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The Wait-and-See Approach

Over the past nine years, Parks Associates has been tracking the activities, attitudes, and opinions of principals active in the custom installation channel.

Has the CEDIA Channel Grown Weary of Bleeding-Edge Technology?

Over the past nine years, Parks Associates has been tracking the activities, attitudes, and opinions of principals active in the custom installation channel. One consistent finding throughout this research is that electronic systems contractors (ESCs) are early adopters of new technologies. They take pride in their role of introducing clients to the latest innovations. Therefore, the results of our latest Channel Monitor Survey, conducted in partnership with Residential Systems, are surprising.

Over the past four years, Parks Associates has asked ESCs to rate their familiarity with selected networking technologies on a scale from “1” to “7,” where “1” is “have not heard of it” and “7” is “very knowledgeable about it.” Fewer ESCs in 2010 than in years past rated themselves as “very knowledgeable” about various wireless, powerline, and IP technologies. We must be cautious about making broad pronouncements from these findings. All survey results must be interpreted within the margin of error, which is listed along with the results of all four surveys listed in the chart on this page.

Familiarity with Wireless, Powerline, and IP
Between the 1Q09 and 2Q10 surveys, both percentages of ESCs who are “very familiar” with ZigBee and Z-Wave declined, from 41 percent to 34 percent with ZigBee and from 27 percent to 18 percent for Z-Wave. Both drop-offs are just within the margins of error, but they still beg for an explanation. It could be that ESCs have redefined “very familiar.” As they become more familiar with these technologies, they realize how much more they need to know. Another explanation could be that some ESCs very familiar with the technologies are no longer in business.

Familiarity with powerline technologies appears to be inching up, but it is not growing as fast as one might expect given the introduction of powerline-based audio distribution systems from well-respected manufacturers NuVo and Russound. We also asked ESCs for their opinion about powerline technology for AV distribution and found that it has not increased over the past four years. In 2Q10, about 20 percent of ESCs considered powerline a good alternative to traditional solutions, and the percentages of ESCs with this opinion have not changed significantly since we began asking the question back in 1Q07. At the same time, the percentage who don’t think it can meet their clients’ requirements has remained at about 20 percent.

ESC’s opinions about Wi-Fi based on 802.11n are another story. From 2007-2009, only 15-18 percent of ESCs believed it to be a good complement to low-voltage wired solutions for AV distribution, but now nearly 30 percent have confidence in the technology. This dramatic increase is likely due to the persistent marketing and educational efforts from the Wi-Fi Alliance as well as the growing ecosystem of suppliers supporting the technology.

In addition, fewer ESCs are unsure about their opinion of Wi-Fi for AV applications and want more information. Only 17 percent feel this uncertainty, and even fewer (10 percent) don’t think Wi- Fi can meet their clients’ requirements. However, 15-20 percent of ESCs plan to stay with traditional wired solutions even if Wi-Fi works well.

Integrators Consider 3D a Mixed Blessing
3D TV was big news at this year’s CES, and the technology certainly could play well in the custom installation channel. Just over one-half of ESCs surveyed in 2Q10 offer 3D TVs to clients requesting them. Of the other half, six percent plan to offer 3D TVs in 2010, and 21 percent will add this product in 2011. So, if all goes according to expectations, about two-thirds of the channel will be offering 3D TVs by the end of 2011. That is rapid adoption for a new technology, but what do ESCs think about it?

A few ECSs (14 percent) believe 3D will be great for boosting sales. However, 39 percent see that impact delayed until more content is available. A sizeable group (36 percent) thinks 3D will confuse and frustrate consumers due to different formats, lack of programming, and the need for special glasses. One respondent called 3D “not ready for primetime.” Another said it is “an additional arrow in the quiver to generate sales [among] early adopters.” Very few ESCs (five percent) think clients will postpone home theater upgrades until the 3D technology becomes more stable and more content is available. Even fewer (three percent) think 3D will increase their support costs.

The bottom line for 3D is relatively positive. ESCs are realistic and not counting on a big bang for their business in the short term, but they see 3D boosting business in the long term. In the meantime, integrators must manage client expectations. Early adopters will buy first but must be educated to expect rapid obsolescence. Manufacturers must carefully walk the line between pushing an immature technology and building future demand. Disappointing early adopters will slow growth in overall demand, but on the other hand, satisfied early adopters will ignite broad-based adoption.

ESCs Demonstrate Caution as Early Adopters
Should we be surprised that ESCs are not jumping to use every new technology? No. Proponents of these technologies must assure integrators, through messaging and demonstrations over time that these new solutions are stable, reliable, and capable of satisfying their clients’ needs. Competing technological approaches slow the process.

In addition, integrators do not yet see powerline and wireless solutions as replacements for traditional Cat-5 wiring systems. Instead, many view these technologies as complements to traditional network connectivity solutions. Over time, as integrators become more comfortable with alternative connectivity media and as the media become more standardized, this complementary role could transition to a replacement role, especially in retrofit projects.

Drawing Conclusions from the Research

When it comes to wireless and powerline AV distribution ESC acceptance persistence may be the key, according to the recent Parks Associates survey.

Supporters of the various technologies should continue educational and demonstration programs. Manufacturers need to identify the right messages to assure ESC s that these technologies can successfully complement their traditional approaches. Testimonials from respected ESC s will help.

In addition, there is another trend that may prompt more integrators to consider wireless and powerline solutions: the movement to retrofit projects. Revenue generated from projects in existing homes accounted for 61 percent of total business in 2009. This is up from 55 percent in 2008 and only 47 percent in 2006. Dealers also expect projects in existing homes to generate 64 percent of total revenue in 2010. Home theaters, multiroom audio, and internet-connected entertainment systems in existing homes are perfect applications for wireless and powerline AV content distribution.

Bill Ablondi is director home systems research at Parks Associates.