CES Preview: More Bang for the Buck

As consumers rein in spending, some electronics manufacturers are taking aim at tightwads

By Douglas MacMillan and Arik Hesseldahl

Ooma's Telo

Dish Network's DTVPal DVR

Sling Media's SlingCatcher

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Each January, electronics gadget makers from around the world trot out their most dazzling gear for the more than 100,000 attendees at the Consumer Electronics Show in Las Vegas. The next CES will be no exception. Manufacturers including Sony (SNE) and LG will duke it out over whose products are the biggest, sleekest, and easiest to use. But this year the industry will also be vying for another superlative: most economical.

With unemployment rising and consumer confidence in the doldrums, many consumers are cutting back on discretionary purchases—and that means consumer electronics. The average U.S. household will spend around $1,437 on electronic devices this holiday season—a decrease of 14% from the previous year, according to a September survey by the Consumer Electronics Assn. (CEA). The outlook has dimmed since then. On Nov. 12, electronics retailer Best Buy (BBY) slashed earnings and sales forecasts, citing "rapid, seismic changes in consumer behavior [that] have created the most difficult climate" the company has ever witnessed. The warning came days after Circuit City filed for bankruptcy protection amid weak consumer spending.

Against this backdrop, several CES exhibitors at a Nov. 11 preview in New York said they'd be pitching products directly to cash-strapped consumers.

No-Fee Phone Service

For people who want to cut their phone bills, for instance, there's Ooma, a Palo Alto (Calif.) startup that sells a device that makes free local and long-distance calls over a broadband Internet connection. The device costs $249 up front, but there are no ongoing fees for service, except for international calls. Ooma showed off a new version of the device that includes a cordless handset that will be available in stores later this year.

Television makers may suffer some of the biggest setbacks this season. The CEA survey found that 20% of shoppers plan to curtail spending on "consumer electronics," a category that includes TV. Still, millions of TV watchers need to upgrade their sets for the analog-to-digital conversion in February (BusinessWeek, 8/13/08). Dish Network (DISH) hopes to benefit with its $250 DTV Pal DVR system, a box that converts a TV antenna to digital, and functions as a digital video recorder for all noncable channels. Best of all, it requires no subscription.

Almost one-quarter of the consumers surveyed by CEA said they plan to cut back on purchases of digital media like DVDs and CDs. That comes as no surprise with the surge in free online alternatives, such as Google's (GOOG) YouTube and Hulu, owned by NBC Universal and News Corp. (NWS). For those who want to watch free programming on a TV rather than a computer monitor, there's Sling Media's SlingCatcher, which for $300 will send streaming or downloaded media straight to any TV. And this month, the company unveiled a nice companion: its own free streaming movie site, Sling.com, where anyone can watch full movies from MGM (MGM), Warner Bros. (TWX), CBS (CBS), NBC (GE), and others.

Of course, some companies are still banking on the gadget geeks who have to have every latest device in their home. For them, Universal Remote Control is showing off a $1,500 home theater controller. Called the MX-6000, it uses Wi-Fi to retrieve and display album cover art for tunes, as well as news, sports, and weather updates. For those consumers who don't have more than $1,000 for a remote control, this year's CES will be more of a bargain hunt.

Douglas MacMillan is a staff writer for BusinessWeek.com in New York. Hesseldahl is a reporter for BusinessWeek.com.