herd mentality were on view.

The Venetian Las Vegas hotel is where, at each CES, the companies that focus on perfectionist electronics and speakers show their wares. Walking the halls, you could enter almost any room and see speakers costing six or seven figures per pair. Many were showing turntables at similar prices. Wires, cartridges, phono preamps, digital converters, and electricity cleaners were abundant. The problem with all this is that such manufacturers assume a core market of enthusiasts, then try to figure out ways to convince those enthusiasts that they need more, better, different, and more expensive components for their systems. Don’t get me wrong -- I’m an enthusiast myself. I love all the little quirky tweaks that improve my overall enjoyment of music and video. But the times they are a-changing.

In my other writing life, I cover wine. For centuries, the most popular wines -- generically called Sherry -- were made in southern Spain (in a region called Xeres, now Jerez, hence Sherry). Sherry makers enjoyed their dominant market share, but missed the fact that young people were beginning to think Sherry was for geezers. Sherry is now a niche product with a small but dedicated group of fans.

Wine lovers all over the world collect Bordeaux, a wine that, famously, must sit untouched for years before its harsh tannins evolve into something drinkable. These winemakers were blindsided by a public who decided they didn’t want to have a cellar full of slowly aging wine, but instead wanted to be able to buy a bottle of the stuff, open it, and drink it. Winemakers who insisted on long periods of aging rushed to the top of the market, while the cheaper alternatives tried to figure out how to make something that was dependably drinkable at release.

Sound familiar? We’re in a paradigm shift, and most of the companies are getting more conservative.

The Las Vegas Convention Center is where, at each CES, the megalithic companies show their future products. Like a few million other souls, I saw Avatar in 3D and agree that it was an archetype changer. But even that couldn’t prepare me for the LVCC’s main hall. This CES might as easily been called the 3D Convention. Everyone was showing a proprietary system with proprietary glasses, and a totally variable ability to produce realistic depth in moving images.

Some of those images were flat-out amazing. Sony was showing a transfixing Kenney Chesney concert that had me staring slack-jawed, until I faced certain violence from the folks standing in line behind me. And Chesney is one of my least favorite country artists. JVC was showing a 3D system using two huge projectors, a 16’ screen, and disposable glasses; it broke ground for reach-out-and-touch-it clarity.

As good as some of the 3D setups were, you’ll have heard a lot of complaining from folks about a seemingly insurmountable problem with the proprietary systems. Given the fact that the glasses will cost $50-$75/pair, how often are you going to want to invite all your pals over to watch the Super Bowl, or the last episode of Project Runway?

The solution is so simple, I’m almost embarrassed to posit it. If all the manufacturers would agree on one type of 3D technology that required one type of 3D glasses, folks could bring their own. Of course, we all know how this film will end. Eight-track vs. cassette, VHS vs. Betamax, CED vs. laserdisc, DivX vs. DVD, DVD-Audio vs. SACD, HD DVD vs. Blu-ray, etc. I’m not holding my breath.

Chapter 3: A Few Things to Look Forward To

Enough of the problems. CES also offered plenty to be excited about. Tops on my list was a product from JVC. Thirty-six years ago, former rock writer Jon Landau, producer of Avatar, wrote, "I have seen the future of rock’n’roll." He was speaking of Bruce Springsteen. Well, I have seen the future of home-theater projectors, and it’s the JVC DLA-RS4000, a projector with all the wonderful traits of JVC’s D-ILA projectors, but at a resolution four times that of high definition (4096x2400 pixels). The price is a cool $175,000, but the way these prices drop, I’ll bet that in the next few years even I will be able to afford one.

DISH is taking a strong step toward proper media distribution. The DISH Network HD DuoDVR ViP 922 has a huge (1TB) hard drive, a much-improved GUI, and a joint venture with sister company Sling, TV Everywhere, that extends your ability to use what’s currently on or recorded on your DVR in any TV in the network, or on your laptop or smartphone. They’ve been promising this little number for a while, but it looks as if it’s finally ready for prime time.

Another company making strides toward universal media access is Monster. They have several systems that can begin to offer what I was describing, the most promising being Monster Digital Express. I had a nice conversation with Anthony DiChiro, Monster’s director of new technology. They’ve been working on this system for several years, and have now combined wired and wireless systems to give good distribution even in large homes. And they have even more to come.

You’ve gotta love a company like Onkyo. No, their receivers don’t have the most transparent amplifiers in the whole world, but they’ve leapt bravely into the home-theater abyss with such receivers as the TX-NR5007 ($2700), creating new room-slaying technologies and adding things like Audyssey DSX, Dolby Pro Logic IIz, and ISFccc certification. They’re networkable, compliant with Windows 7, and priced for the real world. Would I rather have something from Anthem, the only high-end company keeping up with the rapid-fire changes in processing? Yes. But the price difference is compelling.

Finally, CES 2010 was full of interesting new loudspeakers. The best I heard was the ProAc Carbon Pro 8 ($40,000/pair), a big speaker that images so well it "disappears," all the while producing prodigious bass, a totally natural midrange, and highs so delicate it felt as if they were kissing my ears.

As for sound per dollar, Anthony Gallo Acoustics again blew me away, with both their Reference Strada 5.1 system ($7000) and the as-yet-unreleased Reference 3.5 ($5900/pair). Gallo’s speakers filled the room with the most natural, fatigue-free, dynamic sound.

Chapter 4: Wishes for CES 2011

The way people use their media is changing. Music, video, games, and communication are all portable, and every buyer has an idea of what level of quality is desired at every place he or she wants to access those media.

The winning companies will figure out how to integrate the media and give all of us the power to use it any way, any time, anywhere. It must be simple, easy to use, and give the buyer the option of choosing any price level desired.

And which company was addressing that sticky problem? None.

Perhaps next year.

. . . Wes Marshall
wesm@hometheatersound.com