How VMS Pricing Impacts DVR / Appliance Sales

By: John Honovich, Published on Jul 06, 2010

The recent price cut for Milestone's entry level offering is likely to impact the pricing and sales volume of the DVR / hybrid DVR market.

Fundamentally, VMS software and DVRs are substitutes. The more attractive one of these offerings becomes, the less attractive the other does. If one offering's price decreases and everything else remains the same, the other category's sales volume will decrease.

Here's an analogy: when you eat, you have 2 options: (1) going to the store so you can cook for yourself or (2) eat at restaurant. You are likely to pay a premium for a restaurant because they provide a turn key solution. The restaurtant is like a DVR appliance, VMS software is like food at the store.

If the price of food drops and restaurant prices stay the same, many people are likely to eat more at home. Restaurants seeing this are likely to drop prices or face lower customers. This is common sense.

Let's compare this concretely to DVRs and VMS software using estimates. A 16 channel DVR with 1TB of storage may be $3,000 MSRP.  16 channel VMS software may cost $2000 MSRP ($100-$125 license per channel) plus the cost of the PC/storage and setup. The all in VMS system may be $3,500 - $4,000.

Now, take Milestone's price cut from over $100 to $50 MSRP per channel. Now, that same 16 channel VMS software is $800 (down from $2,000) and the overall cost is $2,300 to $2,800.

While we can vary the assumptions, the trend is clear - significant VMS price decrease improves the attractiveness of VMS solutions relative to DVRs. Even if the DVR solution is still 'better' in some ways, decreased price gap makes it easier to pick VMS software.

The industry has gone through this cycle in the past 5 years. In the middle of the last decade, 16 channel DVRs regularly had an MSRP of $10,000 or more. Smart users realized that their was an arbitrage opportunity to purchase VMS licenses and build it themselves for less. This alternative contributed to the ongoing price decline of DVRs.

We expect the Milestone move (and other providers responding) to put further pressure on the DVR market.

Comments : Members only. Login. or Join.

Related Reports

Video Surveillance History on May 06, 2020
The video surveillance market has changed significantly since 2000, going from VCRs to an emerging AI cloud era. The goal of this history is...
NetApp Video Surveillance Profile on Mar 09, 2020
NetApp is increasing its efforts in video surveillance and told IPVM surveillance storage is the fastest-growing segment of its $6+ billion...
Proactive CCTV "Only Affordable Video Archiving Solution" Profile on Aug 12, 2019
Proactive CCTV is claiming to offer "the only affordable video archiving solution on the market", reducing the storage typically required for H.265...
Razberi Technologies Company Profile on Aug 06, 2019
Razberi says they have doubled their revenue in the first half of 2019, citing their proprietary camera hardening and cybersecurity capabilities...
Ionodes Company Profile on Jul 31, 2019
What happened to Ionodes? With seasoned leadership from Jean-Paul Saindon founder of SmartSight and Dr. Michael Gilge, founder of VCS, back in...
Genetec Beats Milestone For IHS #1 on Jun 21, 2019
For years, Milestone has touted that they are the #1 VMS. Now, Genetec has beaten them in IHS rankings. But what is this? Even other manufacturers...
Axis Will Not Block Resellers on Jun 10, 2019
While Axis generally has strong favorability amongst integrators, the biggest complaint is their channel model, which results in smaller integrator...
OpenALPR Doubles Prices on Jun 06, 2019
There is no 'race to the bottom' in cloud / AI video surveillance. In May, Verkada increased their prices. Now, OpenALPR is doing the same with a...
Bluecherry Open Sources Entire VMS on May 13, 2019
Bluecherry announced they have "released the entire Bluecherry software application open source with a GPL license". We spoke to Bluecherry's...
Verkada False Allegations Against Avigilon Exposed on May 08, 2019
Verkada has leveled false allegations against Avigilon, as part of their aggressive marketing tactics against the 'dinosaurs' in the 'ancient'...

Most Recent Industry Reports

GeoVision Presents AI and Facial Recognition on May 22, 2020
GeoVision presented its AI analytics and facial recognition at the April 2020 IPVM New Products show. Inside this report: A 30-minute video...
Density Presents Occupancy Monitoring For Coronavirus Protection on May 22, 2020
Density presented its cloud-based occupancy sensor to deal with Coronavirus at the May 2020 IPVM Startups show. Inside this report: A...
Openpath Presents Two Door PoE Controller on May 21, 2020
Openpath presented its new PoE controller at the May 2020 IPVM Startups show. Inside this report: A 30-minute video from Openpath including...
Bosch Presents MIC 7100 Extreme PTZs on May 21, 2020
Bosch presented its MIC 7100 Extreme PTZs at the April 2020 IPVM New Products show. Inside this report: A 30-minute video from Bosch...
Hikvision Chairman Targeted For Sanctions As Federal Watchdog Calls Out Hikvision "Serious Religious Freedom Violations" on May 21, 2020
The US government's religious freedom watchdog has criticized Hikvision for being "credibly implicated in serious religious freedom violations"....
Hikvision Temperature Screening Tested on May 20, 2020
Hikvision has ramped up the promotion of its 'temperature screening' system, including their salespeople arguing for no blackbody needed. But how...
Axxon Presents VMS 4.4 and AI Behavior Analytics on May 20, 2020
AxxonSoft presented its VMS 4.4 and AI behavior analytics at the April 2020 IPVM New Products show. Inside this report: A 30-minute video...
Indoor Robotics Presents Tando Aerial Drones on May 20, 2020
Indoor Robotics presented Tando indoor autonomous drones at the May 2020 IPVM Startups show. Inside this report: A 30-minute video from...
Directory of 89 Video Surveillance Startups on May 20, 2020
This directory provides a list of video surveillance startups to help you see and research what companies are new or not yet broadly...
FLIR Cancelling Contract With X.Labs / Feevr on May 20, 2020
While X.Labs announced the signing of a new agreement with FLIR on May 12, 2020, FLIR said, in response, on May 18, 2020, that they had cancelled a...