Consolidation and technology are key influences on $6B+ commercial and residential market, according
“The monitoring industry has more trends, more things happening and is much more dynamic than we originally realized. There is almost unlimited growth potential in this industry,” reports Joe Freeman, about the newly released “1998 Report on The U.S. Security Monitoring Market.”
According to the report, produced by J.P. Freeman and Co. in Newtown, Conn., “stable, growing revenues will continue to be the hallmark of the security monitoring industry as it undergoes structural, strategic and technologic modifications during the next five to 10 years.”
During the next five years, the residential section of the monitoring industry is expected to have a 54 percent growth rate in monitored systems with a $5 billion increase in monitoring revenues. Similarly in the commercial sector, a 14 percent increase in systems and a 33 percent increase in monitoring revenues is anticipated. This report, which has been released exclusively to Security Sales, is the first to cover both the commercial and residential segments of the industry.
While all indicators for this market appear to be strong, Freeman believes it is solely up to the industry to determine how large this market can become. The face of the industry is changing. This change is largely occurring from two driving factors. The first, which should have short-term effects, is consolidation and restructuring. The second and longer-term factor is the rising influence of technology. How monitoring companies accept these changes into their operations will determine the ultimate market potential.
Industry to Remain Strong in the Future
All indicators are pointing to a strong market in the future for the monitoring industry. “This has got to be a big market with all of the influx of utilities and other large companies. They wouldn’t be getting into it if they didn’t think the market could support it,” opines Stuart Forchheimer of Homesafe Security Systems in Hunt Valley, Md.
The facts would seem to support Forchheimer’s view. After conducting his research, Freeman met with some surprises as to the state of the monitoring industry. “The level of activity in contract-only central stations is higher than we thought and the level of gross margin is also higher. A report we did in 1993 placed the average residential-only gross margin at 69 percent. Currently, it is at 72 percent, even though prices haven’t risen that much,” he explains.
One of the main reasons for such a strong monitoring industry is the overall health of the U.S. economy-even despite current problems in the Asian and Russian economies and the tumultuous roller-coastering on the Dow Jones. According to the report, “When the economy is growing strongly, both residential and commercial market segments can be expected to expand due to the availability of cash. Remodeling of houses, new home construction, increased new business formations and expansion of existing businesses all drive increased sales of security systems in this environment.
Attrition Rates to Remain Low
Not only does a strong economy lead to an increase in the number of security systems, but it also helps keep attrition numbers low. “[Annual net] attrition numbers have actually gone down. They were at 10 percent in 1993 and are now at 5 percent,” says Freeman. “That doesn’t have as much to do with improved service as it does with a better economy which leads to fewer people moving-which is the largest cause of attrition.”
Even though attrition numbers are currently low, companies are still very aware of the problem and work to keep the numbers from rising.
Wages Are Higher For Contract-Only Vs. Proprietary Employees
According to the survey, personnel at contract-only central stations are the highest paid in the industry, especially at the clerk and operator levels. Central station operators earn about 10 percent more at third-party facilities.
The report analyzed the hourly wages of clerks, system operators and supervisors and showed the following results: proprietary companies pay their employees $7.70, $9.20 and $13.70 respectively. Contract-only central stations pay $9.20, $10.10 and $13.90 respectively.
New Study Gives In-Depth Monitoring Market Analysis
The “1998 Report on The U.S. Security Monitoring Market” was designed to explain and quantify the security monitoring industry for both residential and commercial sectors. This 356-page report from J.P. Freeman and Co. in Newtown, Conn., is the first one to cover the monitoring industry and is sponsored by the Central Station Alarm Association, National Burglar and Fire Alarm Association and the Security Industry Association.
The report fully summarizes the monitoring industry, covering such subjects as monitoring system processes and technologies, distribution channels, new technologies, applications integration and automation, industry regulations and standards, the false alarm problem, communication and power companies, acquisitions and mergers, financials, attrition and an industry forecast. This work was created to serve as a key resource for senior management, marketing executives and technical staff. There are numerous charts and graphs that illustrate trends.
Original research for this project consisted of a survey of 2,000 security monitoring companies and personal interviews with industry executives, telecommunication and utility executives and technical specialists, with secondary research coming from U.S. Government data, trade associations and financial sources.
For more information or to purchase the report, call J.P. Freeman and Co. at (203) 426-6023.
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