ADT and Brinks Home Security Struggles Impact On Industry Examined

By Dan Gelinas, Published Oct 23, 2018, 09:33am EDT

ADT and Brinks Home Security have both been struggling over the last year. ADT valuation is 50%+ less than their IPO target. Brinks Home Security, aka ASCMA, aka Moni, aka Monitronics, faces an investor lawsuit, and a debt crisis.

Their problem can be the entire industry problems as they are 2 of the 3 largest US alarm companies, as this SDM ranking shows:

Are the various struggles of ADT and Brinks Home Security weighing the rest of the industry down? Just as a rising tide floats all boats, do two sinking ships pull others under?

Inside this report, we examine these questions based on conversations with John Brady [link no longer available] of TRG Associates, Peter Giacalone [link no longer available] of Giacalone Associates and one industry expert who choose to be anonymous looking at 3 potential theories of what is happening:

  • Primarily an ADT- and Brinks- specific problem, not reflecting the broader industry
  • Generally, an industry phenomenon driven by Amazon, Google, and others that brings evolution and opportunity for all
  • The changes may be leading to the death of the traditional just-security for $30-$50/month model

ADT’s ***** ***********

*** ***** ** *** at $** ** *** beginning ** ****, *** less **** * **** later, **** *** ******* at **** **** **% less **** ****:

   

Brinks’ ***** ***********

****** **** ******** *** been ** ** **** worse ******** **********, **** ~92% **** *** **** year:

     

***********, ****** **** ******** is******** ** ******** ********, *********** **** *** slow ****** (**** ******** this ** *** ******:********** ****** ****** ***** Brinks).

Themes / **********

***** **** * *** themes **** ******* ** our ********** **** ******** financial *******. ** **** at **** ** ***** below.

ADT *** ****** *** **********/************* *** ** *** ******* *** ******* ********

*** ********** ** **** ADT *** ****** **** Security *** ********* **** internal-only ******** *** ************** on *** **** ** investors, *** ***** ************** and ***************** **** ******* to ** **** *** rest ** *** ********. The "*******" ** ******** company ********** ** *** lend ********** ** **** understanding ** ********* **** one ****** *** ****** to ****** *********:

***** *** ****** ******* at **** ****, ****** fear. ****** *** ****** in *** *** ****** are *** *********** ******** on *** ******* ** the ********. **** ***, for ********, ********* ********* at ******, ******/***-******** ******, and ****** ** ** because ****, ******, *******, SimpliSafe *** ******* ***** butts. *** **** (***?), but ** ***** ****** into *** *********. ****** wants ** ****** ** what ******* ** ** an ***-****** ****** ** an ******** ******* *** disruption. 

********* ****** **** ***** were ********** ****** ** Brinks *** *** **** needed ** ** ************ since ***** ** * common ************* **** ***** troubles *** * ********* for *** **** ** the ********:

** ****** *** *** look ** *** ********** of ****** *** ***, they're **** ** **** compared ** **** *** would **** ** ****. They ****** **** **** at * ******* ******** and *** ******* ** the **** *** *********, the **** ******** **** you **** *** *** more ********** *** ****** have ** ****. ****'* how *** ***** *** a ****** ** **** investment. ** ** ***'** creating ** ** ***** and *** ****** *** can **** ** *** 45 *****, **** *** feel ***'** ***** ** see **** ************, ****'* where *** ****** ***** when *** ** ** sell. *** ******* ** when *** ******* ********* aren’t ******* **** **** hurdle ** ***** ** tough ** ******* *** the ******* ****. * don't ***** *** ***** are ******* **, *** I ** ***** **** those *** ********* **** to **** ** ********.

Amazon, ******, *** ****** **** ************* ********* *** *****, ********* *** **** ********

***** ***** *** **** disruption ** *** *********** model ** $**-$**/***** *** security ************** ********* *** *********, all ***** ** *** security ******** ********* ******* IPVM ***** **** ****** that *** ****** **** is ***** **** **** of *********** *** ***** who *** **** ** adapt.

****'* ********* ****** **** ADT/Brinks ** ******** *** others **** ****, ** general, ***** *** *** out *** ***** ***** to **** ** *************:

* ** *** ********* to **** ****.  * think *** **********/*** ******* will ****** *** ****** and ***** **** ** plenty ** **** *** others ** **** *********** success, **** ** ** is **** ******** ** the ********* *** ******* up ******.

********* ****** ****** *** not **** *** ******** was ****, *** **** the ********* **** ******** new ************* *** **** certainly ******** **** ** awareness:

***** *** ***** ****** too. ***** *** ***** models **** *** ******** to *********** **** *** Ring ***** ***** ****’** offering ************ ********** *** $10/month. **** ***** **** some ****** ** ********** ... *** *********** **** will ****** *** * way ** **** **** everything *****. ****’* **** my *** ***** ** 40 ***** ** *** industry. **** ** ***** radical ******* **** **** expanded *** ********, *** eroded **. ** *** want ** **** ** the ********* *** *** over ***** *********, * feel ******** **** *** DIYs ** ** **** point **** ******** **** expansion **** *******. *****’* a ******* ****** ** erosion **** ****** *** were ** *** ***** about ***** **** * traditional ****** ***. *** there’s **** **** * sliver ** ****** **** wanted ** ** **** their ***** ***** ***. The *** ****** ** marketing *** ********* *** that *** ******* ******** for *** *** ***** guys.

*** *** ****** ** the ******** ** *** going ** **** ** in *** **** *** versus **** (**-**-***-**). *** change **** **** ****** in **** ************,**** ** *** *** ADT ****** *** ****** Amazon. ***** ********* ********** partnerships ** ****:

**** *** ***** ******* about ****** ****, ****** Ring, **** *** ** to *** ******** *** other ***** *********, **** don’t **** ***** *** contract ** ***. **** care ***** *** ******* stream *** ****'** **** sell ** *** ** a ****** ****. *** their ******** ** '***, I *** ******** ** customers. ** * **** a ********, **'* **** for ***** ** *********.' Are **** ***** ** change *** ******** ****? Yes. *** * ***** you’re ***** ** *** more **** **** *** who **** *** * deal **** ****. ****** just *** * **** with ******. * ***** you're ***** ** ******** to *** ***** ******-*** fancy ************ ******** **** our ****. ** ****** about **** ** *** monitoring *********** ******* [**** no ****** *********]. ** you’ve *** * ******** who **** *** ***** their **** ********, ****’* great. *** ** *** incorpoarte ** **** **** professional ********** *****, **** it's * ***. **’* about ******** *** ********.

Standard ~$** *onth / **-***** ***tract ** ***** *****

******** ********* **** **** getting $**-$**/***** **** ********* for *****. ** *** become ******** ** ****** ~$**/***** *** lock ** * *-**** contract. *******, **** ***** is ********, ** ****'* interview **** *** **********' Brady, *****:

*** ****** **** ** there’s ***** * *** of *********** **** *** tell *** '***'** ***** pay *** *** ************ and ***'** ***** ** pay $** ** $** a *****. *** **** they're ***** ** ****'** selling ********** **** *** security ... ****** *** doing **** ****** **** selling ******** *** ********** together *** ******* * better **** [******* ******* Per ****] **** **** used **. ** ***** and ***** ******, *** can’t **** ** ********* on * *********** ******** anymore. ** * *** of **** **** ****** away **** ****. *** the ******* **** ** the ******** ****’* *******. It’s ***** *-** *****, and ** ****** ** about ******* *********** ... ** you’re *** ****** ** sell **** ******** ** $30-$40/month *** **** ******** and ***’** **** ***** perimeter *** **’* *** on ** ***, *** you ***'* **** * video ********, ***’** *** going ** *******. ***'** just *** ***** ** get ***** *****.

******* *********** *** *** models **** ****** ******* supplant *** *****, *** the ******* ** *** two **** **** ** more ************** ** ********* figure *** ***** ****** audiences *** **** **** wants, ********* ** ****’* anonymous ******. *** ********* quote ******* *** **** offerings *** ********* ******* tiers **** *****:

**** ******* ** * possible **** *******. *** can *** * ******* and ***** ** *******. You *** **** **** click ** ****** *** have ** *********. **, you *** ******** *** it **** * **** control *******, ***** ****-**** service ********* ** ** an ** *** *****. Lots ** *******, ******* a ***** ******* ** the ******* *********, *** a **** ** ******* on *** ***** ******** to ***, *** *** well **** *****. ** is ****** ***** **** the *** ********* *** unlikely ** **** ***** supplant *** ****…**, **** versa. *** ****** ** most ****** ** ****** stratify **** * ******* offering ***, **** **** one ******** ** **** consumers’ ***** *** ***********.

********* **** ** ** difficult ** *** ******* or *** *** *********** model ** "****," *** it *** **** ** see ** *** ******** by ******** **** ******** leading ** **** "**********" and **** *********:

** ** ****? ** is **** ** ***. There *** ******* ***** some ***** *** *** paying ******** ** $**-$** a *****. ** ******* is **** **** **** the ***** ******* ********** cost ** ***** *** companies, *** **** **** they're ******* **** *** the *********. *** **** you're ****** **** *** very ****** *** **** you ** *** * full ****** **** ****** or *** ** ******. Could ** **** **** impact ** *********, ***** eventually, *** * ***** we're ****. *** ********* that *** ***** * good *** ** ******** in **** ***** *******, creating **** *****—*** ********* stays ***** ******* *** they **** **** **********, people **** ****** *** people ***'* ******.

Poll / ****

Comments (9)

My gut feel is that while there are certainly individual company management issues, the underlying problem is the incursions of Amazon/Google make it hard to grow customers and hold pricing levels.

It's incredibly ironic that ADT thinks commercial integration is some hot spot after years of rightly dismissing it as much less profitable than contact-based residential alarm monitoring.

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ADT is the Blockbuster of the security industry. 

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Actually it’s BOTH...📉

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Another perspective from a self-declared expert. Note my observations have appeared often in recent related IPVM discussions.

I agree with many of the observations from Peter, John and “Anonymous”… but disagree with the conclusions.  

They did not go deep enough into the cause and effect of why ADT and MONI/ASCMA are sinking into penny stock territory: and why they are mirroring the traditional remote monitored RMR industry, not an anomaly. Here is copy/paste of excerpts from recent posts, October15-16, to other IPVM discussions:

“…This discussion is meaningless if we are talking about alarm security… because nobody is talking about “Part 2 of 2” of the customer expectation…  aka police response to the call for help.  Market disruption in this industry is not about really good automation and entertainment from Amazon, Nest and others. 

Compare this discussion to solar powered submarines.  We assume the sun will be available on-demand and free, just like we are assuming the police will be available on-demand and free.   Here, the “big disruption” is low priority or no police response to calls for help from monitoring firms, like ADT and Monitronics, for millions of deterrent alarm customers. Without meaningful reaction-to-the-action, a deterrent sign and decal is a cheaper alternative.  This whole subject of “security” is a bottomless pit. The need for protection of people and property is global in size and as old as civilization itself.  The US is one of the last places on the globe where private firms, like ADT & Monitronics, could demand emergency response (without an emergency)by local law enforcement to private contract deterrent alarm customers….”.  Millions of ADT customers and most of Moni/ASCMA customers are the “deterrent” type.

Said differently, the core component of the remote monitoring segment of the private security industry is…, on-demand police response at no cost to the caller. And it is the core component that provides investor market value of 25-50x. When that core component goes away the market collapses. That core component is going away or already gone…., unless a substitute source of private response can quickly materialize. Other IPVM posts focus on why the alarm industry has lost credibility, and consequences yet to come.

Source: Lee Jones; Support Services Group

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Hello Lee Jones I am from Canada and we have been experiencing no police dispatch before verification policies for many years. The consumer in Canada for the most part does not expect a police response and certainly don't believe anything good will come if the police do respond.  

  

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As a consultant, I have worked with numerous highly-paid 20 and 30 somethings in the high-tech industry, who despite their wealth, see no value whatsoever in monitoring services for their million dollar + homes.  They would much prefer to receive a message on their smartphones and then bring up a camera so that they can assess the situation themselves and take appropriate action. I have tried to make various arguments against self-monitoring ("what if you are in the sky on an airplane?"), but they have usually fallen on deaf ears.

I am sure that this in part has something to do with the decline in demand for monitoring services and the value of the companies who provide them.

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The traditional security industry has gotten lazy IMO. We want to install a system that has incredible margins, doesn't require any service, and we never want to interact with the end user again and expect them to continue to pay month after month. The market has already changed in that we see that the vast majority of all new sales come from "Smart" homes - ok: security systems that remotely arm/disarm and talk to lights, locks, and thermostats but the concept of smart homes.

The end consumer is looking for value-added connected services: video doorbells, wifi/networking, automation with garage doors, lights, locks, entertainment, video verification, and interaction: remotely and on multiple devices and apps. If as an industry, we don't become technologists to the home, we lose value in the eyes of the consumer. The companies that are thriving right now are the ones who have picked up additional services in networking/connectivity and audio/entertainment/automation. The real threat to traditional security companies come from the rise of Amazon home services or a modified Geek Squad who can install the DYI as a DIFM for a fraction of our labor costs and low margin rates, with an inferior mesh wifi router, a wireless speaker - and then what does the end user need us for?  If a companies model is purely dependant on selling contracts, they need to diversify quickly.

 

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We want to install a system that has incredible margins, doesn't require any service, and we never want to interact with the end user again and expect them to continue to pay month after month.

I can admit, I've not been in the industry terribly long, but I think to a certain degree it's always been like this. I hear from managers and fellow co-workers who did residential stuff in the 80's and 90's, and looking at the sheer number of small companies that have come and gone. Built up a small account list and sell it off to a bigger guy.

Heck a co-worker told me he used to sell systems for cash, sign them up for a monitoring agreement and then immediately selling the contract to another company. Did not having a monitoring center or contract of his own, basically relied on this other company immediately buying the contract.

In my own experience, when I first started I had met with several clients who paid big money for their systems, and rarely ever heard from us, and were perfectly fine with it. Until something did go wrong, and their 15 year old panel no longer exists and they have to pay $xxx for a new one.

I guess now that I type this all out, you are right. The industry has become lazy, not adapting with the customers. The customers have changed, and the industry hasn't really changed with them.

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Observations by Manufacture #3 and Integrator #4 are on target and very timely.

The interpretations and the market values of RMR- Recurring Monthly Revenue are changing so fast that even market leadership and investors cannot keep up. We believe the historic market values 25x-50x is collapsing due to faster attrition and slower RMR growth… for reasons pointed out by #3 and #4. We can find the solution only we can define the problem.

We believe the problem is a core component missing from basic RMR, ie “security”, as in security alarm system. Aka… “reaction-to-the-action”.  Aka… on-site response when the alarm system calls for help. Customer notification with slow or no on-site response has a much lower revenue that on-demand police or private response. Third party remote monitoring firms are handy-caped, with little or no control of local conditions that dictate slow or no public emergency response. And owners of contracts should not be surprised if they collect $40.00 monthly but pay only $4.00 for third party remote monitoring.

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