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CEDIA Expo 2017: Where High-End Audio Met Smart Home, Whilst Amazon Extended Its Reach into Both Sectors
Anyone who doubts the existence of the inextricable link between custom installation (CI) and high-end audio in the US would have been quickly convinced by a visit to CEDIA in San Diego, held on 7-9 September. Futuresource Consulting sent analysts who are focused on both audio and smart home to the event, which attracted a large number of delegates to the 470 plus booths. At least 70% of the exhibitors were showing audio equipment, several of whom were high-end international brands who had chosen not to exhibit at IFA Berlin the previous week. All exhibitors that Futuresource spoke with were hugely positive about the state of the sector and the volume of business being generated by the show.
One factor common to both shows though, was the growing influence of Amazon, both in audio and in smart home more broadly.
Futuresource estimates that mainstream audio brands such as Yamaha, Pioneer/Onkyo and Sound United might expect 10% of volume and perhaps 20-25% of value of their US audio business to be transacted through the CI channel. But when one looks to the really high-end brands such as Wisdom Audio, Pro-Audio, Storm Audio, Martin Logan and Datasat, the reliance on the CI channel is much heavier, with anything north of 50% of volumes going via custom install.
One factor that makes the CI channel so lucrative is the profile of some of the brands that are available here. Many vendors have brands targeted specifically at CI, often with much higher price tags and offering substantial margins. Integra is one such brand, offered by the Pioneer/Onkyo group exclusively via CI. Whilst Pioneer/Onkyo branded AVRs start at $200 at retail, Integra starts at $800. One high-end brand of architectural loudspeakers (PRO Audio) tells its resellers that an advantage of dealing with PRO Audio is that there are 'no published prices.' In other words, the end-user will be hard pressed to discover whether or not they are getting bargain from their installer. This contrasts sharply with the one-size-fits-all transparent pricing available from Amazon.com, which of course is more focused on lower ticket items. At the other end of the scale, Snap A/V (which owns several brands and specialises in supplying the CI channel), labelled its products at CEDIA EXPO with dealer price and MSRP. These revealed substantial margins, for example the ES-AW-360-6-BRN landscape speaker was advertised as $159.95 dealer price, but $459.95 MSRP. Another in the landscape series was $549.95 at dealer level, versus $1499.95 MSRP.
At the Luxury end of the market, the end-user is cash rich and generally expects to pay premium prices.
In order to make their products attractive to the CI Channel, audio manufacturers have to ensure that their devices are compatible with the three-big hitting smart whole home control systems, Crestron, Contol4 and Savant. Ease of use and integration with other devices within the home is the very raison d'etre of the CI channel. Which takes us on to the company that was most discussed at CEDIA - Amazon. The online retailer has managed to spread its influence into both audio and smart home by selling millions of devices that come with Alexa, its voice personal assistant (VPA). Perhaps reluctantly given that VPA technology brings to the average home the sort of automation that used to be exclusive to the CI industry, custom installers and high-end audio manufacturers alike have embraced Alexa. Virtually every exhibitor at CEDIA showed products that work with Alexa (and occasionally also with Siri and the Google Assistant).
Following the success of Amazon Echo, Dot and the rest of the Alexa family, Amazon wants to partner with custom installers to launch "Amazon Home Services". At Amazon's CEDIA keynote, custom installers were invited to partner with Amazon to provide technical support and custom installations to Amazon's clients. Amazon appears to be seeking to establish itself as the market place through which consumers seek advice, support and custom installation services. With this move, Amazon could add to its platform a large pool of engineers and technical staff that can be booked into appointments at consumers' homes.
The move though raises suspicions among custom installers requiring reassurance that Amazon wants to partner with them rather than deprive them of their business. The CI channel has until recently been the exclusive supplier of smart home products, so understandably fears that Amazon's Alexa products - most notably its Echo, Dot and Tap - are bringing DIY smart home to the mass market without the participation of professional installers. However, research conducted by Futuresource with installers indicates that the likelihood is that the industry could actually benefit from the move to so-called DIY smart home devices, which are purchased at retail. This is for three reasons. Primarily, it is educating the mass market about the possibilities that hooking up a range of devices in the home can offer in terms of comfort, convenience, security and entertainment. Secondly, it is quite likely that lower-end installers will be called in by consumers unable to competently set-up the range of devices they have bought, but failed to self-install, so that they work together effectively. (Retail brands such as Ring, Igloo and August had booths at the show and one installer recently advertised installations from as little as $500). Thirdly, there is the possibility that those who have learned for the first time about smart home thanks to Alexa and its many skills (ranging from audio, to lighting, climate and appliance control), may make the leap to a full-on custom installation involving the likes of Crestron, Control4 or Savant.
It is also probable that Amazon is seeking a foothold for Alexa products in Crestron and Control4 households in order to target these high net-worth homes, with its retail and content services. That said, it seems unlikely that – at least in the short term – Amazon would try to compete with the CI channel by retailing like-for-like smart home products at knockdown prices.
CI would be well advised to embrace voice assistants in the same way as the audio hardware industry is doing. Not far down the line too of course will be a much greater push from the providers of alternative voice personal assistant technologies such as Google, Apple, Microsoft, Samsung and others. The challenge for CI hardware and software vendors and installers will be to know which platforms to support, as Amazon is just the early mover in this story whose plot is yet to fully unfold.
Here at Futuresource Consulting we deliver specialist research and consulting services, providing market forecasts and intelligence reports. Since the 1980s we have supported a range of industry sectors, which has grown to include: CE, Broadcast, Entertainment Content, EdTech and many more.