Driven by economic prosperity, changing lifestyles, longer drive times, and the need to keep kids amused, the automotive rear-seat entertainment aftermarket continues to experience phenomenal growth. However, this market is closely linked to price; focusing on the ability to supply a low-cost system will ultimately determine this industry's future.
New strategic research from Frost & Sullivan (www.frost.com) reveals that the North American automotive rear-seat entertainment aftermarket generated revenues of nearly $208 million in 2000. Frost & Sullivan projects this figure to more than double by 2007, topping $480 million.
"With declining price points, the rear-seat entertainment market, like the consumer electronics market, is set to become a mass market," says Frost & Sullivan industry analyst Meenakshi Ganjoo. "Through 2000, the market has already reached the magical retail price point of $399 for the low-end systems, which in turn, is expected to drive volume significantly."
New technologies, however, will have to come down in price if this industry is expected to reach its full potential, according to the research. Video-based systems are relatively cheap, but the digital versatile disc (DVD) format is where the future lies. These systems have a long way to go before they are considered affordable, Ganjoo said.
"The market has been helped by the exponential growth of home theaters and DVDs," says Ganjoo. “But prices of in-vehicle entertainment systems remain high because these systems are built to function in harsh vehicle environments. DVD-based systems have a long way to go before they touch the so-called 'magic price' of about $300-350. While prices of home theater systems have dipped, a lack of economies of scale in the rear-seat entertainment aftermarket is making it difficult to push costs down."
In order to push prices down, manufacturers need to expand their targeted customer base to increase demand for these products. They need to devise new strategies for marketing and distribution to raise awareness among potential customers, according to Ganjoo.
"Traditionally, the industry as a whole has focused on younger males between the ages of 16 and 25," Ganjoo said. “As a result, the distribution channels, in particular, are not yet accustomed or geared to serving the expanded customer base.”
"One of the challenges of the business is to expand the customer base. With the expansion of products that combine information with entertainment, there needs to be an industry effort to widen the target audience to include women, baby-boomers with kids, and professionals who pursue information and productivity," Ganjoo said.
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