IP Camera Competitive Guide 2013

IP cameras remain the main growth and competitive driver within the surveillance industry. Indeed, IP camera advances clearly led 2012 major events across the industry. In this report, we examine 4 key drivers and how they are changing the market:

• Cost - Commoditization or Aggressive Competitors?
• Image Quality - WDR and Low Light
• VMS Enabled Cameras - Replacing VMS Server Software?
• Panoramic Cameras - Replacing PTZs?

IP cameras have become more cost competitive but not commoditized. Indeed, the two main companies driving down costs on the professional side of the market, Avigilon and Axis, are not stereotypical low-cost providers. When markets become commoditized, outsiders with few or no differentiating features take share away with lower cost substitutes. By contrast, Avigilon and Axis are proactively pushing prices down with high quality offerings.

A few years ago, Axis likened itself to the Germany luxury car manufacturer Audi, a high end specialist. At that time, it was true. Now, it is completely different. Axis has aggressively introduced significantly lower cost products including, in the last year, low-cost minidomes, low-cost cube cameras, and one of the lowest costing panoramic cameras, in addition to giving away server free VMS software. Axis has taken the fight to budget providers like Arecont, ACTi, Vivotek, etc. And given Axis' large market position and strong overall quality, it makes it hard for rivals to compete. This in turn, puts pressure on these companies, as well as mid tier manufacturers to match or get knocked out of deals.

Avigilon's torrid growth to $100+ million USD has been fueled by quality products at extremely aggressive pricing. As the company has repeatedly stated, it is maximizing growth rate over total profitability (though the company is modestly profitable). In 2012, Avigilon added low cost bullets and WDR cameras to a catalog that includes its super low cost encoders. Combined with the company's strong VMS offering with no ongoing maintenance fees, Avigilon's price points and quality are putting pressure on incumbents.

Additionally, on the traditional low cost side, Chinese mega manufacturers Hikvision and Dahua are gaining ground, with Hikvision's quality improving and Dahua offering possibly the least expensive IP HD camera kit in the world (through resellers like Q-See [link no longer available]). That noted, hese manufacturers are a factor at the low-end / entry-level part of the market more so than the professional space.

Cost - What Should You Do? If you are a customer of other major players - like Sony, Panasonic, Bosch, Pelco, etc. - you should push for more discounts and lower prices. Certainly, these companies are well aware of the incursions companies like Avigilon and Axis are making and, if pushed on it, will feel pressure to reduce prices.

Image Quality - WDR and Low Light

With 720p and now 1080p widely available from essentially any vendor, HD alone no longer differentiates. While many vendors talk about competing with analog, the reality is that the real competition is against other HD vendors. The two areas where image quality still suffers, even with higher pixels is most often in harsh lighting and low light conditions.

At the end of 2012, a surge of 'true' multi-exposure WDR cameras were announced, driven by new HD sensors with built-in WDR. We expect this trend to continue in the Spring 2013 releases, further expanding HD's lead over SD / analog.

For low light, two areas of differentiation exist: (1) image processing and (2) integrated IR. On the former, Axis's introduction of Lightfinder over the last 18 months has clearly given them a lead in this area - Axis's newest generation of cameras (with Lightfinder) are clearly superior in low light to almost all other vendors D/N cameras. We do yet see significant responses to this. On the other hand, integrating IR within HD cameras is becoming increasingly common with nearly every manufacturer now offering them. Interestingly, Axis is relatively weak in this area with only an indoor only box camera and an expensive dome offering. By contrast, Avigilon's new IR bullet series has advanced feature sets and attractive pricing.

VMS Enabled Cameras - Replacing VMS Server Software?

While VMS enabled cameras with edge storage support has been around for years, Axis's ACC introduction has really sparked this segment. With Axis's broad array of low cost cameras and ACC's simple setup, it makes for a very attractive alternative to both analog DVR kits and entry level IP camera / VMS software systems. Uptake of ACC has been very strong. We expect to see lower cost rivals respond in the next 6 to 9 months or lose significant business to Axis.

Panoramic Cameras - Replacing PTZs?

See our 'Everyone Going 360 report" for a full review of this driver.

Secondary - Smart Cameras

For more than a decade, pundits have predicted analytics would be the next big thing. After a few years of widespread agreement that analytics disappointed, some are starting to project a future for the technology. Indeed, IPVM readers choose analytics as the next big thing over the next 5 years. However, for 2013, expectations should be set low.

The big problem is that there are very few new analytic offerings and while running them on the camera has lots of potential, without broader availability of quality products, the market is not going anywhere.

One element has been resolved. The ObjectVideo lawsuits are over, with settlements from Bosch and Pelco at the end of 2012. We expect manufacturers, on average, to pay in the range of $3 to $12 per camera for an OV patent license. While having an agreement in place removes uncertainty, having to pay this tax adds costs to an already weak area.

We expect to see more smart camera announcements in 2013, if only because there were so few in 2012. One key player to watch is Axis. They have had an analytics platform for more than 3 years but it has made little progress in that time. In fairness, there are few viable analytics providers to run on such a platform. Incremental steps may be made but it is too late to have a major practical impact in 2013.

Secondary - Higher Resolution Cameras

Growth in 'super' megapixel offerings has slowed. Even 10MP cameras are still fairly uncommon despite 5MP cameras being fairly widely available for the last 4 years. The most notable news last year was Avigilon's 29MP release, though it was an incremental advance to their Pro line, expensive, proprietary, bandwidth inefficient and super low frame rate. Nonetheless, it remains an excellent sales tool to lead with a unique offering.

The far future of super high resolution is starting to appear with 1000MP+, or gigapixel cameras. New releases last year included ipConfigure's and startup Aqueti's. With $100,000+ USD price points, adoption will certainly be extremely limited but it could be an interesting differentiator for large outdoor critical infrastructure deployments.

>With those notes, increases in single and multi-imager super high resolution cameras were low last year. While we expect some improvement this year, it will not be a major driver.

Conclusion - Most Likely Impacts

Of these, here are the key practical impacts:

• Lower costs, ~10% to 15%, are likely achievable as Axis and Avigilon continue to put price pressure on the market.
• WDR HD cameras will become far more common as mid tier manufacturers take advantage of off the shelf sensors with true multi-exposure WDR.
• Panoramics are more broadly used for small to mid areas, replacing both fixed and PTZ cameras there.
• Small systems increasingly opt for edge storage / decentralized VMSes from camera manufacturers.
• Setting up remote access becomes less of a problem as more camera manufacturers include cloud access for free as a standard feature.

2014 UPDATE

Cost competition has accelerated significantly since this article was released. See our 7 Key Surveillance Trends for 2014.