26.02.19

Tim Kridel: The industry we work in

Tim Kridel APAC Jan-Feb 2019 use
View of the earth with data points

Knowledge is power. Tim Kridel shares insights from professionals and AVIXA’s latest IOTA report while examining the outlook for the AV industry.

AVIXA released its Industry Outlook and Trends Analysis (IOTA) report for 2018 and the numbers provide key insights for the pro AV industry. The headline statistic is the fact that the pro AV industry is expected to grow from USD 186 billion in 2018 to USD 230 billion by 2023.

How is this growth going to be achieved? The fact that gross domestic product (GDP), a key barometer for sales opportunities, is forecasted to rise by 4.3% through 2023 by IOTA is a good starting point. With AV solutions and systems being required by every vertical, this puts the pro AV industry in a good position to benefit.

The link between the rising GDP and the increasing value of the pro AV industry has an interesting implication. While the global average rise for GDP might be forecast to be 4.3%, this does not mean that every country across the board is posting the same numbers. In fact, GDP growth is higher for emerging markets especially those in Asia Pacific.

This means that we can expect a change in the status quo of the three major regions. The IOTA report predicts that Asia is on track to become the largest AV market, surpassing North America, and it will account for 36% of the global pro AV industry pie by 2023. On the ground, the growth predicted by the IOTA report is being spurred by a mixture of improving technology, changing markets and an increased emphasis on consumer experience (CX).

CX is a key consideration for verticals such as hospitality and healthcare. Increased attention to CX has meant increased scrutiny for technology, seeing that more often than not technology serves as a key touchpoint between the organisation and its client. The opportunity for pro AV in these verticals is growing.

At the same time, change in political and cultural climates is opening up new avenues for pro AV. In April 2018, Saudi Arabia’s first movie theatre opened, and the kingdom’s Ministry of Culture expects to license another 2,000-plus screens by 2030. Lifting the decades-old cinema ban is just one part of Saudi Arabia’s Vision 2030 plan, which includes a USD 2.62 billion investment fund dedicated to theme parks and various other entertainment options.

For pro AV, Saudi Arabia and the global cinema market are two of the many bright spots amid the gloom of Brexit and the trade wars. That’s one takeaway from AVIXA’s latest AV Industry Outlook and Trends Analysis 2018 report and from InAVate’s interviews with integrators, distributors and analysts.

Sean Wargo, AVIXA senior director of market intelligence, says: “Cinema is one sector we’ve highlighted as a strong grower for this forecast period. Cinema is growing is due to regional changes, opening of markets. But more systemically, across the region, the upgrade cycle is driven by things like direct-view LEDs.”

At Inavate, we have previously covered direct-view LED screens, including Europe’s first theatre with one: Zurich’s Arena Cinemas. It uses Samsung Electronics’ Cinema LED Screen, the first product approved by the Digital Cinema Initiatives (DCI) standards organisation. Similar Samsung LED deployments can be found at Lotte Cinema World Tower in Seoul , Korea, Wanda’s Wujiaochang theatre, located in Shanghai’s Yangpu District in China and at Paragon Cineplex in Bangkok, Thailand.

Chris Chinnock, Insight Media founder and president, says: “There are at least three companies in the pipeline to get DCI approval. Certainly, next year you’re going to see more competitors coming into the market.”

Those vendors will be selling to a growing number of exhibitors due for a technology refresh, thanks to the virtual print fee that financed first-gen digital projectors. Chinnock says: “A lot of those deals are expiring, and that equipment is getting to be 10 years to 15 years old. It’s time for those exhibitors to think about upgrading to an LED or a laser projector or keeping what they have and just expecting to pay more in maintenance. These decision points are an opportunity to enter the market with LED. There’s a lot going on here.”

Emerging markets

As a brand-new technology, direct-view LED hasn’t begun to slide down the cost curve. That descent could get a push from yet another emerging technology— one that has potential outside of cinema, too.

Chinnock says: “There are newer technologies—mini LEDs or micro LEDs—that promise to reduce the cost of those screens significantly. People are talking about putting them in TVs, digital signage and cinemas. We’re not quite there yet, but three years is a very reasonable time frame.”

Displays continue to displace projectors outside of theatres as well.

Jenny Hicks, Midwich head of technology, says: “We are still in a period of transition from projection to professional-grade flat-panel displays. In addition, the next transition period has already begun from flat-panel to direct-view LED.

“Over the next two years, we expect to see networked AV solutions and LED more widely adopted. My personal prediction would be that by 2025, these technology categories will have overtaken their predecessors in revenue performance.”

Two other emerging technologies are artificial intelligence (AI) and machine learning (ML).

Hicks says: “AI and ML have entered and influenced the AV market the most, with analytics now a must-have for digital signage systems, device and building management, targeted marketing through gender, age and mood recognition, and voice control offering the simplest user interface we could hope to achieve. Demand for AI and ML is already there, and the market is frantically playing catch up to offer the variations on solutions required.”

Is a cloudy forecast good?

Other big market opportunities are the result of trends that have been playing out for a decade or more, such as the convergence of the AV and IT industries.

Jon Sidwick, Maverick AV Solutions global vice president, comments: “We’re seeing real, live examples of multiple thousand-room deployments of single-configuration solutions around voice-video-data collaboration. A lot of it is being fuelled by the last two or three years’ worth of work done by Microsoft and the other unified communications (UC) platform providers.

“This has taken us to a place where video-audio-data communications is ubiquitous. Businesses are saying: ‘This is not a luxury installation that I do in a few rooms. This is a must-do in every room.’ It’s every meeting room and every office.”

Cloud-based services and infrastructure are common in IT, and convergence is bringing that model to pro AV. John Bailey, Global Presence Alliance president, says: “We believe the pro AV market will remain strong over the next two to three years but will continue a major shift towards scalable huddle room solutions that support UC platforms. That forecast is supported by major analysts who are predicting a 15% to 23% compound annual growth rate for UC cloud technology, as well as real estate and workplace trends, and the total global addressable huddle room market.

“That shift brings some difficult changes for the AV industry, which was built on technical complexity and customisation, because UC ‘cloud-connected’ rooms are simple and standardised and built for scale. To some, this might indicate further commoditisation of AV hardware. However, the scale of the deployments also requires professional services such as program, project and quality management.”

Cloud and UC also are continuing to change the field of vendors present.

Sidwick says: “It’s creating a landscape that’s a strong mixture of really good pro AV companies and completely new entrants. A great example is Zoom, which is a company that most probably wouldn’t have thought about two years ago. But Zoom is now entrenched right in the middle of the UC platform market.

“We’re supplying the market channel with consistent Zoom rooms on a global basis. In those rooms, we’ve got a mixture of computers from Dell, control from Crestron or Apple, Logitech audio and videoconferencing, connectivity from Vision, which is our own brand, and a variety of display options from very well-known pro AV companies such as NEC and Samsung.”

These trends show up in the IOTA report. One example is commoditisation, where vendors such as QSC are moving their software from purpose-built hardware to off-the-shelf IT servers. This trend is negative for integrators that live and die by hardware margins and positive for those that rely more on services for revenue and market differentiation.

Wargo says: “There’s tremendous potential for value-added services, [such as] design, installation, managed services, those sorts of things. So, I think it creates more opportunities than it kills off revenue through price compression.”

Expect this topic to get more attention in future IOTA reports. Wargo says: “One area where I’d like for us to dig deeper is services. It’s about 17% right now: the portion of total AV that is services.”