On the bright(er) side, IHS also reporting more IP cameras shipped than non-ip cameras in 2015. Which may be the first year ever.
Yay!
It also may be the last year for some time.
Collapsed Growth, Collapsed Pricing, IHS Now Admits
Published Jun 22, 2016 10:27 AM
The downturn in global video surveillance growth and camera pricing are the two most important themes for the industry today.
We have been calling this out for years, starting most notably with other 2014 Falling Down guide that declared:
Falling down - the theme of the 2014 video surveillance industry. This is the toughest stretch for the industry overall, since at least the 2008-2009 recession.
Moreover, in January 2015, we called the China the #1 threat to the industry.
And the industry, especially for manufacturers and distributors, has gotten much worse. Now, IHS has admitted their rosy 2015 forecast was wrong and the numbers are quite bad.
IHS Background
IHS video surveillance (formerly IMS Security) primarily sells numbers to large manufacturers, asking manufacturers to share their revenue and then re-selling the aggregated numbers back to manufacturers. In addition, they make financial projections, typically bullish that please their manufacturer customers.
In January 2015, IHS declared:
The global video surveillance industry can defy conventional market logic, resist product commoditization and still grow by more than 10 percent in 2015
Logic was not defied.
Collapse ********
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Good *** ***********?
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Outlook - ******** ** **** ** ***** ****** *********
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**********, ******, *** ***** ** ****, the ****** *** ********* ******* ** the ****** ***** ************ ****** **** be ********* ****** ** *** ******* government.
Comments (7)
U
Undisclosed #1
Jun 22, 2016JH
John Honovich
Jun 22, 2016Also, related, each unit that goes HD analog further drives down average pricing.
This is the flip side of 5 - 10 years ago, when each unit that went from SD analog to IP drove up average pricing and total revenue.
Jonathan Lawry
Jun 22, 2016I heard it said, from an industry great, "IHS typically hires impressionable recent college grads with no industry experience. They always estimate awesome growth at the beginning of the year, and sharply revise down mid year. Why would anyone buy their research?"
This seems to validate that statement.
U
Undisclosed #1
Jun 22, 2016JH
John Honovich
Jun 22, 2016The IHS / IMS no industry experience element is strange. You would think if you were selling a high priced product ($5,000+ per report), you would want and benefit from people with relevant domain knowledge.
In terms of why anyone would buy it, there does not seem to be many buying it (most common cases: large incumbent manufacturer, tech company looking to expand into video surveillance or outside investors).
The reasons being:
- Mega company wants numbers on their competitors and partners. IHS numbers are regularly off (since impossible to verify most) but at least you get something, so if you want to have a number for what Agent VI or Arecont or Exacq or Axxon, etc. did, IHS will list it.
- Investor or company needs to have a quantified number to justify a deal or investment. We hear this from time to time (what is the market size and 5 year CAGR projected for encoders with audio support in Europe? and give it to me to nearest fraction of a percent). My philosophy is that it's impossible to do this reliably / accurately but the demand is there.
- Publicity. IHS allows it. When manufacturers say they are #1, it's often an explicit or implicit reference to their IHS category. IHS does a great job of creating dozens of categories that help various vendors be #1 in something.
Finally, the awesome growth / sharp revision cycle is a turn off to seasoned veterans but there are many optimistic or naive or new people coming into the industry that want to hear positive things, even if wrong. And, in defense of IHS, they tend to be far more conservative than the various fly by night research services with even more outlandish forecasts, like the one that fooled ADI earlier this year.
HL
Horace Lasell
Jun 23, 2016"at some point in the next few years, when most integrators accept selling similar low cost Chinese products, the advantage for early adopter integrators will disappear and integrators will face lower total margins and more competitive stress from larger scale direct purchasing from stores and the Internet."
To carry the argument to the extreme, let's try to imagine what might happen if hardware costs were close to zero. If China's economy experiences a truly dramatic shock, product might be available for little more than the cost of shipping, possibly as long as there's inventory to liquidate -- perhaps a year or so?
Even under such circumstances, the big boys will always have work. Customers with a pressing need but not much market awareness will expect that you can't go wrong using ADT, for example, to install your marked-up free hardware.
Experienced customers may have learned that an expert local installer can deliver better value. I'd like to imagine that top-notch installers will always be in demand, regardless of hardware commodity pricing.
On the low end, installers who work for peanuts will always attract a certain clientele.
Until the market rights itself, there should be a blossoming of work, when you consider that the price of entry will never be better.
As for bulk discounts, as hardware becomes an increasingly small fraction of the installation price, hardware discounts should become less relevant than brand name, local reputation, or price of labor.
Unfortunately, under such circumstances, it would seem as if manufacturers would have to be capable of treading water for a while in order to survive.
JH
John Honovich
Jun 23, 2016Experienced customers may have learned that an expert local installer can deliver better value. I'd like to imagine that top-notch installers will always be in demand, regardless of hardware commodity pricing.
I agree with that.
On the other hand, quite a lot of integrators are benefiting from a Chinese / Sweden 'arbitrage play' right now. The integrators who went to Hikvision early are cleaning up matching against more reluctant / conservative integrators who are sticking with Axis. Hik integrator goes in at 1/3 to 1/2 the total price of Axis integrator and wins most deals in the small to mid market. Related: Is It Time For Me To Start Selling Hikvision?
I am saying that opportunity will go away as many / most integrators switch to Hikvision / Dahua etc., and multiple Hikvision leading integrators compete head to head for these deals, driving total prices down lower.