CEDIA Sees Growth in Home Controls

Custom Electronic Design & Installation Association’s latest research projects a 5% gross revenue increase this year compared to 2011 for electronic systems contractors. Among key findings, the residential network is rapidly becoming the backbone of virtually every low-voltage subsystem in the home. Plus, highlights of CEDIA Expo 2012.

Home networking systems — The average number of installations in this market segment is projected to increase 40% in 2012 compared to the previous year, with an average project size of about $900. The residential network is rapidly becoming the backbone of virtually every low-voltage subsystem in the home, according to Shonkwiler. No longer are home networks comprised of simple printer sharing and basic Internet access. Today’s homes are being outfitted to handle voice, data and entertainment, while surveillance, medical sensors, teleconferencing, automation and other control features are projected to grow in prominence.

“No matter what happens in the world of home electronics and the price points they are at and the markets they are serving, installers have found that their services — specifically managing the network, systems integration and control — will keep them as a staple in these types of projects. They can offer a service that is not plug-and-play and may never be,” Shonkwiler says.Among all installing contractor types, only security dealers are projected to see a slight decline in revenue for 2012. When the margin of error is factored, earnings could actually be about the same as 2011. A slight decline in revenue may be caused b
y competitive pressures, as well as the assumption that security dealers are taking a lower price point for equipment and installation and instead focusing on creating recurring revenue. Note: surveyed revenue numbers include equipment sales and installation fees and exclude monitoring fees. Source: CEDIA

Home theater / audio systems — The average number of installations for 2011 and projected for 2012 remains steady. The average project size was $20,000 for home theaters and $11,000 for audio systems. According to the report, more than 30% of security installation companies surveyed are already offering distributed audio and video to their clients. Also to consider, wireless technology is being widely used in audio system installations. More than one-third (39%) of dealers surveyed report they are incorporating wireless technology, and a similar number (37%) are implementing a mobile device as the primary control interface. For those dealers that have yet to embrace this category, it’s a good option to look into to diversify your business.

Among other key findings, expectations for security system installations remain about the same in 2012 compared to 2011. CEDIA’s results show 22% of security installations in 2012 are IP-based, and 46% of security system dealers offer professional monitoring services using their own central station or a third-party provider. Energy management and monitoring also appears poised for significant growth as more installation firms gear up to offer services such as climate and lighting controls, automated shading and motorized window treatments.

“One of the great things that will help this industry come out of the recession and see a positive trend in growth, even if it is modest, is that technology is getting out to the mass adopter faster than ever before because of the iPhone, because of that mobile device possibility,” Shonkwiler says. “That ability to now appeal to a larger audience is definitely going to drive additional installations.”

Retrofit as Business Savior

Reinforced by CEDIA’s report is the stark reality that projects in the residential market have remained heavily one-sided in existing homes while new home construction continues to recover from the recession. Results show 73%-84% of all installations are now retrofit. In 2007, the ESC channel was estimated to have a near 50-50 split between work in new vs. existing homes. In 2011, the mean percentage for ESCs’ revenues from residential business was 72%.

As for installing security installers, the latest numbers show 77% of their gross revenue is generated in existing homes with the balance in new construction. Could the tide be on the verge of returning to a more balanced split between the two market niches? The latest housing numbers available at press time indicate a vast improvement that could revitalize the economy’s sluggish recovery.

According to the Commerce Department, construction starts in September were at an 872,000 annual rate, up 15% month-over-month and up 35% year-over-year. In fact, construction activity in September was at its highest level since July 2008. The increase has been fueled by record-low mortgage rates, more stable home prices and a shortage of previously occupied homes for sale.

While a boost in construction starts may eventually lead to a rebirth of sorts for the new home market, the dealer channel for the time being will remain heavily entrenched in existing homes. Getting there proved to be a difficult transition for many companies; however, expected growth in 2012 illustrates that ESCs are adapting and finding opportunity in changing markets. All dealer channels seem to be recognizing opportunities to leverage existing skills in new product or service segments to increase revenues per job, sell upgrades and add-ons and serve new customer types.

“Contractors and integrators had to adjust to the fact the majority of their business was retrofit and remodel. Many had to seize those opportunities in order to survive,” Shonkwiler says. “Hard lessons were learned. For a while, there was just a lot of denial. People didn’t want to give up the fact a lot of their business came from new homes.”

Rodney Bosch is Managing Editor of SECURITY SALES & INTEGRATION. He can be contacted at (310) 533-2426.

About the Author


Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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