Axis on Network Camera Trends

This report summarizes a presentation made by Axis GM Fredrik Nilsson on the progress and future of IP cameras (presented at the Milestone Partners Conference). As the market leader in IP cameras, knowing Axis' outlook is important to analyzing industry developments. In the premium section, I offer rebuttals and contrasting viewpoints to provide professional's pointers on debated issues.

The bullet points below summarize the key points from the Axis presentation:

• 2008 was a milestone year for IP video. IP video moved from niche to mainstream as everyone was talking about IP and the incumbent analog manufacturers were advocating IP.
• 2009 should see another big break as analog sales start to decline for the first time
• By 2012/2013, IP cameras should be more than 50% of the surveillance camera market.
• Axis sees the main 3 reasons for IP videos' growth as quality, scalability and in many cases, lower TCO (total cost of ownership).
• The consumer market is driving technology and helping the growth of IP. Whereas the video surveillance market is about $10 B USD, the consumer technology market is about $700 B USD.
• Analog video surveillance is based on a 50 year old technology that is not global (NSTC/PAL/SECAM)
• The rise of H.264 is driving IP cameras, reducing storage and bandwidth r equirements
• Though H.264 requires more processing on the client side, hardware acceleration for H.264 is becoming increasingly common on consumer graphic cards
• Bandwidth used to be a limiting factor but is now a driver of IP video with 1GB networks common
• Mobile networking is still a limitation but in a few years will be a driver
• Mesh IP networks has improved substantially with vendors now being able to deliver 180 Mb/s per radio
• High-Power PoE (802.3at) is becoming available which will enable PTZs to use PoE in 2009
• Storage continues to become cheaper and cheaper; today a 1.5TB hard drive can be bought for $126 USD putting the cost per GB under 10 cents
• Other storage improvements driving video surveillance include SSD, decentralized storage and server virtualization
• While analytics have problems with confusion and overpromising (e.g. finding terrorists in stadiums, facial recognition, aggressive behavior and bag left behind), many other analytics are drivers for IP including people counting, perimeter protection, motion detection and active camera tampering
• IP video benefits from over 50 standards currently: in resolution, compression, wireless, networking, audio, etc.
• One important standard is missing: for cameras but expect IP camera standards to be available in 2010
• Axis broke the top 10 video surveillance companies, indicating the strength and power of IP video
• Like Audi and BMW, IP video will do well in a recession as companies choose products with great value (like IP video)
• People will not go back to analog just like they would not go back to walkmans or tube tvs
• While IP video companies growth may shrink from 40-60% down to 20-30%, analog companies growth may drop from 10% to -10%
• Analog companies shrinking revenue will force many to reduce R&D expenditures which can make the shift to IP video quicker

• While analog sales may decline in 2009, the magnitude of the fall in IP video sales growth is much deeper than analog. In other words, the growth gap between IP and analog is actually shrinking which means that that the transition to IP video (at least temporarily) is being slowed).
• Given the state of the global economy and how the transition is clearly being slowed, it is certainly wishful thinking to believe that IP will be the majority by 2012 or 2013.
• Analog video may be based on a 50 year old technology but the reality is it still offers good value (better than IP) for most deployments. Saying analog is old is more of an emotive appeal than actual analysis.
• Hardware acceleration for graphic cards is certainly coming but the average end users uses 3 year old PCs. Most end users will not change PCs to accommodate a viewing application for video surveillance (I have learned this lesson very painfully in the field).
• There is no way mobile networking will become a driver in the next few years. In most countries the bandwidth will not be there and even in those areas with the bandwidth, carriers will charge high rates for any application that consumes bandwidth 24/7/365 like a surveillance camera.
• Mesh networks exhibit 180 Mb/s only in demonstrations bonding multiple radios. This is not a practical architecture for long term use with actual meshing. While mesh is valuable in niche applications, the hype continues to far outstrip the reality.
• Using SSD or decentralized storage is still far more expensive (6x - 10x) than hard drives. Using this approach radically reduces the cost of deployments and is therefore only used in niche deployments. Also, almost none of the major VMS providers support on-board storage. This will only improve slowly and is a minor factor in the growth of IP video.
• By 2010, it is unlikely to see anything more than limited application of camera standards. Not only is there the issue of the competing standards, it is going to take time for VMS vendors to add suport (none do so currently) as well as for the camera manufacturers. Even once we do see camera standards widely adopted, there will be significant issues with firmware and low level camera interaction that may not be resolved for years.
• Another critical standard that is lacking is for video management systems. There is no standard for retrieving video from VMS systems and until this is resolved, legacy DVR systems will have a key advantage over IP. This is because most customers want a single user interface to view all video. Without VMS standards, the best way to accomplish this is through using a single VMS vendor. Of course, this favors the incumbent analog provider.
• Analytics will not be a strong driver for IP. Even within the analytics that work reliably, analytics can be run centrally in servers - specifically DVRs. Already a number of DVRs have analytics pre-loaded. Expect this to become more and more common. This will dampen the value and incentive to move to IP since analog cameras can become analytic enabled through the DVR.
• While people will not go back to walkmans (because walkmans are obsolete), analog video is still the overwhelming majority of sales. Most users do not need to switch back. They can simply keep what they have and add to their existing analog systems. This is a big difference.
• The analogy to Audi and BMW is interesting. Does Axis want to be the market leader of all IP cameras or simply a high end niche player? Audi and BMW are niche players - 1/8th the size of Honda and Toyota. Axis continues to focus on premium products even in a new cost conscious era. Plus Axis growth is falling far faster than the budget IP camera providers. This is why I continue to believe that Axis has mispositioned itself and will be overtaken in the mass market by lower cost, good enough cameras.