GOING DIGITAL.

HERE'S WHAT YOU NEED TO MODERNIZE YOUR HOME THEATER SYSTEM

WITH THE NEW DIGITAL LOOK OF HOME THEATER that's being touted this holiday season, you may be thinking about updating your own system. As you consider what to buy, it will help to know about market trends and what's available--whether it's the latest in VCRs or hi-fi speakers.

Until now, a no-frills home-theater system meant hooking up your stereo to the TV and VCR. Today's home theater gives you the most realistic, high-quality video and audio, including powerful surround-sound speakers that are about one-tenth the size of floor-size models just a few years ago.

Here are a few of the choice items currently on the market: four-inch-thick, near-flat TVs that are thin enough to hang on your wall; the recently introduced Digital Versatile Disc (DVD) that can hold a movie plus additional information (and may eventually put an end to CDs and VCRs) and DVD players. Also look for the movie-theater-like, realistic picture and surround-sound of high-definition televisions (HDTV), available in select cities since November; the finer detail and improved color of digital televisions (DTV); and the very practical home-theater-in-a-box, a one-package surround-sound system.

Although prices start at as little as $3,000 for a basic retail-purchased system to more than $150,000 for a custom-installed ensemble, there's no cause for alarm, says Kerry Moyer, staff director at the Consumer Electronics Manufacturers Association in Arlington, Virginia. "Most people already have the elements of a high-quality system in their home," he says. A home theater is basically a stereo large-screen color television (25 inches or larger), a receiver with surround-sound capabilities, four or more speakers and a hi-fi VCR, laser-disc or DVD player. Statistics show that 25% of families already have some of those items and can complete their home-theater system for under $1,000.

What's more, as newer technology is introduced, prices will drop on the current crop of digital models. DVD players, introduced in 1997 for $500-$1,000, now cost about $399-$499. The powerful surround-sound quality of Dolby AC-3, which cost $1,200 last year, is now a bargain at around $499. The holidays and major winter sporting events like the Super Bowl will bring even more deals into showrooms when the previous year's models are cleared out.

To familiarize you with the latest, we've compiled a collection of some of the season's offerings that can add to your home-theater system, along with some advice you'll need as a consumer to make the most of your purchases.

Televisions

The television is really the center of the home theater. Choices range from flat-panel or direct-view to rear or front-projection models. Television sales for direct-view and big-screen projection sets were down last year, due in part to the anticipation of digital television. This means lower prices for consumers willing to purchase existing TV sets. Prices for projection television sets fell below $1,500 for the first time last year on some entry-level sets. Expect to pay less than $500 for a standard 27-inch set, but a 25-inch set (with fewer features) may be a better value, at about $250.

Looking to the future, the first flat-panel TVs, measuring as little as four inches deep and 40-50 inches diagonally, were introduced last year at around $11,000 and this year ranged from $8,000 to $25,000. Prices are expected to drop considerably next year, but keep in mind that the cost of a television is a function of how much it costs the manufacturer to produce the large panels of glass.

You'll hear that DTV products and broadcasts will be ready for the holiday rush, but expect initial prices to range from $7,000 upward. The DTV format will offer a wide-screen, built-in multi-channel surround-sound and digital signals. Don't worry about your regular TV sets becoming obsolete in the digital age just yet. You'll be able to pick up DTV broadcasts on your TV if you purchase or lease from your cable operator a set-top converter box, which will be available next year at a cost of roughly $2,000.

You've probably also heard of Web TV, an Internet terminal that connects to your TV and allows you to surf the Net without the investment of a personal computer, although the picture is not as clear. Prices have dropped as low as $99, from $299 last year.

High End

PIONEER'S PRO-100 is a reference projection screen television that's state-of-the-art. At 51 inches, it features a high-resolution optical lens with 1000 horizontal resolution. Its high brightness quality, color and picture are sharp and crisp. The best part is its screen size and picture-in-picture display, which allows you to watch two programs at once or view movies in cinema-like quality. The system comes pre-programmed for DVD and Digital Surround Sound, and its remote control walks you through its functions on-screen. The PRO-100 functions on a standard TV signal and costs about $4,800, while the PRO-700HD is HDTV-ready and retails for about $8000.

CONSUMER BUYING TIP: The display and audio are the most important parts of your home-theater system. The larger and costlier the set, the more features you can expect to get. If you can do without watching two shows at once with the picture-in-picture feature or additional jacks, you can save hundreds of dollars. As you determine the price range that's in your budget, consider also the quality of the picture and the brand's track record for repairs.

Moderately Priced

SHARP'S 32KS400 is a 32-inch big-screen TV that offers noise reduction and a comb filter that removes static and improves color distortion. The "S-Video input" terminal allows direct connection at video sources, including your laser disc, DVD player and camcorder. Another feature, EquiSound, regulates the change in volume that occurs between commercials or when you switch channels. You can use "Personal Preference" to program your favorite channels, up to four categories with four channels per category. The Picture-in-Picture device allows you to view another program while the Closed Captioning text remains on for the main program. The suggested retail price of $800 is within the expected price range for this type of set.

VCRs, DVD players, and Laser Discs

VCRs, which exist in nearly 90% of U.S. households, have become very affordable for consumers. Prices fell to an average of $157 last year. Models continue to be updated with features that produce better quality, including high-speed fast forward and automatic advance past commercials. VCRs with programming aids like VCR Plus may cost $20-$50 more.

A less popular option for movie lovers: laser disc players, which provide better picture quality than a VCR and move track to track like a CD player and, in newer models, are recordable. Another advantage: they can play selected tracks of a movie in any order. Laser discs have not hit the rental market like videos, so you need to be willing to spend about $15 and up for the movies. The players cost about $400-$1,000.

The newest kid on the block: Digital Video Disc players. About 350,000 DVDs were sold to dealers in the last nine months of 1997, surpassing other audio video products like CD players and VCRs. The first DVD players sold for $500-$1,000. Prices have recently dropped to about $399-$499. At present, you can only play back DVDs, not record on them, but enough space exists for one full-length feature film with superior picture and sound quality. DVDs allow you to view movies in a wide-screen format, similar to movie-screen proportions, and search rapidly for scenes. The number of movies available on DVDs has grown to about 1,500. The biggest drawback: DVDs are not compatible with HDTV. A new digital VCR is in development that will not only work with HDTV but will rival DVDs in the near future.

Moderately Priced

TOSHIBA'S V3 line is highlighted by new six-head hi-fi VCRs. Sharper pictures in the extended-play mode come across with the new V3 design. With the six-head decks, extended-play picture quality is indistinguishable from the standard play mode. The M784 high-end model ($499.95) features DNR perfect, which incorporates both Digital Noise Reduction (DNR) and Color Signal Enhancement (CSE). DNR scans each frame of video and removes the specks that appear in worn videotapes. CSE improves color sharpness and reduces horizontal bleeding. Also featured is VCR Plus C3. The most affordable model in the new line, the M754, also features the six-head design and includes basic elements; an auto head cleaner, digital tracking and hi-fi audio for $279.95.

CONSUMER BUYING TIP: If you're looking for a VCR, consider a model with four heads or more. Additional heads give clearer picture quality between frames. The newer models have six heads; older models have just two. A hi-fi VCR may cost more, but you'll get clearer sound quality, especially if you're looking for the most realistic sound. If recording programs from television causes you stress, look for added features like VCR Plus +, which allows you to enter a program code into the remote. It will automatically switch channels and signal your VCR to record. If you're in the market for a DVD player, you'll also need to look for a good-quality Dolby Digital receiver to make the investment worthwhile.

High-End

PIONEER'S DV-09 is an updated Elite DVD/CD player with THX-certified enhancement, a high-quality, movie-theater-like sound reproduction. Images are virtually noise free with a new circuit, "Component Frame Digital Noise Reduction," which compares frames, distinguishes differences and removes the noise. The Legato Link feature restores frequencies above 20 kHz that are lost during the digital recording process. You'll pay $2,200 for this model. If movie-theater sound isn't as important to you, you can save money by holding off on the THX, an upgraded version of Dolby Pro Logic receivers.

Speakers and Audio

Receivers are what hold the home-theater combination together--the television, cable boxes, DVD players, VCRs, satellite receivers, CD players and cassette decks--all plug into this device. Many build their home theater around the A/V receiver. Expect to spend about $250-$500 for a Dolby Pro Logic model. The Dolby Digital receivers are an upscale option that produce separate left and right surround channels. Expect to see prices in the $700 range.

Surround-sound has given a whole new way of listening to music and viewing movies during the past few years. The number of speakers required for a Dolby Digital home theater has increased, while subwoofers, which give off the thundering, booming sound, have also gained in popularity. Speakers can cost as little as $200 per pair for a budget system, but $500 and up is more likely. A pair of surround speakers may cost as little as $80-$250.

Home-theater-in-a-box sales have also grown--to $282 million in 1997, up from $164 million the previous year. It has appealed to consumers who want the simplicity and affordability that comes with a combination receiver with built-in amplifiers, surround-sound, satellite speakers, powered subwoofer and remote control.

The news in CDs is an affordable recordable CD player in two formats; write-once, which can only be recorded on once, and rewritable, which can be recorded on continually but cannot be edited. Write-once discs sell for under $10. Rewritable discs are costlier at $20, but are re-recordable.

High-End

FOCAL.JMLAB'S UTOPIA line of audio speakers are considered among the best in the world. The French manufacturer's custom-made speakers function on a three-way bass system. Audiophiles will delight in its crystal-clear sound, thanks to the "W" series cones, which sandwich fiberglass layers around a core of plastic foam that surrounds its woofers and midrange and treble drivers; it also features an inverted dome tweeter. Each driver is internally mounted in another independent subenclosure and then double enclosed with additional side panels lined with lead sheets, which minimize distracting resonance. A high efficiency rating means that these speakers won't need much power to drive the volume. Not for those on a budget, the Utopia line (mini to grande) retails from $6,500 to a phenomenal $70,000 per pair.

CONSUMER BUYING TIP: When you're in the market for speakers, look for multichannel sound, which will help even out sounds between speakers. In a traditional home-theater setup, you'll have five speakers, positioned left, center and right, two surround speakers and a subwoofer. But if you get varying sizes, the sound will be uneven. The multichannel device will make the sound uniform. You'll also need a surround-sound processor, which will steer the sound to the correct speaker for the best effect. The least expensive option: your typical receiver, which has all the technology--amplifier, surround-sound processor--in one box. The more expensive, but better-quality option is to buy the components as separates. Also consider the kind of cable that's being used. Don't hook up a $2,000 speaker set to the same cord that carries your electricity; you won't get the best sound. A more sophisticated cable will balance out your sound.

Moderately Priced

BOSE VCS 10 center channel speaker is designed to work as a component in a home-theater system. The VCS-10 works with any stereo speaker to deliver realistic reproduction and allows you to upgrade your existing speakers for a home-theater experience. The speaker enclosure measures just over 3 inches high and blends with most televisions and home-entertainment centers. Estimated retail price: $199. For rear surround, a VCS-30 speaker set is available that includes the VCS-10 center channel speaker and surround speakers. The three-speaker package works with component stereo loudspeakers from any manufacturer. Estimated retail price: $349.

Where to buy?

Once you work out your budget and decide what you want in your home-theater system, you'll need to decide where you want to spend your money. Here's a look at your options, with advice from the Custom Electronic Design & Installation Association, an international trade association of companies that specializes in designing and installing electronics systems for the home (800-669-5329; www.cedia.org/cedia).

* Department stores may have a limited selection, without the breadth of specialty stores. You'll see a few broad market brands that are reputable, but prices are high. Because of the competition of warehouses, only a few department stores still sell audio and video. The location may be convenient if you're doing additional shopping.

* Electronics warehouses are focused on moving items out more than anything else, so here it's buyer beware. You'll find discounted prices, even up to 40% with close-out sales, but also beware of discontinued and even damaged items, and make sure warranties are valid. You may also have to pay a membership fee.

* Online shopping may be quick and prices low, but you can't see or hear the items before you purchase, which is a must for audio/video products. It can be a huge risk, since you won't have a dealer to service the item and shipping costs can add significantly to the price. It's also easy to get ripped off; you might get a used item in the mail.

* Specialty stores will have a wide range of electronics to choose from. You may see stacks of equipment, which is fine if you like to do your own research and shop independently. Personal service may not be as emphasized at some stores as the selection of products available; prices may also be higher. In some specialty stores you'll find a complete home-theater setup, and you can discuss your options with an expert.

Extra coverage or not?

After you decide to make that electronics purchase, the salesperson will probably ask you to purchase an extended warranty or service agreement, which is like repair insurance that you buy separately from the product. Do you need it? Probably not, unless you're buying an expensive, easily damaged product. An extended warranty is one type of service contract, which may help you pay for costly repairs and routine maintenance. But you're wasting your money if the service contract overlaps with the existing warranty that already comes with the product. Take time to compare the two for similarities. Be aware that some contracts may not pay for labor, may pay for parts only, may limit the number of repairs or require a payment before each service call. Before buying a contract, ask yourself (and the dealer) these questions suggested by the Consumer Information Center in Pueblo, Colorado:

* Who is offering the contract--the retailer, the manufacturer or an independent third party?

* Where will the product be serviced? At your home, a repair shop or in a manufacturer's service center?

* Does the contract begin when the product warranty ends so you're not paying twice for the same coverage?

* How long will the service contract coverage last?

* What exactly will you get for repairs and maintenance for the money you'll pay?

* Is the contract valid if you move?

* How much time do you have to decide whether you want to buy the service contract?