IHS Markit projects growth, changes for alarm monitoring market to 2022

Company analyst recommends traditional security companies look more at value-added offerings
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Monday, May 14, 2018

LONDON—IHS Markit, a research firm based here, recently released some insights on the alarm monitoring market in 2017 and what it predicts will happen by 2018 and 2022. 

One highlight from the company’s recent research is that the residential alarm monitoring market in the Americas region reached $12.5 billion in 2017, and IHS Markit expects it to grow to $13.7 billion in 2018.

“Most of the [central monitoring stations] that we spoke to are really focusing on these value-added services, which mostly tied into video—and that could be video analytics, free video storage, things along those lines,” Blake Kozak, IHS Markit principal analyst, smart home and security technology, told Security Systems News.

Kozak highlighted verification as a particular trend within video. “I think that more and more consumers are more willing now to put video in their homes.”

IHS releases a report on the alarm monitoring market about every 12 to 18 months, according to Kozak.

IHS is seeing more connected systems in the SMB market. “In 2017, there were 4.66 million SMB monitored accounts in the Americas region, of which, 980,000 were connected,” Kozak said. The number of connected systems for SMB will almost double in the next four years.

“A lot of technology that was meant more for consumers … I think some of these devices are starting to find their way into small-medium business, and even enterprise to a certain extent, but much more so on the small-medium business side,” Kozak said.

The traditional monitored account market for SMB is going to be growing around 2 percent annually over the next 5 years, he noted, and “SMB connected accounts will continue to ramp up and will see double-digit growth starting in 2022.”

There is a similar trend toward connected systems in the residential market, according to Kozak. “The traditional alarm monitoring market—where you just have a keypad, you don’t have a mobile app—is actually going to be declining starting next year and the connected systems are going to be growing upwards of 18 to 25 percent annually.”

Kozak continued, “So, it’s not necessarily that the market’s slowing, it’s that the market is shifting.” Dealers who aren’t getting more involved with video and other value-added services will start to decline in a few years, “especially as you see more MSOs entering the space and more DIY-type systems,” said Kozak.

The report looked at alarm monitoring for small- to medium-sized businesses and large enterprises as well as the residential space.

MSOs and professionally monitored to DIY systems will collectively make up about 20 percent of the residential alarm monitoring market by 2022, according to IHS Markit; these portions of the market make up about 9.5 percent in 2017.

MSOs will rise to cover about 14 percent by 2022, Kozak said.

Comcast is the more predominant MSO at this point in the U.S. market, Kozak said, as the provider accounts for 78 percent of MSO monitored accounts in the U.S. in 2017. “There aren’t that many who have a lot of penetration at the moment but I think that as these MSOs expand out their ecosystem, I think they’ll be in a much better position to perhaps converge or take customers, especially because … they own all of the aspects of entertainment and media,” he said.

“In order to overcome that, these dealers and other traditional security service providers will need to innovate around video more and partnerships,” said Kozak.

Comcast recently purchased cloud-based automation provider Stringify in September 2018 and a business unit of Icontrol—the Converge platform—around March 2017, Kozak noted. “So, they’re in a very good position to integrate their media content, their voice remote, all of these other features and functions that most traditional security service providers don’t have.”

Kozak advised that security service providers should be ready for a wave of consumers—like millennials—that are looking for offerings outside of traditional systems, with devices such air quality sensors and lighting, at a certain price point.

DIY installed systems that are professionally monitored will remain a “relatively small” portion of the market, increasing from a 3 percent share of the market to about 6 percent over the next five years, said Kozak. Though, DIY installed and self-monitored systems are also a factor, he added. “I don’t think that the professional security market is going to be impacted, in the short term, by the DIY market.”