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 : PRO Members only. Login. or Join.

Related Reports

Anyvision Facial Recognition Tested on Aug 21, 2019
Anyvision is aiming for $1 billion in revenue by 2022, backed by $74 million in funding. But does their performance live up to the hype they have...
Dahua 4K Camera Shootout on Aug 20, 2019
Dahua's new Pro Series 4K N85CL5Z claims to "deliver superior images in all lighting and environmental conditions", but how does this compare to...
US Government Ban of Dahua, Hikvision, Huawei Takes Effect Now on Aug 13, 2019
The 'prohibition on use or procurement' of Dahua, Hikvision and Huawei products and 'essential components' take effect today, August 13, 2019, one...
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...
Milestone "GDPR-ready" Certification Claim Critiqued on Aug 12, 2019
Milestone is touting that its latest XProtect VMS is "GDPR-ready" with a 'European Privacy Seal'. However, our investigation raises significant...
Stanley Makes "Multi-Million Dollar Investment" Into Banned Hikvision Products on Aug 09, 2019
Just days from the US government ban going into effect, US mega-corporation Stanley has dramatically increased its imports of banned Hikvision...
Axis Door Station A8207-VE Tested on Aug 07, 2019
Axis newest door station, the A8207-VE, claims to deliver "video surveillance, two-way communication, and access control" in a single device. But...
Vivotek Revenue Soars on Aug 05, 2019
Vivotek's revenue has soared so far in 2019, growing 45%. Inside this note, we examine import records and see who is driving Vivotek's growth...
Avigilon Blue VSaaS Tested on Aug 05, 2019
Avigilon says Blue is a "powerful integrator cloud service platform", easy to set up and configure, quickly scale business, by leveraging cloud...
Cisco Settles False Claims Act Suit For Video Surveillance Vulnerabilities on Aug 01, 2019
Cisco entered the video surveillance market in 2007 and suffered for many years through a variety of its own errors and arrogance. The conclusion...

Most Recent Industry Reports

TMA Apologizes to Amazon / Ring on Aug 23, 2019
Not only is Amazon / Ring making major incursions into the residential security market, the organization representing the biggest incumbents, The...
China Dahua Replaces Their Software With US Pepper on Aug 22, 2019
What does a US government banned company do to improve its security positioning in the US? Well, Dahua is unveiling a novel solution, partnering...
Security Integrators Outlook On Remaining Integrators In 2025 on Aug 22, 2019
The industry has changed substantially in the last decade, with the rise of IP cameras and the race to the bottom. Indeed, more changes may be...
First GDPR Facial Recognition Fine For Sweden School on Aug 22, 2019
A school in Sweden has been fined $20,000 for using facial recognition to keep attendance in what is Sweden's first GDPR fine. Notably, the fine is...
Anyvision Facial Recognition Tested on Aug 21, 2019
Anyvision is aiming for $1 billion in revenue by 2022, backed by $74 million in funding. But does their performance live up to the hype they have...
JCI Sues Wyze on Aug 21, 2019
The mega manufacturer / integrator JCI has sued the fast-growing $20 camera Seattle startup Wyze. Inside this note: Share the court...
Dahua 4K Camera Shootout on Aug 20, 2019
Dahua's new Pro Series 4K N85CL5Z claims to "deliver superior images in all lighting and environmental conditions", but how does this compare to...
ZK Teco Atlas Access Control Tested on Aug 20, 2019
Who needs access specialists? China-based ZKTeco claims its newest access panel 'makes it very easy for anyone to learn and install access control...
Uniview Beats Intel In Trademark Lawsuit on Aug 19, 2019
Uniview has won a long-running trademark lawsuit brought by Intel, with Beijing's highest court reversing an earlier Intel win, centered on...
Suprema Biometric Mass Leak Examined on Aug 19, 2019
While Suprema is rarely discussed even within the physical security market, the South Korean biometrics manufacturer made global news this past...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact