The $100 MP Era is Here
By John Honovich, Published May 13, 2015, 12:00am EDTThe video surveillance industry has entered a new era.
This era is disrupting the biggest players in the industry and changing long-held industry dynamics.
The Old Era - 2009 to 2013
Megapixel surveillance first broke through in 2009. Though they had been available for many years before, going from MJPEG to H.264 plus the entrance of major manufacturers into megapixel, empowered megapixel to go from niche to everywhere.
Today, megapixel is not only expected, 720p and even 1080p are commonplace, if not increasingly commodities.
~$100 MP Era
In the past year, a new era has emerged.
In the previous era, megapixel was 'novel' and relatively expensive. 'Cheap' megapixel cameras were $400, $500. Most megapixel cameras were $700 or more.
Price has certainly declined year by year, but the drop in 2014 / 2015 has been extraordinary.
Now, ~$100 MP cameras are increasingly ordinary. HD analog cameras are often even less than $100 (see HD Analog vs IP Tutorial and HD Analog Usage and Rejection Statistics). Even MP IP cameras are routinely $100, driven by 'China' - The #1 Threat / Force in the industry.
Drop in Premium Side Too
Those "$100" megapixel cameras are typically fixed focal length, short range integrated IR offerings.
But even the 'high-end' of megapixel cameras has dropped down in price dramatically. Where just a few years ago, true WDR, smart IR, auto-focus, etc. where the province of ~$1,000 cameras, now you can routinely find them in $500 ones.
Manufacturers Hammered
For manufacturers, especially the established Western brands, the impact has been severe. A big part of the problem has been that the 'Chinese' historically only OEMed, allowing Western brands heavy markups. Now, the 'Chinese' are building their own direct branded businesses (see Top Manufacturers Gaining and Losing Ground), which is punishing revenue and margins for manufacturers. Another key issue is improved components (sensors and chips), that let 'anyone' deliver quality video.
There is no easy way out for Western manufacturers. 'Solutions' are certainly one attempt, with camera manufacturers buying VMSes (e.g., Tyco/Exacq, Panasonic/VideoInsight, Canon/Axis/Milestone). Even the most successful recent solution provider, Avigilon is clearly feeling the market pressure.
Ultimately, developing new, innovative features and offerings that the 'Chinese' cannot replicate might be the best path but most Western manufacturers likely lack the resources or engineering to truly withstand.
Integrator Challenges
For integrators, the impact is mixed but the change is problematic.
Since so many integrators rely on the profits of marking up cameras, the price drop is a challenge. Lower product prices with the same markup percentages means less total dollar profits. Combined with product pricing widely available on the Internet, there is clearly a lot of price pressure.
We think embracing "$100 MP" is important, because the reality is integrator competitors are already doing so. You might as well be early, make some more profits than be late and lose out to the earlier adopters.
Golden Time for End Users
For end users, it is good times.
Cameras have gotten a lot better and they have gotten a lot cheaper. Video coverage and quality that was a dream 5 or 10 years ago is now easy to achieve.
The main practical barrier is incumbent manufacturers fear mongering about lower cost solutions. Certainly not everything low cost is good (beware of Chinse spammers with $39 cameras) but there is now a vast array of low cost, MP products even from bigger manufacturers (e.g., from our recent testing Honeywell HQA HD-CVI, testing Samsung Lite, etc.). Use caution always but do not be suckered into paying 2x or 3x more than what the emerging market norms are becoming.
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Comments (32)
Ultimately, developing new, innovative features and offerings that the 'Chinese' cannot replicate might be the best path but...
Maybe the West should consider replicating some of the new 'Chinese' offerings, like 200m IR and H.265? If they 'can', that is.
Maybe the key is to create direct relationships with a trustworthy and quality Chinese OEM manufacturer and cut the middle men to maintain margins. Easier said than done? Perhaps. But it's definitely a consideration here. There's only so much you'd want to pay for extended warranty and part-time tech support.
It is an interesting dichotomy to be sure. Margins (thus profits) are going down. That forces the service-oriented companies to either sell more gross, find ways to be innovative in delivering service or cut back on service. Not necessarily service techs, but overall staff. Service is more than just a tech in a truck.
H.265 can be a game changer for an IT person and for customers, but right now it does not mean much. There are no recording options for it. What will the price be and how long before that bottoms out (race to the bottom). There is also the concern about it not being backwards-forwards compatible with existing equipment. Will customers that only recently purchased a good, inexpensive video system be willing to change it out at any expense just for the sake of bandwidth gain?
As a last note, I completely understand the rules of the board. It bothers me personally and somewhat professionally that there are so many "undisclosed" remarks in every thread (not just this one A). If you are going to say it, then sign it.
Because we are an end user, better tech at lower prices increases the chance that improvements make it into the next budget. Obviously price is not the only consideration. But it is a consideration alongside performance.
I think this is a huge opportunity for traditional manufacturers to broaden their horizons. The Chinese cameras are dirt cheap, but they all come preinstalled with the stink of slave labor. The Fair Trade Food movement has proven that people will pay a certain premium for products which check certain social boxes. Maybe the security industry could take a few pointers.
I'm trying to understand the down side to this issue. When the hardware is less expensive, doesn't it make the installed system affordable to a wider base of customers? Wouldn't a larger customer base lead to even more sales and installations? Plus, wouldn't some fraction of those customers want or need long term support?
I wonder what a price elasticity curve might look like for megapixel cameras? If everyone had half a dozen of them, just replacing normal failures could support a pretty decent market.
I think the integrator business today is like the minicomputer business in the late 70's/early 80's, when people in that game had to learn to stop living on margin from hardware. Technology maturity progresses like this in patterns, I guess. Customers have to learn to buy the right stuff too of course.
This helps bring the low end of the market together with the high end and brings about a depression.
As cost go down every system out there looks the same, this will cause all of the walmart, costco system s to be more attractive to customers.
What this will cause is the NAFTA effect in the economy .
Lots of cheep systems and no or lower profits , bringing out the welfare ecomomy.
Just wait untill this saturates the marketplace.
Price Down, Profits Down, Cost Down, Professionalism Down
Just another Trunkslammer enviornment where you wont even pay the overhead to keep the doors open .