Power

Consumer tech is bracing for its first contraction in more than a decade

CTA says unemployment is hitting consumer spending — but there are some bright spots.

Netflix on a computer

CTA predicts that Netflix and other streaming services may actually benefit from consumers cutting down on spending and moving away from more-expensive cable bundles.

Photo: Gabby Jones/Bloomberg via Getty Images

Tech is in store for its first contraction since the 2009 financial crisis, according to new estimates from the Consumer Technology Association. The trade group predicts a 2.2% revenue decline in 2020 across hardware and services.

CTA's director of business intelligence, Rick Kowalski, told Protocol that there is no quick turn-around on the horizon. "This is a one- to two-year crisis from here on," he said. "Unemployment will be high, and consumer spending will be lower as a result of it." The group is even predicting declines in segments like laptop sales that should be booming as remote work and remote learning increases, hinting at challenges beyond the consumer market. "We are expecting businesses to also pull back on computing," Kowalski said.

The trade group predicts 2020 U.S. tech revenues to total $406.8 billion, 2.2% below 2019 totals. The crisis will accelerate some existing trends, including a shift from hardware to software and services, with streaming services and video games seeing a 14% year-over-year growth.

Subscription video services in particular will grow their revenue by 28%, with a slower growth for live TV services resulting in an overall revenue increase of 23% for streaming video, CTA projects. Netflix and other streaming services may actually benefit from consumers cutting down on spending and moving away from more expensive cable bundles. "It accelerates cord cutting," Kowalski said.

Sales and revenue for phones, on the other hand, are expected to decline by 6% year-over-year, and consumers are forecast to be buying fewer TVs this year as well (6% decline in units, 14% in revenue). Game console sales will likely get a boost from the introduction of new models, and wireless earbuds continue to see strong growth.

Some segments are being hurt by a downward pressure on prices. Smart home products are expected to see 12% growth in unit shipments but a 6% decrease in revenue. The same is true for connected health, which includes anything from fitness trackers to smart watches (units up 4% year-over-year, revenue down 4%). Kowalski specifically called out health monitors like connected thermometers as one area seeing 75% growth due to the pandemic. "The pandemic has brought a new awareness to connected health products," he said.

The CTA's forecast is based on shipment numbers observed during the first half of the year as well as other signals the trade group is getting from its members. Kowalski said he was confident in the numbers but admitted that there are still a lot of unknowns, including impending health restrictions and a possible second stimulus package. "This has been one of the more difficult years to try to forecast numbers for this industry," he admitted.

Correction: This story was updated at 8:50 a.m. to correct the spelling of Rick Kowalski's name.

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