CES Recap: Hard Times Bring Some Cutbacks

Posted by: Kenji Hall on January 13, 2009

Would the recession put a damper on the tech industry’s glitziest event of the year? That’s one question I hoped to answer last weekend at the Consumer Electronics Show inside the Las Vegas Convention Center.

The show—a sprawling high-tech bazaar that ended on Jan. 11—stretched over four days, and executives had flown in from around the globe to hobnob and show off new products. A tour of the booths, I reasoned, might shed some light on how companies planned to get through one of the worst economic downturns in recent memory.

But it wasn’t as cut and dry as I had assumed. Companies had made plans for the show up to a year in advance, reserving hotel rooms, paying for booth space, and booking party venues long before the global financial crisis started to affect the tech sector. Sharp, for instance, hired a Cadillac Escalade SUV limousine to drive executives to dinner with Boston Red Sox slugger David Ortiz, a half dozen other baseball stars and tech journalists at the hip N9NE Steakhouse inside the Palms hotel. Intel kept its high-profile 12,000-square-foot booth near the convention center entrance and went ahead with a party featuring the band Counting Crows at the Luxor hotel’s LAX nightclub. “We had to book things for this year’s show by the first quarter of last year,” said Intel spokeswoman Suzy Pruitt. “And the food and other arrangements were paid for by the second quarter. I’d be curious to see what happens in 2010.”

Last week, the Consumer Electronics Assn., the industry group that organizes CES, forecast that U.S. electronics sales would fall by 0.1% to $171 billion this year, from $172 billion in 2008, after recently revising down figures for the fourth quarter. And recently, market researcher DisplaySearch predicted that sales of TVs--the global tech industry’s biggest single source of revenues--could slide 1% to 205.3 million units this year, a rare reversal from the recent heady gains for flat-panel TVs.

Those figures suggest that the recession hasn’t decimated tech companies the way the collapse of the dot-com sector did eight years ago.

Even so, the CEA was still advertising for booths with just a month to go before the show. In the convention center's North Hall, sofas and tables had been set up to fill unrented booth space. And some officials complained that retailers didn't send sales reps and that visitor traffic was down by about a third from previous years. (The CEA estimates that every CES attendee will take part in an average of 12 business meetings while at the show.) "I've been coming for more than 10 years and I had never seen open space before this year," said Larry Wang of Goodeal Group, which showed off parts and wires for stereo speakers.

And companies found little ways to trim their budgets for CES. Sharp and Intel said they sent fewer people to the show, though neither would elaborate. Polaroid spokeswoman Lorrie Parent said the company’s meetings with Best Buy officials were canceled at the last minute by the retailer; other companies said Best Buy had called them with similar news. (A Best Buy offical later told BusinessWeek that the company sent a team to CES, but had scaled back its presence so that only the people who had to be there went. It had the same approach last year.)

Chicago-based digital map company Navteq, which had been hosting annual parties at the swanky Las Vegas Wynn, made this year’s event open to employees only. And portable Global Positioning System makers TomTom and Magellan opted for meeting rooms on the convention center floor, rather than booths, cutting their fixed costs to a fraction.

But there was no shortage of high-end products from the biggest global brands, which filled their booths with Internet-linked TVs, Blu-ray players, and other pricey gadgets. Sharp had a $20,000 high-definition television, Panasonic built mini-theaters to demonstrate its 3-D video projection system, and NBC Universal had several makeshift stages so it could broadcast from the show. Intel had a race-car simulator and a glass wall that people could touch to rotate 3-D computer-generated images of buildings.

Meawhile, Sony taped episodes of Jeopardy at its booth (which was twice the size of the previous year’s) while Cisco Systems displayed a $1,000 digital music system. Even Polaroid, which filed for Chapter 11 bankruptcy protection last month, brought flat-screen TVs and its new PoGo, an all-in-one compact digital camera that prints photos much like the company’s classic instant cameras. Polaroid spokeswoman Lorrie Parent said the Minnetonka, Minn.-based company views the show as an invaluable marketing and public-relations event. “I can’t speak for next year, though,” she said.

The one silver lining: cheaper hotel rates. So many people cancelled their reservations that some hotels had slashed their rates to as little as $60. (Walk-up rates for rooms at the Hilton next door to the convention center were still $330 per night.) "There were lots of last-minute canellations of rooms so we upgraded to a better room at the Riviera for the same price as a room at Bally's last year," said Justine Liu, director of global brand marketing for Taiwanese portable GPS maker Mio Technology.

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