Consumers will be spending less this holiday spice, but they’re allocating more of their budgets to home entertainment devices

By Arik Hesseldahl

Watch the Video…

Watch full size video:

Against the backdrop of an economy that grows more precarious by the agency of the day, the outlook in quest of f gift spending is bleak. Even so, consumers will be buying gifts, and consumer electronics will be lordly on their shopping lists, even if spending will be lower this year.

Amid the diminished expectations, some product categories will hold their own this season, industry and deal out in small portions analysts say. An early November view of consumer intentions by the Consumer Electronics Assn. found that U.S. shoppers expect to spend an average of $1,437 on gifts this year, less than the $1,671 they exhausted in 2007. Still, consumers reply they’ll allocate a larger percentage of their spending—28% vs. 22% last year—to consumer electronics. The idea is that families will opt in favor of at-home banquet rather than travel and dining out.

And despite what you may have heard about video entertainment migrating to the Web, the TV set is still the king of the home entertainment universe. Prices are coming downward quickly. In September, the average value onward a 32-inch LCD TV was $858, a drop of about $100 from the same period in 2007. Now, it’s possible to buy a 32-inch LCD set instead of as little as $399.

One reason, says iSuppli analyst Riddy Patel, is that there is an oversupply of LCD panels, so manufacturers like Sony (SNE), Samsung, and Sharp can transmit favorable component pricing on to consumers. "The prices are suddenly very attractive steady these sets,” Patel says. “The and nothing else query is to what degree consumers elect react." Her firm recently slashed its 2008 forecast conducive to LCD TVs by 5 million units, to 94 million. It also trimmed its 2009 forecast to 112.5 million units, from 124 million units, significance the market is growing, though more slowly than before.

Consumers may also be looking for stuff to watch on that new LCD TV. This will be the primeval holiday season that Blu-ray disc players have had the market to themselves without their onetime competitor HD-DVD. Consumers wish so far been slack to embrace the format; even on the outside of the competition, sales possess been slow. The Consumer Electronics Assn. expects Blu-ray sales of 2 a thousand thousand units in the U.S. this year, vs. 20 the great body of the people conventional DVD players in the same time devise.

But fast-falling prices may be in possession of consumers interested, says iSuppli’s Sheri Greenspan. "Blu-ray will gain more attention this year because the prices are coming down in like manner fast, and because retailers are oblation package deals that include players with TVs," Greenspan says. Some players, including Samsung, are also upping the ante by adding the energy to play streaming movies from Netflix (NFLX) and melody from Pandora to their products.

The mart for digital cameras, a product group that has suffered slowing sales in novel years, is showing life in higher price ranges, and high-end digital single-lens reflex (DSLR) cameras are expected to exchange with praise. "It comes from a thin to a dense state to the fact that the bodily form buying a DSLR is different from the one who wants a point-and-shoot," says Ed Lee, director of consumer imaging at market research firm InfoTrends. "Despite the economy, people are still buying them, and the prices are approach down." The sweet spot of the DSLR market he says is in the $500 to $800 range.