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Residential Security Revenues Continue Shift Toward
RMR (Mass-Marketers Willing to Absorb Hardware
and Labor Costs for Monitoring Contracts)
Smaller security companies throughout the US are
being forced to sell their monitored security accounts to larger providers in order to
survive. This situation is a direct result of the mass-market security companies’
continuing strategy to keep installation prices down by absorbing the hardware and labor
costs in order to reach price sensitive consumers.
In the past few years, hardware prices have been decreasing between 1%-2%
annually due to competitive pressures. At the same time, labor costs have been increasing
at a rate of roughly 5% because of a tight labor market, causing the overall cost for
residential security installations to increase (according to Parks Associates’ newest
security report,
Residential Security:
National Forecast). However, mass-marketers have continued a strategy of
low-priced or free installations with 2-3+ year monitoring contracts, which has created
fundamental changes in security pricing and revenues for the total residential industry.
Figure 1
In 1999 monitoring revenues are forecast to account for roughly 76% of the
total residential security revenues (more than three times the hardware and labor revenues
combined). By 2007, that number is expected to increase to almost 79%.
"Though the majority of security companies
are typically small, local dealers/installers, the mass-market giants have
really impacted prices and pushed the total industry toward a reliance on
monitored security and its monthly recurring revenue to make a profit," said Parks Associates. "This shift is making it harder and harder for small security companies to
compete with their larger competitors, so many are joining dealer programs and selling off
their monitoring accounts."
This change has largely been brought about by the transition of some of
the larger security companies into regional and national mass-marketers (ADT,
Brink’s, SecurityLink from Ameritech, and Protection One are all strong examples). At
current installation prices, mass-marketers typically take almost 30 months to recoup cost
and make a profit. Small dealers can’t operate on such an extended time scale and
often have no choice but to sell their monitoring contracts through dealer programs.
To learn more about the residential security industry and its latest
trends and changes, check out one of Parks Associates’ newest reports,
Residential Security:
National Forecast.
The National Forecast report gives comprehensive breakdowns for the residential
security industry (including housing forecasts, average security prices for monitoring and
hardware, revenue forecasts, and more). Details can be obtained on the Internet at:
www.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.
http://www.parksassociates.com |
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