Biggest Gadget Show Nears Crossroads

Jan. 7, 2008— -- The biggest. The smallest. The thinnest. The fastest.

Superlatives reign each year at the annual Consumer Electronics Show, an international gadget spectacular in Las Vegas that is the biggest technology trade show in the world.

But as the recession is forcing companies to scrutinize how they spend every last dime this year, some industry watchers are starting to wonder if, and when, a new superlative might be appropriate: the last.

In June 2004, organizers of COMDEX (the Computer Dealers' Exhibition), a major computer expo also held in Las Vegas, canceled the annual show because of dwindling participation.

In December, when Apple announced that Steve Jobs would not attend this week's Macworld and would no longer participate after this year, analysts wondered how long Macworld could last without the iconic Jobs and the revolutionary company he founded.

Following reports of unoccupied hotel rooms in Las Vegas and widespread corporate cut-backs, Rob Enderle, principal analyst with the Enderle Group, asked this week in a column for a technology industry news site, "Will This CES Be the Last?

"This suggests a show like the last COMDEX where I'll actually have a great time but folks will wonder whether it is the last CES," he wrote.

"I think it's, once again, causing people to think about the value of going to shows like this," Enderle said.

Given the timing so close to the holidays and the high cost of the booth, especially in a bad economy, "shows like this might fall off," he said.

When buyers and sellers couldn't rely on the Internet to connect and unveil new products, he said, trade shows like CES were necessary for business. But now that products can be publicized online and technology takes less time to bring to market, CES is mainly a media event.

If this isn't the last CES, Enderle told ABCNews.com, he thinks the end might come in a couple of years.

CES is not only the largest trade show in North America but the biggest technology gathering in the world. But that gathering and the glitz are scaled back this year in the economic downturn. About 300 fewer companies are exhibiting this year in 1.7 million square feet of exhibit space, down from 3,000 in 2008, according to the Consumer Electronics Association, which runs the trade show. The Arlington, Va.-based association is expecting 130,000 attendees from Jan. 8 to 11, compared to last year's 141,000.

Association spokeswoman Laura Hubbard told ABCNews.com that despite the buzz since Apple's decision to stop exhibiting at Macworld and lower attendance levels, CES is in safe territory because it's a trade show that is not open to consumers.

CES Still in Good Shape

Despite the flagging economy, CES and the industry it showcases are still in good shape, she said.

"Unlike other industries, the consumer electronics industry is giving consumers products that they depend on for their daily lives," Hubbard said, adding that manufacturers are unveiling all-in-one, multi-functional products to adapt to the climate.

Additionally, she said, CES and other trade shows are economical solutions for businesses. Instead of traveling to 12 different locations to meet clients or sellers, businesses can come to the show and meet all of them in one trip.

But analysts point out that the trip is still an expensive one.

"I don't know a single company that hasn't cut back in some way," said James McQuivey, an analyst at Forrester Research. "I don't think CEA is aware of it now because registration is free, but the no-show rate is going to be much higher than it's ever been."

Meeting in a Hotel Suite

Take Belkin, for example, a producer of accessories such as USB cables and iPod cases. Gone is the double-decker exhibit on a plot larger than a professional basketball court. Ditto the VIP area with a live band and the grab bags full of tchotchkes for everyone swinging by the booth. Of Belkin's 1,000 employees worldwide, a hundred are going to Vegas, half of last year's contingent.

"We're redistributing our resources and funds," company spokeswoman Melody Chalaban said. "By holding meetings in a hotel suite, we can stay better focused and we're taking the money that would be spent on a booth to help our retail partners promote our products."

Belkin saved more than $200,000 on floor space alone.

One public relations representative told McQuivey that instead of sending employees from each company, he is going alone to represent them all. But he has no meeting or booth space. Instead, he plans to meet with his contacts in a convention center cafeteria.

Most companies are not driven to that extreme. Kirkland, Wash.-based Digeo, which specializes in high-definition home entertainment, has about 90 employees and sent 29 people to Las Vegas two years ago. This year, fewer than a dozen are going. And the company sees even bigger savings by foregoing its customary booth on the convention floor -- $24,500 to reserve 700 square feet -- and opting for a meeting room instead.

"We need to be there," said company CEO Greg Gudorf. "But with the economic situation being the way it is, it's a much more cost-effective way to do the show. I think more companies are realizing they want to sit across from partners and talk. Maybe they don't need as much flash in a booth."

A More Subdued Convention

Mark Farish, senior marketing manager for home and portable electronics company Coby Electronics, said his company did implement some cost-cutting measures but sent the same number of employees as last year.

He acknowledged that there has been talk of a more subdued CES -- that attendance is lower and some manufacturers are pulling out -- but, for Coby, there have been little to no changes, he said.

"As history has dictated, as far as the cycle goes, there will be downturns and upturns," he said. "You can't just say we're hitting a rough time, 'let's pull out.' You'll never get this sort of ability to show everything in its best possible light, where [buyers] can actually come and touch it and feel it and then negotiate."

CES plays a crucial role in his company's business, Farish said. It lets buyers touch, feel and test products in every category and then choose which to pursue. And the timing, he said, is perfect for Coby and the budget-planning cycles of its distributors.

He totally disagrees with the notion that CES will disappear anytime soon.

"It may be modified, it may be reduced, it certainly won't go away anytime in the near future," he said.

Still a Vibrant Trade Show

Ross Rubin, an analyst with NPD Group, agrees that CES will endure, although it may not garner last year's record attendance.

"While many trade shows have been struggling in the current economic climate, CES remains a vibrant show with over a hundred-thousand attendees and a strong exhibitor presence," Rubin told ABCNews.com in an e-mail.

Those attendees range from big-box retailers and distributors to resellers and storefronts.

To entice these customers, Consumer Electronics Association offered a special package of incentives and discounts, including a $100 airfare discount and two nights of hotel costs. The bigger players do not see much of a change in their numbers. A spokesperson for Staples, the office supply retailer, said the company is sending a few less people to CES compared to last year, as well as sponsoring a media and analyst room to introduce a new line of shredders. Competitor Office Depot is sending 10 buyers to the show, the same as in previous years.

But some retailers are having a tougher time getting people to the show. Specialty Electronics Nationwide represents 2,800 retailers and other buyers doing $12 billion in business every year. "We did our best to get dealer bodies here," said Jeannette Howe, executive director of the group. "But it's challenging financial times for everybody and some are making choices at the 11th hour not to come."

Howe said she sees many of the no-shows from companies based in the Rust Belt where the auto industry's woes compound the housing and credit crises.

Plenty of Hotel Discounts

Not to be forgotten during the half-week convention is Las Vegas itself. CES is estimated to bring in a $204 million revenue, outside of gaming, to the trade show capital of America, according to the Las Vegas Convention & Visitors Authority. The number of conventions and their attendances are both down about 4 percent from January to October of 2008 (the most recent month for which figures are available) compared to the previous year. Economic impact from conventions had a nearly 7 percent drop in the same period.

Hotel rooms are still to be had at a discount during CES, unheard of in years past. Lower occupancy means less revenue from room taxes that go toward the convention authority and the city. Later this year, the 50-year-old Las Vegas Convention Center will undergo renovations as part of a three-stage, $890 million project financed by municipal bonds, putting in place improvements for CES and other trade shows to come.

"The question is do you really need all those people there in the first place," said McQuivey of Forrester Research. "There is some value to the show, just not 130,000-people value."