7 Key Surveillance Trends for 2014

By John Honovich, Published Apr 21, 2014, 12:00am EDT

Here are the 7 key trends we see for the video surveillance market emerging in 2014:

  • Low cost camera manufacturer competitive shift
  • FLIR and Samsung aggressive expansion
  • 4K camera problems emerging
  • H.265 availability limited
  • Axis access control starts slow
  • Edge recording stumbling
  • Weak innovation will drag down growth

Overall, these trends combine to deliver the most challenging situation the video surveillance industry has faced in a more than a decade.

Low cost camera manufacturers are having the biggest impact on the video surveillance market in 2014, driven by 4 key factors:

  • The maturity of HD video surveillance – everyone now sells HD / MP cameras
  • The lack of a ‘big new thing’ to shift customers’ requirements
  • The expansion of large Chinese manufacturers into western markets
  • The slow response of incumbent Western manufacturers

It is becomingly increasingly hard for manufacturers to differentiate their 720p and 1080p offerings and limitations in 5MP+ camera and analytic performance constrains demands for higher end offerings.

Large Chinese manufacturers, most notably Dahua and Hikvision, as well as their Western OEM partners, are taking advantage of this. While Western brands continue to sell ‘budget’ lines at $200 - $500 per camera, these competitors are regularly selling at half that price or even less. Plus, the quality has gotten better and their Western based support is improving.

Meanwhile, major Western brands are doing little, if anything to respond. Though Axis has released waves of mid to high end tier products, their $300 and lower camera offerings have had little expansion over the past year. The same pattern, or worse, goes for Panasonic, Sony, Bosch, etc. Even Arecont, who just a few years ago was widely viewed as a low cost alternative, is now comparably quite expensive for buyers looking for ‘simple’ 720p and 1080p cameras.

Low-end business is typically less attractive to major ‘brands’ and skepticism exists about their viability. However, we are seeing significant migration to these low cost providers. Equally importantly, this is giving them a foothold to move upmarket which could cause even worse issues in the next 5 years for incumbent western manufacturers.

We expect low cost camera manufacturers to push market prices down significantly over the next 2 years, either through them gaining sharing or western manufacturers forced to respond with price cuts and new lower tier options.

FLIR and Samsung Aggressive Expansion

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The two most notable manufacturer expansions in the surveillance market right now are coming from FLIR and Samsung. Both are combining their corporate brands with a low cost focus to expand their surveillance market share.

FLIR is aggressively pushing downmarket, first through its acquisition of Lorex and now through its low cost thermal line. FLIR is expanding both into the consumer market as well as the budget / DIY markets, including an upcoming non-IP HD line.

FLIR certainly has risks here as not many companies have successful transitioned from selling super high end products to very large customers to, in this case, literally, selling to Costco and Sam's Club. Can FLIR really accept the super low unit price and depressed margins of selling in this market? Will it total enough revenue to keep them motivated? The next year will tell.

By contrast, Samsung's expansion into IP is fairly straightforward. Samsung has been strong in analog surveillance, as well as numerous electronics / devices (like smartphones and tablets) where they sell into the mass market. The difference in the last year is that Samsung has gotten serious about increasing resources for both new IP products and sales efforts.

The Samsung approach appears to mimic Axis, with similar products and feature sets, but at notably lower pricing (see Samsung WiseNet III camera tests, Samsung Hiring ex-Axis employees and Samsung discounts). Combine this with Samsung's overall brand in technology and they have a chance to cut into Axis strength in Western markets. Of the other big incumbent brands in surveillance (such as Bosch, Panasonic, Pelco and Sony), none of them has been anywhere near as aggressive about IP expansion, especially with the low price points Samsung is willing to accept.

4K Camera Problems Arising

We are still a year away (2015) from seeing a range of 4K cameras, as many manufacturers ‘releasing’ 4K are simply ‘demoing technology’. That is problem #1 as, without shipping products, widespread adoption is impossible.

Moreover, a number of technical problems / constraints are likely to further constrain 4K:

  • Poor low light performance – not just because of more pixels but because of processing limits on image processing / gain control
  • Limited lens availability including the risk that lenses marketed as 4K will not be ‘true’ 4K lenses or, if they are, will be quite expensive
  • No ‘true’ WDR
  • 2x to 4x more bandwidth / storage costs than 1080p
  • Much more expensive than 1080p cameras

This is similar to where HD was in 2008 / 2009. Over the next 5 years, all of these issues will likely be overcome for 4K cameras. It just means that for the immediate future, 4K will come with big limitations.

H.265 Limited Availability

H.265 does have the potential to be a real differentiator, especially against growing low cost camera offering, because manufacturers could use this as a testifier for premium prices (i.e., ‘this H.265 camera costs more but it will save you X hundreds of dollars on storage.’).

The problem is that only manufacturer, Aventura, is offering H.265. Aventura has limited market presence and a go-to-market strategy that focuses on selling their own products end to end. This makes H.265 mostly invisible to the broader surveillance market.

Equally concerning, other manufacturers are not even ‘technology demoing’ H.265 or making claims about upcoming support.  We suspect some will do so in fall 2014 but adoption could push out to 2015 or even 2016.

Axis Access Control Starts Slow

The big news of fall 2013 was that Axis was commencing its long anticipated entrance into Axis control with the release of their A1001 door controller and Axis Entry Manager software.

So far, overall adoption and interest appears low.  Access control, in general, moves slowly as incumbents tend to be entrenched in long-standing deployments. Plus, Axis’ offering, while solid (see IPVM test results), delivers no competitive breakthrough. Finally, unlike HID, which allows manufacturer partners to re-sell / mark-up HID’s products, Axis is selling through their traditional channels, cutting out access control manufacturers and reducing their incentive to promote it.

However, Axis has a sizeable customer base and sales force, who they surely will be using this to market directly to major accounts. Plus, Axis integrators may slowly start to adopt Axis for smaller door systems to complement their video projects.

Edge Recording Stumbles

Edge recording was hot over the past few years culminating with Axis Camera Companion and Milestone’s Arcus, platforms that allow recording video directly on SD cards inside the camera.

Both have cooled over the past year. We see three key factors.

First, the low cost potential of edge recording for small systems has largely disappeared. Edge recording can save money by eliminating the cost and time of buying and setting up a dedicated recorder. However, with the rise of low cost camera manufacturers who are selling turn key MP IP kits for $1,000 or less (see our test of the 4 channel $699 one), edge recording with more expensive Axis et al. cameras is harder to justify for those focused on minimal cost.

Secondly, unresolved problems with edge recording have emerged. Most notably showcased in our discussion: "Axis Edge Storage And Camera Companion Is Unstable". Axis still has offered no clear solution. A key element of paying Axis a premium is that fundamental failures like these should be non-existent.  What rationale integrator is going to deploy an edge recording system to save their client some money up front only to have to deal with an ongoing service / support crisis?

Finally, few camera manufacturers have responded with their own full edge recording offerings and no major camera companies have adopted Milestone Arcus. Without broader manufacturer support, adoption is constrained.

Weak Innovation Drags Down Growth

Overall, as the above trends illustrate, little new innovation is driving the surveillance industry forward.

Growth typically comes from 3 areas:

  • Macroeconomic expansion, i.e., the ‘economy’ does well
  • Demand increases, e.g., crime rates rise or terrorist event occurs
  • Greater value of products, i.e., innovation improvements

So while one can debate or hope for the broader economy to strengthen or demand to increase, weak innovation is certainly a headwind against video surveillance growth. Indeed, this is the opposite situation in the 2008 – 2010 time frame, where the economy was clearly poor but innovation, driven by the shift from analog to IP, strengthened the overall market.

Now, the biggest ‘positive’ driver is lower cost cameras, which will certainly increase the attractiveness of HD to buyers but presents problem to the growth and profitability of both incumbent integrators and manufacturers. 

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