InfoComm Analysis: AV stamps its worth on a worldwide stage

InfoComm, the av industry’s trade body, has made countless efforts to quantify professional av through its various market definition studies, economic snapshots and other research. While the trade association has trained its sights on various individual regions of the world, it has never done a single, comprehensive study of the worldwide av market – until now.

Last month at Integrated Systems Europe (ISE), InfoComm released the 2010 Global AV Market Definition & Strategy Study, an exhaustive look at pro-av around the globe.

According to its international director Terry Friesenborg: ‘We had lots of anecdotal information before, but we didn’t have the metrics. We knew that we had a big industry, but now manufacturers looking to globalise their business can go to a bank and show them the numbers.’

The study, conducted by Acclaro Growth Partners, values the industry at EUR66.4bn (£57.8bn) by 2012. That dwarfs the broadcast technology industry, which in the International Association of Broadcast Manufacturers’ most recent report, pegged its total size at EUR18.2bn.

While the pro-av figures, of course, encompass large chunks of broadcast as well vertical markets from government to education and residential, there is general cause for optimism in the report’s findings.

The global av industry was worth EUR50bn in 2009, and is expected to grow 10 per cent over the next three years. Despite a troubling economic environment last year, spending on av goods and services did not contract. According to the report, this growth is being propelled by displays and av conferencing equipment, streaming media, webcasting, wireless connections and software.

Hotspots include digital signage, videoconferencing, and command and control facilities, which registered an 8 per cent compound annual growth in demand between 2006 and 2009. By contrast, projectors are no longer among the fastest growing product categories, with price erosion a key contributing factor.

Service on the up

Arguably the most significant trend the report reveals is that services are, for the first time, growing faster than products. Across all regions, services are running at 10 per cent per annum compared with product sales at 9 per cent. In Europe, services represented about 35 per cent of the pro-av market last year, up 2 per cent since 2006.

According to the report, the need for installation and integration services has been driven by the rise in demand for DOOH and videoconferencing applications. Programming, maintenance and training were identified as the fastest-growing service sectors.

‘All the partners we work with offer some type of managed services or service contract arrangements tailored to specific customers and this is certainly something we look for in a potential solutions partner,’ says Barrie Guy, general manager of LG’s business solutions division. ‘Those manufacturers who dabble in direct sales, ignoring the channel, are those who will be burnt or lose business in the long run.’

Technology managers have expressed a growing need for service contracts as av systems have become complex. In parallel with that, training has become an essential service offering. Whereas three years ago InfoComm reported that training as a paid service was so small it was negligible, training has become vital for digital signage and videoconferencing installations.

Systems integrators have upgraded their design skills to more service-oriented capabilities as a result. In North America, the indications are that around 60 per cent of fees can be attributed to SI/design-build firms and the remaining 40 per cent to design consultants.

Outside the US, the percentage of design work done by SIs is even higher. ‘Rapid hardware price erosion has been an important factor in this shift, driving channels toward service and support to generate additional revenue streams,’ says Chris McIntyre-Brown, research consultant at Futuresource Consulting.

‘One could argue that this is not a new trend, certainly not in terms of installation services,’ he concedes. ‘But the growing convergence of av/IT products has provided the perfect platform to offer pre-sales integration and post-sales training skills. Interestingly, price erosion has also forced hardware vendors to look outside traditional manufacturing strengths; branded digital signage solutions are a prime example.’

In a typical digital signage installation, the cost of the hardware is only around 25 per cent of the total investment. ‘Naturally the content is also a key element, but the highest proportion will come from the installation and managed service, certainly for the larger installations where SLAs will be drafted into the contract,’ says Simon Jackson, VP, Northern Europe, NEC Display Solutions.

‘We are now seeing more professional and innovative site installations coupled with appropriate service levels, which can only be a good thing for the industry as the digital signage market continues its expected growth rate built on a more experienced knowledge base. This will provide a better experience for the customer and deliver better results for the client,’ he adds.

The convergence of av with IT, security, voice and data are also driving the need for integration services. Dynamic and interactive content creation services and templates for digital signage form a growing part of the North American market, although they are almost non-existent in other regions.

While most av integrators outsource these services, there is a trend for integrators to bring them in-house, thereby helping to grow the combined set of av services to account for more than half the North American av market by 2012.

The hospitality industry is among the first sectors to embrace full-scale service packages, not just in-room technology but content services too, including delivery, billing and scheduling. ‘The hotel groups tend not to break down the technology chains in the way a large corporate would with, for example, a digital signage project, once it reaches procurement,’ observes Guy.

‘Hotels will use the integrator solution end-to-end, ensuring compliance and reducing the chance of compatibility issues. Other sectors tend to e-auction, splitting everything up from cabling, installation, head ends and maintenance – and with what results?’

Economics by region

The InfoComm report confirms North America as the largest pro-av market at 45 per cent of the total, with Asia second (25 per cent), ahead of Europe (23 per cent). Duffy Wilbert, InfoComm’s senior vice-president, says the result is ‘surprising,’ but fits an overall trend in which emerging markets are poised for the fastest growth in coming years.

The first half of 2009 was difficult for most European pro-av vendors, but the market began turning around mid-last year. Indeed, it grew from EUR9.6bn in 2006 to EUR11bn in 2009, and is projected to reach EUR14.7bn by 2012. But it is not growing as fast as the Asia Pacific market.

‘At the end of last year we took a decision to expand our existing resources in AsiaPac. The report gives us confidence that we took the right decision,’ remarks TV One managing director Steve Mattingly. ‘Overall, the report has helped confirm our own sales data and research to help us target products and resources in other markets.’

The pro-av market in the UK, which accounts for 22 per cent of the total European business, slowed dramatically in late 2008 and growth is significantly lower than the rest of Western Europe.

Matters are worse in Dubai, where the market has gone from strong growth to no growth in less than a year. Nonetheless, the wider Africa and Middle East region is strong, and predicted to grow from EUR1.58bn in 2009 to reach EUR2.29bn by 2012.

Also worth noting is that streaming media and webcasting presents one of the best opportunities for growth and diversification – although the opportunity is not being captured by av professionals.

IT’s share of the market is much larger and growing at a faster rate. Because of the reliance on the IT network to enable the use of these technologies, the report states, end-users often call upon the IT vendor to integrate these technologies.

Pro-av’s share of streaming media and webcasting is expected to grow during the next three years, according to the report, which makes it one of the fastest growing product categories.

INFOCOMM STUDY FINDINGS

- The slowest growing customer segments are rental and staging, home/residential and retail/distribution. Education is the fastest growing customer

- A lack of standards for green av is contributing to the widespread confusion in the industry. Environmental issues are even on the radar in Latin America, Eastern Europe, Middle East, Africa and APAC.

- Digital signage technology is becoming increasingly intelligent By 2010, we can expect to see DOOH equipped with cameras that enable the systems to track what part of an advertisement is getting a customer’s attention

- Pro-av end users and vendors are drawn increasingly to cloud computing solutions that provide greater flexibility and fewer constraints

- Pro-av vendors are concerned that skills are not keeping pace with technology