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Security companies are competing for the top spot in the industry in an ongoing battle that will only intensify due to new consumer trends within this evolving market place. In the past year, the number of consumers purchasing home security systems has increased and is expected to continue growing, despite the fact that the incidence of reported crime has declined for the past six years.

Specifically, there was a 9% growth in the number of monitored security accounts from 1997 to 1998, and is projected at 6% to 8% for the next few years. These consumers are purchasing systems not only the overall growth for the security market as intrusion-alert devices but also with a host of other integrated features, including automated lighting, entertainment, appliance, and HVAC controls.

"Key trends in security have changed the direction of the industry," said Parks Associates. "Crime, once a major driving force for security sales, no longer seems to be the major reason for adoption. Instead, the promise of peace of mind, insurance breaks, and advanced integrated features through a security system has created a paradigm shift. As these new trends in consumer adoption help expand the industry as a whole, the recent merger activity will become even more significant."

Many of the top security companies are hoarding monitored security accounts at an alarming rate. The numbers for the national security providers continue to expand as they acquire smaller security firms, thus adding these accounts into their already substantial pool of resources.

Currently, ADT leads the race with some 2 million security accounts (roughly 50% commercial and 50% residential). Protection One is number two with 1.5 million residential and commercial accounts. SecurityLink from Ameritech, prohibited from further acquisitions until February 2001 (under the 1996 Telecom Act), lags behind at third with roughly 1.1 million accounts but is actively making deals to increase its market position. For example, the company has secured the option of purchasing Smith Alarm in the year 2001. (See Figure 1 for specific instances of mergers.)

Figure 1

Just as important, but less publicized, is the consolidation and juxtaposition of power on the manufacturing and distribution side. For example, in 1998, ITI (Interactive Technologies Inc.) bought Caddx, and ADI (Ademco's distribution company) is in the process of acquiring KingAlarm distributors. In addition, a number of other shake-ups are occurring. Digital Security Controls Ltd. (according to Parks Associates' 1998-1999 Dealer Survey and other research) has become the number one manufacturer of security systems for high-end dealers/installers (with an estimated 20% market share of residential installed security systems), besting such manufacturing giants as Ademco, Napco, and ITI.

"Due to consolidation, a number of security companies are emerging as global corporations, not just within the security industry, but among technology driven businesses in general," Triolet said. "Security providers are branching out. It is conceivable that some of the telecommunications companies (the RBOCs in particular) will be lobbying the government as soon as 2004 to keep security companies out of telecommunications industry."

For more information about Residential Security ‘99: Market Analysis and Overview or other reports on the residential security industry, please contact Parks Associates at 972-490-1113 or by e-mail at sales@parksassociates.com.

About Parks Associates: Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions.

The company's expertise includes new media, digital entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, consumer electronics, and home control systems and security.

Each year, Parks Associates hosts executive thought leadership conferences CONNECTIONS™, with support from the Consumer Electronics Association (CEA®), and CONNECTIONS™ Europe. In addition, Parks Associates produces the online publication Industry Insights in conjunction with the CONNECTIONS™ Conference series.

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