With a deepening recession, many hope that the newly passed US stimulus will bolster the weakening video surveillance market. Given the sheer size of the stimulus ($787 B USD) and the desire to spend it ASAP, the spending has the potential to help local and international video surveillance companies.
Here are a few key background resources on the stimulus and its breakdown:
Though the overall numbers are certainly huge, the more critical questions are (1) how much of this will really go to video surveillance, (2) when will this be likely to be spent and (3) how big of an impact will this have for video surveillance companies.
Here are the key conclusions:
- The actual spending on video surveillance from the stimulus will be quite small - likely to be in the range of $150 - $250 M USD total spent over 2 years.
- While the government is focused on spending the money immediately, the timing of projects likely puts the execution of most video surveillance projects in 2010.
- The recession stimulus package is far less important financially to the video surveillance industry than continued Terrorism related spending.
At a macroeconomic level, the stimulus could benefit all industries by stopping the spiral of decreasing spending and investment. The government will 'stimulate' demand and incent the private sector to start spending. On the other hand, there are deep questions about the long term impact of the increasing debt needed to pay for it
. For the long term, this tradeoff needs to be examined carefully.
In the short term, the stimulus package will have little impact on the video surveillance industry. It is likely to be no more than a 2-3% increase in annual US video surveillance spending (given that overall US video surveillance spending by end users is in the $6 - $8 Billion USD range).
Size of Spending on Video Surveillance
Estimating the size of spending from the stimulus requires us to make certain assumptions. Specifically, we need to determine how much money is available for video surveillance out of larger disbursements. For example, over $100 Billion USD will be spent on education
. but almost all of it is in non security areas. Unless we examine more closely and segment the spending, we will vastly over-estimate the potential impact.
Within each sector (education, health care, transportation, etc.) we will isolate specific disbursements that may be used for video surveillance and then estimate what portion of the disbursement is likely to go to video surveillance.
The best directory I have found breaking down the overall bill is at Probublica
which offers a comprehensive breakdown and explanation of spending
and tax cuts
. I'd encourage you to scan through this. When you look at the detailed breakdown it's hard to find many direct applications to video surveillance. Moreover, so much of the spending is to simply keep municipal governments solvent and to help stabilize those hit by the recession.
Here are some specific items that could help video surveillance:
- Southern Border and High Intensity Drug Traffic: $30 Million
- Rural Drug Crime Program: $125 Million
- Education for the disadvantaged - school improvement: $3 Billion
- School Improvement Programs: $65 Million
- Defense Department Facilities for various commands: $4 Billion approximate
- Border Stations and Land Point of Entry: $300 Million
- Border Security Fencing, Infrastructure and Technology: $100 Million
- FEMA Port Security Grants: $150 Million
These programs total approximately $8 Billion. In addition, there is about $40 Billion in funding for transportation including $26.7 Billion for highway infrastructure investment. However, these are general transportation projects that will be overwhelmingly spent on non-security expenditures.
Exactly how much will be spent on video surveillance will certainly be hard to tell. Nonetheless, it is reasonable to assume only a small fraction (1/20th to 1/200th) of these appropriations will be spent on video surveillance because almost all of these items are much broader than security.
Timing of Spending
Given that almost all of these items are general construction/infrastructure projects, it is likely that most of the associated video surveillance projects may not be deployed until 2010. Generally in construction, video surveillance is one of the last systems deployed (because it depends on electrical and newtorking infrastucture, etc.) Even if the general projects are started in the next few months and are rapidly accelerated, it will take some months to get to most of the video surveillance portions. The key exceptions to this would be the Port Security and Border fencing initiatives.
Relative Importance of Terrorism Spending
Compared to what we can expect from the stimulus, terrorism related spending on video surveillance has been far greater over the last 6 years. The amount of funding for Homeland Security has averaged $50 B USD per year
. The total spending on the Iraq war is estimated at $600 B USD to over $1 Trillion USD
. This is only the direct spending. The fear of terrorism and increased regulations for critical infrastucture has resulted in billions more being spent by the private sector (e.g., utilities) and local/state goverments.
Making this spending even more important is the much higher precentage of it that is dedicated to video surveillance than the general infrastructure spending found in the stimulus.
In comparison, this 'stimulus' is not much of a stimulus at all compared to the drivers for video surveillance over the past few years.
There is minimal upside from the US stimulus package but significant downside for the industry if terrorism spending is reduced. Such reductions may accelerate depending on the withdrawal from Iraq as well as general economic pressures de-prioritzing terrorism.
There will certainly be some video surveillance projects for the video surveillance industry and, to the extent, that these projects fit your product or geographical focus, you obviously should purpose. Nonetheless, you should be conservative in estimating the significance of the positive impact that the stimulus will provide.
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