Barnes Buchanan 2019: Despite 'Strange Narrative' Great Time To Be In Security

By Dan Gelinas, Published Feb 11, 2019, 11:14am EST

A "strange narrative" is being spun, said Michael Barnes [link no longer available] at the 2019 Barnes Buchanan Conference. However, despite that narrative, it is a "great time" to be in the industry.

Barnes gave a 3-hour presentation on the current state of the industry during which he talked about 5 key areas (Growth, Structure, Operating Metrics, Threats, Market Values) that illuminated several themes, listed below:

  • Strange Narrative - People Feel Threatened
  • Data Shows Healthy Market
  • Most Serious Threat Is Complexity
  • Medium Threats
  • Low Threats
  • Fear Could Dry Up Investment
  • ADT & Brinks Underperforming
  • Multiples Healthy
  • Commoditization Of Hardware, But Service At A Premium
  • Incursions from Big Tech and Telcos
  • Growth Up Slightly
  • Move Toward Service
  • Regional Alarm Co Market Share Shrinking
  • Stickier Customers = Lower Attrition

IPVM attended the presentation and examines Barnes presentation and logic.

Strange ********* - ****** **** **********

****** **** *** '******* narrative' ** **** ****** feel ********** ******* ** the ********* * *****:

  • *** ****** ** *********
  • ****** ******* **** *** scale ** *** *********
  • ****** ******* **** ***** companies & ****
  • *** **** *********** ****
  • **** ********* ****** *********** systems ***** *** **********
  • ********* ********** **** **** it *** ********* *** incumbents ** *******

******* ****** ******* *** characteristics ***** ******* * widening ***/*** ****** *** confusion *** ******* ** the ******* *******, ********* to ******. ** ***** is *** ****** ********* versus *** ********* ****.

Data ***** ******* ******

*******, ********* ** ******, the ******* ** **** the **** **** *** average ***** ******* ***** is ***** "****** **** they **** **********." ******* might ** *****, ** said, *** ** ***** be * ****** **** expensive ** ********* * new ********, *** **'* countered ** "***** ************ in **********" *** ******** appreciation *******. ** ** a "***** **** ** be ** *** ********," according ** ******.

****** **** *** "******* narrative" ** *****:

*********, **** ****** *** us ** **** ****, 'yeah, **’* * ***** time ** *** **** the ********.' **** ****** want ******* ** ****** this **** ** ***** for ****.

Most ******* ****** ** **********

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**** *** ** ****. There ** ********** ********** across *** ***** ** our ******** *****. *** rate ** ****** ** faster, *** **** ** overwhelming ** ****. ********* management ************** ********.

Medium *******

****** ****** ***** ******* he ********** ** ** at **** *** ****** in ***********. **** ******** the *********:

  • ***--*** ****** ******: "*** is *** ***. *** disruptive. ******* ******** ***** detectors **** **** ****** for ********** *** ******** attractive ********, *** *******--** ** *** ***--******** ***** **** ** well. ** *** ***** it *** ******* ****** with * ******** *** or * **** *** in ***** ****** ****." In ****, ****** ****, the ********* ** *** companies ***** ***** ********** in *** *****, ***** would ******* ********.
  • **** ***********--*** ****** ******: "Is ** ****** **** some *** **** ******* will **** *** **** a ********** *********** ******** and **** *** *** of ********? ********, *** not ******." ****** ***** the ********'* ****-*********** ********* and ************ ******** ** counters ** **** ****.

***** ** ** **** that *******-******** ***** ********* have**** ****** ***** *** 1970s, ******* ** *** they *** *** ** the **** ****** ** SimpliSafe ** *********. ********* are ******** ** ********* and ****** ** *** up, **** ** ** likely **** ********* **** continue ** **** **** and **** *********** ****** to *** ** ***** systems **********.

*** ******* ** **** existing *** ** *** unrealized **** ********* *** and **** **, ** there ******, **** ****** and **** ** ****** to *********** *** ******** demands ** *** ******. Traditional ******** ********* *** distributors ** *** ******* with *** **** ********* and ******* ** *****.

Low *******

****** ************* *** ***** 3 ** *** *******:

  • ******** (****** *** **** maybe * *% ****** share)--Higher ******, *** ***** low: "***** *** **** good ******* *****. *** two *** ****, ******* and **&* *** ** and **** *** *** because **** ****'* *** target ******* *** ********* caught ** **** ****."
  • ****** **********--*** ******: "****** say "*** ****** *** want ******** ******* **** it." *** ****. ***** are ****** ** ************ households *** **** **** technology. *** ********** ******* across *** ***** ** booming *** ****-*** *********** is **** ** *** rise."
  • ***** ********* *********--*** ******: "Bigger ** ******. ******, ADT, **** **** ***** you ******* ****’** ****** and *** ***’* *******. The ******** **** ***********. That ** ********* ** a ******, *** ** will *** ******* ******* the ******* ****** ***."

***** ** ** **** that ******* (******* **** / ****** ****) *** AT&T (******* **** / exited ****) **** *** in *** **** ***, there ** ******* ******** them **** ****** *****. And ***** *** ******* others *** **** ****** in *** *** ***** well, ********* *** **** in *** **** *****:

  • ******* (******* ** ****)
  • ********* (******* ** ****)
  • *******/**** ****** (******* ** 2011)
  • *** (******* ** ****)
  • ******* **** (******* ** 2013)

Fear ***** *** ** **********

****** ***** **** **** though ** ********* *** threats ** ****** ***-***********, the ********, ** *******, feels ********** *** **** can ****** *** **** of ******* **** *** industry:

** **** ***** ** this ********. *’* * little ********* ***** ***** existential *******.

*****, ******* ******* ** not, *** **** **** effect. ********** ***** *** less *** ** ****** in ** ******** **** feels *****.

ADT & ****** ***************

****** ************'* ***** ***** ***** is ****************** **** *******-******** ****** ** ****** Home ********. ****** **** **** given **** *******'* ***********, though, *** ******* ********** were ********:

** ******' ******, **** companies *** *** *** same ********** ***** ***** companies *** *** **** simply ********** ******** ******* from *********** ******.

******* *** *** ****** Home ******** ** ******* any *** ************. ** you **** ** *** suite ** ******** ****'** offering, ****'** *** ***** with * ****** **** package. ****'** *** ** understanding ** *** ***** and * ***** **** that *** ***** *********.

*******, ****** **** *** was ******** ******** ***** and ******** *********. ** said **** *********' ******** were ********** ** *********** issues, *** ** ******* from *** ** *** of *** ***** ******* he ***********.

******* ** *** *** brand **** ** ****** Home ******** ** ****** to **** ** *** of *** ******** ** debatable, ***** ***** *** been********* ****** *** ***** name ************* ******* ***** *** put *** *******,********************* **** ******** *******.

Multiples *******

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********, ****** **** **** most ************ ** *** industry ***** *** ******* between *** *** *** RMR. ** **** **** while ** *** * "spooky ****" ** *** industry, ** *** * good ****, ** ****:

*** ******* ** **** the ******** ** ***** trading **** ******** ****** for *** *** ***** players. ** ***** ** that **'** ******** ** see ** ********** ****** of ************ ****** ***** down ** *** *** to *** *****.

*** ******* **** *** above **** ** **** when *** ** *** industry's ******* ******* *** performing ** ****** ********* to *** *******, ** is ****** **** ********* could **** **** ** a **** ** **** away ******* ** * lack ** *** *********, a **** ** *** innovation *** * **** of ******.

Commoditization ** ********, *** ******* ** * *******

****** **** *** ******** would *** ****** ************ as ** ***** **** and **** ****** ***** ubiquity:

***'** ***** ** **** all ***** ****** ** data ****** **** *** filter--you--at ***** ***** ***** and *** ******** ** going ** ****** *** to **** * ******** decision ** ************ ** the ********'* ****** ** protect ***** ****** ** their ******. ** **** not ****** * *********. There **** ** ***** pressure, *** ****, *** it ** * ******** service.

** * ******, *** video ************ ******** ** already ************ ********* ******* *** **** storage. *******, ******** *** still ***** ** ** able ** ** **** at * *******. *** panelists ** *** ***** Monitoring ***** ** *** 1 ***** ** ****** about *** **** ** mary ***** **** **** to ******* **** ***** to *** ******** *** realize ***** ******* *******. (Solink,*******,***** ***).

Growth ** ********

****** **** *** ******** industry ******* *** **** growth ** ***** ******* over *** **** ** years ** ~*% ****, marked ** ** *% climb **** $** ******* in **** ** $** Billion ** **** *** then * **** ** slightly **** ****** **** around ****. **** *** followed ** * *% climb **** $** ******* in **** ** $** Billion ***** ** *** in ****, ** **** in *** ******* **** the ****** *****:

**** $** ******* *** split **% / **% between ******* *** ***** Revenue, *** ********** *** Service ******* ** ****.

Move ****** *******

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********** *** ******* ******** were ** *% **** 2017 ** ****. **** reflects * ****** ******* from ******** *****--*% ****** in ****, *% ****** in ****, *% ****** in ****.

********* ** *** *% Monitoring *** ******* ******* growth ********:

  • ****** **** ***** *** more ********
  • ****** ******* ***/****
  • ****** ** ********** ********* rates
  • ***** ******** ** * SECaaS *****

***** *** ************ ******* was ** *%, ****** been ******** ** ****** unit ***** *** **** services ** **** ** an ****** ** ***** commercial ********, ********* ** Barnes.

****** ***** ********, ****** by **** ******* ** insurance *** ********* *******, improvements ** **********, ******** costs, *** ********* ******** sophistication *** *********.

Regional ***** ** ****** ***** *********

****** ***** *** ******** into * ******* ********, each **** ***** *** piece ** *** ****** share ***:

  • ***** ***** ********* **** nearly **** *** ******** at **%
  • ***** ****** ****** **** the ******** ********* **** include **** ******* ** ADT (**% ** *** national *****), ******** ** MSO's ** ***** ********* ("4 ** * ******* these ****") (*%), *** JCI *** ****** **** at *%.
  • ******** ***** ********* **** 12% ** *** ******* security ******** *******.

*** ******* ***** *********** the ********:

****** **** ***** **** the ********** ** ******* alarm ********* **** **** older **** ** ***** old *** ** ** 6% ***** **** **** the ****** *** **%. At *** ********* ** 2019, **** ****** *** at **%.

***** *** ********* *****, family-owned *** ******** **********, Barnes ****. ** ** 30 ***** ***, ****** noted ***** *** * swell ** ***** ********* and ***** ***** ********* are ******* ** ****** cash *** ** *** business ***'* ****** **** to ********.

****** ***** **** *** leading ** ********* ****** share *** ******* *********:

****** ***** ** *** smaller ******* ** ********* and **’* ******* ** how ******* ** ** to ******* * ******** in *****’* ******** ***********. People *** **** ******** to ******** *** *** out.

** **** **** *** reason **** ******* *** getting ******* *** *** that ****, ******, *******, and ****** **** ****** in *** "******* ***** butts."

Stickier ********* = ***** *********

****** ******* ** * small ******* ******* ** performance ** *** ********, noting **** ******** ******* as * ********** ** RMR *** ******* **** 11.6% ** **.*%

****** **** **** *** a ***** ********** **** the ******** *** ****** toward ******* **** ******* contracts. ****** **** **** services *** ** ******** customers, ***** ********** ** is * ******** ********* rate, ** *********** *****:

**** ***** ** ******* with *** ********* ***** of *** ****** ******** players:

Poll / ****

Comments (35)

The data for 2018 probably is pretty solid but that does not mean that the fear is illogical.

The problem is things may very soon be getting a lot worse.

For example, $10 monthly Amazon Ring security system was just announced a few months ago. The AI video-driven tech model (whether it is by Amazon or Deep Sentinel or whatever tech company) is going to grow and get better.

The tech companies could be wrong here but it would not be the first time an industry went from doing fine to falling off a cliff in just a few years. If $10 per month monitoring from tech companies and AI video alarm monitoring expands, the big incumbents like ADT could see their 'data' decline noticeably in the next few years.

From what Dan described to me of this event, I get the feeling that alarm incumbents are a bit blind to what's coming. Or I could be wrong!

These are two very real threats, but I predict they will impact the big incumbents (ie. ADT) more than the local companies.

$10/month monitoring certainly puts downward pressure on RMR and I predict that pressure will result in higher attrition in terms of both unit attrition and ARPU. Companies with high Subscriber Acquisition Costs will be more negatively impacted by this as they rely heavily on RMR (with low, stable attrition) to recoup SAC.

Local alarm companies (who have 47% market share) are (almost frustratingly) unwilling to invest heavily in SAC. As an anecdotal example, I spoke with a company last week that offers $25 referral fees to the exactly zero people who care enough about $25 to refer anyone. Many of local companies have minimal or nonexistent marketing budgets resulting in a negligible marketing cost per account. In addition, most recoup at least their equipment costs at time of install. That gives them a lot of flexibility to compete with lower monthly monitoring offers.

New technology (ie. AI video alarm monitoring) COULD be disruptive. I think it will impact commercial alarm monitoring more than residential. Video monitoring in the home presents a real privacy issue, and video monitoring outside the home would be a challenge. I imagine the operators at Deep Sentinel shouting "Get off the lawn!"

All that said, I think the biggest threat to the industry is investor uncertainty. And if ASCMA files bankruptcy, that uncertainty will be validated. ADT stock would certainly tank (despite their disciplined approach to lowering SAC and attrition).

A lot of debt laden companies will struggle to refinance their credit facilities and all that cash flow will turn into crash flow.

I'm optimistic on the potential for local alarm companies to pull through this correction.

There is no cliff.

But for some, the quick drop and sudden stop will be the end.

Companies with high Subscriber Acquisition Costs will be more negatively impacted by this as they rely heavily on RMR (with low, stable attrition) to recoup SAC.

Jake, agreed. Many of these big companies are spending hundreds of dollars or more per customer acquired (because of the use of expensive door to door field sales people). I see those companies at risk to technology companies who sell purely online with a fraction of those SAC costs.

For example, the $10 monthly monitoring model cannot work for companies with high SAC costs but fits nicely with the online model of Amazon, Google, etc.

 

$10 monthly monitoring model cannot work for companies with high SAC costs but fits nicely with the online model of Amazon, Google, etc.

You're right about that! But low monthly monitoring works for local alarm companies too. Thankfully they have access to scaled and highly competitive wholesale central monitoring stations. If the downward pressure on RMR means their larger, national competitors are unable to "give everything away" and support the commission structures of their current door to door sales programs, local alarm companies will gain and retain market share. 

I imagine the operators at Deep Sentinel shouting "Get off the lawn!"

Assuming Deep Sentinal ever “Gets off the ground!” ;)

...the average alarm company today is doing "better than they have previously." Margins might be lower...

doing better with lower margins?

It is a good time to be in security, I am just tired of it all. Security the whole concept that something is secure, when I can do so much more. It is time to take away the reigns of this RMR, Integrator, Distribution, Design, Engineering, Consulting and Installation. Take away all of it.

Gone are the card readers, mobile credentials, door contacts, 7aH batteries, gutter boxes, resistor packs and machine labels. All of it gone, including the "enterprise" system SUP, SSA that factory ships with a SQLExpress database.

Unfortunately, I must use some type of cable, for now. I will start with every door having a camera installed both sides, cut thru the wall as one unit, whatever. The camera is mounted at say 5 feet. We will circle back to this.

Welcome to your online social security cypherID, here you are registered for all video analytics, voice recognition, personal IoT device (much more than a cell phone). These cryptographic data bits are your digital DNA unique for each human on earth. Eye, Fingerprint and your Terrestrial DNA is all part of the Human on Record.

Glad to see that you were forced to register (you dinosaur you), however everyone else is born into this technology. Now let's start by ripping out all that security infrastructure cabling, aiphones, lenel, hikvision. Rip it all out and please recycle. Burn that SUP and never worry about that technician that cannot use a digital multi-meter to trouble shoot EOL resistors again. Let's send that aging account rep back to school to find another means to feed his family other than selling overpriced low technology security systems. You can add enterprise security systems If you like. Fire that security engineer, what is he doing? marking up a riser chart for rex detector labels? figuring out the camera brackets for some vague RFP? Let him go, things are soon to standardize. Trunk-slammers, give it up...you never install to code and come up with some funky spliced solution. Perhaps it is time for you to invest in a food truck. Project Managers, you're safe as there is always some miserable hole of a project, could be anything! that you can be thrown in to manage.

Those cameras.... both sides of the doors? every door? yes. Let's go to 2029 and ask yourself what do you see? What has Alexa become? Is bandwidth no longer an issue? Video AI is crazy, no longer a trip line you draw in a camera field(lol). Everything is tied together(internet). Each building is a Sentient AI, it knows who you are and has the ability to service your every need.

Each door locked or unlocked has the video and audio ability to authenticate your face, voice, cell phone and even biometrics. Tailgating is captured and each and every one is ticketed for building violation code (100-bit coin first offense). The door handle LED and audible let you know you can access or cannot access the door. Again, we need to build a battery powered device to live on the door, no coring, feed thru hinges...come on guys that is totally the T-Rex security sales guy we need to abolish.

It is ok to let your mind wander and think about your rights, bunker down and say it will never happen, but it will. Smart youth need to make smart systems to kill off all the legacy manufacturers and technology needs to unify our life into the Matrix.

Back to some more esoteric fun thoughts. Let's say you tailgate into somewhere you do not belong. If there is no human guard to dispatch, then a robot will come and remove you from the area. The robot knows who you are, can fine you and you must comply. Just leave to an area, it's that simple. This keeps people in check, if you want to rebel then that robot can lock all your financials until you face to face with an officer (skype, Alexa). Repeat offenders go to jail, this will stop a lot you tough old dinosaurs that want technology but cannot abide by it. Even homeless people are issued a cell device, free service and places to charge it are abundant. 

Uber will have cars you can just get it from anywhere and go anywhere, like Alexa it already knows who you are and how to take your money for the services used. Hotels, airplanes you can just ask to get in the que and reservations are made. Remember, every door will have a camera, capable of biometrics, AI video and audio this is the standard.

Of course, our lock technology will increase, most likely to some blue tooth battery pack on the door itself. Batteries that need to be charged phone home to the robot battery janitor can replace the batteries as needed. 

You are the credential, your DNA fused with AI technology is forever unique and is used for everything. I know all the non-hackers are going to talk about hacking, all I can say is this: The cryptology that is coming will require another like AI to even think about interfacing. Hacking will be near impossible from a keyboard and Parrot OS using skid.

Alexa, Siri, Cortana, Watson and Ok Google are the new high digital priests of The Milky Way cyberspace. Want to know where your kids are at? just ask. Need to know if they are late to class, failing on subjects? just ask. Do you want the latest IPVM hikvision review? try asking. Enough with the type, click, scroll and sort UI. Alexa, how many access violations have there been today in the London office? Alexa, fetch me a Peet's Coffee. 

All you old farts think the internet was a big thing, it was only the beginning. Robots are the future and with technology built into the door, elevator, car, shipping dock, movie theater and home they will control everything but not everyone. It all started with the microwave, digital alarm clock and Sony Walkman. Devices such as these helped us in basic ways they just need to be improved and updated to march into the year 2050.

Yes, this is a good time to be in security, the comet is coming for all those legacy access controlasaurs, vmsaurs and hd-analogosauruses. A good time indeed.

 

It is a good time to be in security, I am just tired of it all.

Again, I was disappointed in the Michael Barnes crystal ball. However, he is excused when we remember he is a promoter, rather than a prognosticator. We now know silence is not a good cover.
And, I have been labeled “the endless-loop” due to my repetitive messages about one of the biggest threats to the traditional alarm industry that nobody wants to talk about. Aka SLOW or NO police response to calls for help from remote monitoring firms, due to diminished credibility… aka a threat to the core component of the industry. We estimate that the majority of the remote-monitored deterrent type customers in the US, over 15 million, are unaware that they have been quietly downgraded from a “police call” to “customer call” when their expensive alarm system is “activated”. Several states have already legislated / banned monitoring firms from calling the police first. What will your business model look like with full disclosure?
ADT, as a public company, could be asked by SEC for such delayed full disclosure. Also, maybe reason for ADT stock @ single digits.
Source: Lee Jones; Support Services Group

Again, I was disappointed in the Michael Barnes crystal ball. However, he is excused when we remember he is a promoter, rather than a prognosticator.

In fairness, Barnes is collecting and analyzing data on past performance. The key question is how much the past (and recent past data) represents the future. Barnes may prove right that the data points to a stable future for incumbents but technology disruptions could make recent past data irrelevant if fundamental changes come in.

You are correct, he did a good job of presenting lots and lots of historical data. And he covered most of the operational and financial topics. He knows the overall market better than most. How could he overlook a topic that could invalidate much of his outlook for the future. Police response is the core component of business models of interest to his audience.

Municipalities are quick to point the finger at alarm companies for false alarms, but they'd have a hard time policing their jurisdictions without monitored alarm systems. They'd have to post an officer on every corner to keep an eye out for crime.

You suggest that police response is the core component of the business model. I'd argue the core component is detection and notification-- for now. Today, most alarm companies settle with police response because it's available. Let the police stop responding altogether. Should that occur, alarm companies will provide better, faster guard response or contract with guard services to respond. They're already doing it in some areas. That ought to relieve the "strain on police resources" really fast.

Do you hear that? That's the sound of budget cuts! Then watch as private industry profits from providing the response that public servants fail to provide their public.

Can we improve technology and reduce unnecessary dispatches? Of course. But don't be fooled. Police rely on the alarm industry, not the other way around.

 

Police rely on the alarm industry, not the other way around.

I’m sure they would like to. But if the alarm is unreliable, it’s counter-productive.

With false alarm rates running north of 95%, it’s not being “quick to point the finger”; obviously there’s room for improvement.

Ironically, your suggestion of dramatically increasing privatized policing would work.  Once the costs of the responding to false alarms were transferred directly to the alarm industry, they would have the incentive to fix it.

Inefficient, yes. Counterproductive? I don't think so.

The trouble with "false alarm" figures is that they include all dispatches where police find no evidence of a break in.

False alarm makes it sound like the alarm system incorrectly detects a person or open window/door. It's not a false alarm, for example, if you leave the house without disarming your alarm system. That's a real alarm condition caused by user error. Nonetheless, such a scenario would be counted as a false alarm.

Again, I fully support improving technology to reduce unnecessary dispatches but I'm hesitant to use the term false alarms.

The cost of unnecessary police dispatches to electronically detected alarm conditions indirectly costs the alarm industry as slow/no response devalues the perceived value of alarm monitoring.

The cost of unnecessary police dispatches to electronically detected alarm conditions indirectly costs the alarm industry as slow/no response devalues the perceived value of alarm monitoring.

That’s quite true.  But the cost is spread across the industry as a whole, with the better installed systems paying for the inadequacies of the others.  So it’s indirectly and unfairly applied.

That’s why your privatized policing suggestion would change things.  When a company is footing the bill for their own false alarms, and only their own, then their a clear and immediate incentive to improve their own systems.   

Jake, this would make for good debate with law enforcement. They would absolutely disagree with most of your assumptions.

After many decades and millions of systems, we now know that monitored deterrent alarm systems (majority of all monitored systems)… (1) do not catch the bad guys; (2) helps the bad guys identify the better targets; (3) helps to manage the in/out timing for successful intrusion; (4) shifts the crime activity to other areas of the community; (5) creates nasty demographic discrimination; (6) dilutes sovereign immunity; (7) appearance of collusion; (8) does little, or zero, to reduce crime; (9) more upon request. Justification for the deep dilution of the public/private partnership. So why should (your comment) the “…police rely on the alarm industry, not the other way around”?.

You are correct alarm industry leadership has the solutions, but refuse to accept responsibility. The trends point to SR-Subsidy Recovery wherein the monitoring firms pay for on-demand police response to private fee customers. No false alarm fees, just subsidy recovery for use of public services for private purposes. Unnecessary police response plummets quickly.
Source: Lee Jones; Support Services Group

After many decades and millions of systems, we now know that monitored deterrent alarm systems (majority of all monitored systems)… (1) do not catch the bad guys; (2) helps the bad guys identify the better targets; (3) helps to manage the in/out timing for successful intrusion; (4) shifts the crime activity to other areas of the community; (5) creates nasty demographic discrimination; (6) dilutes sovereign immunity; (7) appearance of collusion; (8) does little, or zero, to reduce crime;

my system does all that?  Boy, do I feel guilty...

I’ll take a pass on addressing points 1-8. Would like to see some stats to support them.

But let’s talk “SR.” Charging for public services based on actual cost of individual consumption is a slippery slope. There are few public services that are equally utilized across demographics. But we’ll stay on topic of police resources. Should the police charge people who call 9-1-1 to report suspicious activity? Should poor neighborhoods with higher crime pay more taxes for extra patrols?

I do support promotion of alarm verification to minimize unnecessary dispatches. But paying police to provide response they’d freely provide to a neighbor who thought he heard shouting next door is unreasonable.

 

After many decades and millions of systems, we now know that monitored deterrent alarm systems (majority of all monitored systems)… (1) do not catch the bad guys; (2) helps the bad guys identify the better targets; (3) helps to manage the in/out timing for successful intrusion; (4) shifts the crime activity to other areas of the community; (5) creates nasty demographic discrimination; (6) dilutes sovereign immunity; (7) appearance of collusion; (8) does little, or zero, to reduce crime; (9) more upon request

What if I just go with signs and dummy cameras, to get the deterrence effect without the false alarms and at the same time bolster sovereign immunity?

 

TO: Undisclosed #1: Good alternative for “deterrence”, and you save lots of money. Another alternative is to upgrade to a “defensive” system, which provides remote-witness, audio or video, by the monitoring source. Thus removing nearly all false alarms. Most remote-witness verification systems get very high response priority, all across the country, even in states that have legislated/banned calls from deterrent systems; and they reverse all of the 8 reasons police ignore most deterrent alarms, as mentioned earlier.
Again, why did Michael Barnes completely overlook these critical high-visibility industry historical issues during his presentation.

...and they reverse all of the 8 reasons police ignore most deterrent alarms, as mentioned earlier.

Even that “nasty demographic discrimination?”

Thank you, Lee, for your contribution to the discussion.

In fairness, Barnes is collecting and analyzing data on past performance...

As for fairness, does Barnes have a pony in the race?

Fair question...and yes...I do.  Generally, my firm makes money from capital flows into the industry and M&A activity.  Relatively agnostic as to where the money is coming from or going to, or who is buying whom.  My concerns are around bad data driving bad decisions.

Dan Gelinas did a great job summarizing my presentation, but exaggerated a few points, and missed a couple of others. I am not quite as casual about the risks in the industry as indicated.

John Honovich's comment about the relevancy of historical data is a great one!!

I don't purport to have a crystal ball.  Heck, I own both ADT and Brinks...LOL.  Just trying to bring to the questions as many facts as possible, and suggest alternative views/perspectives...and, then, of course, say what I think.

Thank you, Mike. I appreciate the feedback. As for missing a couple points, I can't claim that my coverage is exhaustive. You'll notice there's no coverage of Day 1, for example. I tried to pick what I thought were the main themes and issues of import for our readers. Having said that, there was a whole lot of information and I look forward to engaging more on what the important issues were.

Heck, I own both ADT and Brinks.

Because you’re bullish or hedging?

 

IPVM/Dan:

Thank you for attending the conference.  We appreciate your support and coverage!!

Mike Barnes

ADT because I am bullish and as a hedge...Brinks is a long-shot bet, for sure.

Brinks is a long-shot bet, for sure.

Its not long if you’re short ;)

Ha...agreed!!  Actually, I am in the bonds, but still worried.  Silly me, thought the improved dealer program channel (ADT and Brinks are 80% of the markets buyside, and had both improved prices and terms), a decent position in DIY with LiveWatch, the Nest agreement, and the rebranding to Brinks were all decent moves. Flip side, too much debt is too much debt...no room to maneuver.

Mike... can you respond to Lee Jones comment about police response.

This is a nuanced topic, hard to do it justice in this type of forum.  This year was our 24th annual conference.  At every one of them we debated about whether to highlight the false alarm issue.  That is, highlight as a potential existential threat to the industry and/or its configuration/model.  In each an every one of those 24 years, we have discussed it, but not highlighted as such.  Also, in each of these years alarm sales have increased (excepting during the Great Recession) and the public/private interface hasn't melted down.  The industry today is almost 3 times the size it was when we first held the conference. Not to say this isn't an issue.  But I have come to view it not as a flaw, but a feature.

The total number of devices, especially including cameras and their trillions of pixels of data, are generating a rapidly increasing flow of information, all of which is potentially helpful/useful/valuable.  First responders (and others) want this information, this will never change.  But, lacking unlimited resources, there is an inherent need to filter...and public sector dollars rightfully seek for that to happen, as much as possible, before it reaches them.  Pushing the private sector to do the filtering, with the associated market driven forces driving innovation and efficiency makes sense, and is also likely to not change.  Figuring out the proper allocation of responsibilities and dollars is a natural friction point, but again there is nothing unique about this (i.e. many other sectors such as health care, and education have similar issues/friction).

Further, in the last 24 years, the price of systems have declined, the capability has increased, the number being used has increased (~3x). It is more affordable than ever, and the imbedded (voting and taxpaying) base involves a much larger demographic than ever, with penetration increasing (which, inherently means farther down the socio-economic spectrum).  Additionally, almost half of the market are businesses and institutions, who have huge influence on public sector policy. [NOTE: the notion that only the rich have them or can afford them is no longer true]

The notion that systems don't work is false.  They do, unquestionably.  Maybe not as often as they should, and maybe with too many false positives. The mandate to use smoke alarms, including the need for professional monitoring in some applications is a both a testament to the actual and potential capability, and also this countries political will to devote resources to encouraging the use of technology and processes to gather useful data, have it effectively processed and filtered, and then have public sector response.  Advances in sensing technology, imaging/video, and smart filtering are huge, with costs declining.  Throw in drones, and Uber drivers, and one can see a bright future for the ability to intelligently sift through the "fire hose" volume of data and hand off to the public sector only that which is most likely to truly require action.  BUT, even if the industry could somehow achieve a 99% success rate (which it never will), the public sector would, and arguably should, continue to demand improvements.  They are, after-all, the purchasing agent for the actionable data, spending our collective tax dollars.  I am happy they are driving a hard bargain.

Lastly, the industry has huge flexibility.  Routinely in many segments (most notably certain commercial applications) response is private, even for fire.  Huge variances in system capability, response protocols, and price points, with an equally large range of solutions...with the delta increasing.  I don't see a tipping point that applies to a huge segment (or all) of the industry, and/or an inherent structural problem that results in a meltdown.  At any given time, there will be pockets where the friction generates some heat, you bet.  But, nothing approaching a systemic, existential threat to the industry.  From my vantage, as long as the data is valuable (NOTE: the smartest people in the world have systems protecting them, by choice, both in their homes and at work), the public sector is wanting to fulfill the mandate placed on them by taxpayers to serve and protect, the amount of data generated needs filtering, and the end-user is willing to pay for some or all of the filtering costs...the current structure, and its associated friction survives.  It is a muddle.  Just like it always has been.

That is as short as I can make my view on the specific issue.  For anyone that has made it this far, I would like to make two more points.  First, the narrative I often hear connected to this issue, which I think is most problematic and dangerous is that the current structural arrangement has the alarm industry making money using public sector resources in some corrupt or unfair way.  Not true.  I think anyone would be hard pressed to point to a public sector service that every taxpayer benefits from equally, or in proportion to their taxes paid, or [insert variable].  The problem is that the narrative that the alarm industry is built on a house of cards deters capital and/or makes it more expensive, to the detriment of the industry (and, yes, to me as well).  The debate around this structural arrangement is good and healthy, but a narrative that implies it has been settled is dangerous.

This leads me to my second point.  Lee Jones was an early mentor/role model and has continuously helped me understand the industry for over 30 years.  I value and respect his view, and would suggest that readers do the same.  On the vast majority of industry issues we agree. On this one we don't.

Thank you for your thorough response.

 "BUT, even if the industry could somehow achieve a 99% success rate (which it never will), the public sector would, and arguably should, continue to demand improvements"

This is an excellent point. And I agree that the tension is healthy. It pushes public sector resources to be efficiently utilized and the private sector to improve technology.

Also, I wholeheartedly agree with the following...

"(NOTE: the smartest people in the world have systems protecting them, by choice, both in their homes and at work)"

I'd add that I have systems both at home and at work. You may draw your own conclusions! LOL

 

Thank you, Michael, for taking the time to compose such a thorough and thoughtful response. I appreciate the ongoing discussion happening here.

Very well said Mike !

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