The exponential growth in the North American mobile video market has befuddled its skeptics, including some big mobile electronic companies, who believed that like navigation equipment, mobile video would cause a big media stir, but fail to make major inroads into the mass market.

But the staggering growth in automotive rear-seat entertainment aftermarket in 1999 as well as in the year 2000, has finally put that debate to rest. There is no doubt that rear-seat television/video systems are among the hottest selling items in the market today.

The market, which generated an estimated $125 million in manufacturer-level revenues in 1999, grew by over 250 percent, belying most optimistic forecasts. Year 2000 proved to be another strong year with manufacturer-level revenues reaching nearly US$208 million.

Some of the lesser-known but early entrants, such as Texas Saddlebags, Inc., (TSI) made the biggest strides. Not surprisingly, a large number of big and small mobile electronics manufacturers have begun to embrace multimedia in their bid to improve profit margins.

North American Automotive Rear-Seat Entertainment Aftermarket

Source: Frost & Sullivan

However, it is a market where big companies with fairly large pockets and R&D bugets are more likely to succeed in the long run. Smaller companies run the risk of spreading themselves too thin, is believed to be the case with TSI. It is understood that TSI is getting out of the business.

In 2000, the market was dominated by four main competitors, Audiovox Corporation, Clarion Corporation of America, Alpine Electronics of America, and Rosen Products. However, the market is still in the introductory stage and participants are scrambling for position in a market that is seeing new companies enter the fray almost every month.

“The market is expected to grow in leaps and bounds over the next five years. To put a percentage on it is very difficult, but every year you would find at least doubling of sales,” says George Schedivy Audiovox’s Vice President Mobile Video Division.

Acknowledging that part of the growth in the market could be attributed to the fact that the market is still in the introduction stage and it is the early adopters or innovators that are driving growth, there is no doubt that some in the industry had simply underestimated the market opportunity. It might have been a niche market in 1999, but with consumers now being able to secure a system for under $500, it is becoming mainstream very, very quickly.

There is no denying that rear-seat entertainment aftermarket growth will be closely linked to prices, and there is no doubt that prices will continue to drop, particularly at the entry-level systems. With rapidly declining price points, the rear-seat entertainment market, like the consumer electronics market, is all set to become a mass market. In the year 2000, the market touched the magic price point of $399 for the low-end systems, which, in turn, is expected to drive volumes significantly.

The market has largely been driven by economic prosperity, changing lifestyles, longer drive time, and the need to keep kids amused. At present, the target market for these systems are family-type vehicles that carry more passengers, typically children. As a result, these systems are especially popular with the growing market segment that is purchasing vans and SUVs. This customer base is expected to expand to include high-end luxury vehicles in the immediate future, followed by mainstream passenger vehicles in the long term.

The market has also been helped by exceptional growth of home theaters and DVD in the recent years. “As the vehicle owners get more comfortable with video technology and DVD formats at home, they try to extend the entertainment system to their vehicles,” explained another senior industry excutive.

rear-seat television/video systems are among the hottest selling items in the market today

The exceptional growth in the rear-seat entertainment aftermarket has led to a significant change in mobile electronics customer profile, opening the market to a much wider segment of the population that includes women and older men. Its appeal has changed to reach beyond the typical 16- to 25-year-old male category, to a more affluent segment. Women and older customers are increasingly seeking rear-seat entertainment for their kids and “home office” features in the car. Although members of Generation Y have not remained untouched by the new technology.

Industry executives agree that what is extremely important in this industry is that in the past, automotive entertainment had primarily been catering to 16 to 25-year-old male with just auto sound. With the introduction of video in the vehicle, the customer base has broadened significantly to include 16-50-years old.

There is no question that the early adopter or the innovator type of customer is purchasing this gear because it is very cool to have. What is very interesting is that the appeal of the system spreads from the very young automotive enthusiast, which is a single adult male, right up to the more up-scale family.

While the expanding customer base has created new opportunities, this change in customer profile also poses new challenges for companies. The biggest of them being the need to design new marketing and distribution strategies catering to the new demographic base.

With the changing demographics, the industry has already adapted its packaging and advertising to focus on family and kids. Depicting happy kids while on the road is essential, as this is exactly what the product does.

By Meenakshi Ganjoo

Frost & Sullivan has just published a report on the North American automotive rear-seat aftermarket.