Table of Contents
This report has been created by IHS, a leading analyst research firm, for the Continental Automated Buildings Association (CABA). CABA is a leader in initiating and developing cross-industry collaborative research, under the CABA Research Program. Following the CABA Digital Home Forum at Qualcomm, San Diego, CA (October 2012), attendees selected the topic of Monetization for the Connected Home Landmark Research Study for 2013.
CABA is an industry association dedicated to the advancement of connected homes and intelligent buildings technologies. CABA is an international association, with over 350 major private and public technology organizations committed to research and development within the intelligent buildings and connected home sector. Association members are involved in the design, manufacture, installation and retailing of products and services for home and building automation.
IHS was commissioned by CABA, as a result of an extensive competitive bid process, to provide bespoke research and support in strategy development, by conducting this research for CABA as part of the Connected Home Council (CHC) Landmark Research Study for 2013.
IHS is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make highimpact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered
in Englewood, Colorado, IHS is committed to sustainable, profitable growth and employs 6,700 people in 31 countries around the world.
IHS combines market, technology and supply chain analysis and forecasts at every operational step of the electronics value chain from strategy, planning and analysis to product design and development and supply chain management.
ES2 REPORT METHODOLOGY
Two main primary research processes were conducted for this report: extensive interviews with industry participants and an online end-user survey of North American consumers.
INDUSTRY PARTICIPANT INTERVIEWS
A series of detailed interviews were conducted by telephone with key decision-makers at a number of different types of organizations, across the following company types: device suppliers, existing service providers, dedicated service providers, specialist home automation providers, contractors and installers, dealers and distributors, utility companies, retailers and platform and software providers.
IHS conducted 21 in-depth interviews during the process of this specific study. These interviews were informed by IHS’s extensive knowledge of conducting research in this area, including a large scale study, ‘Connectivity Opportunities in the Smart Home – World – 2012’ (IHS: 2012) which involved conducting more than 40 interviews with a wide range of relevant industry participants located in Europe, North America and Asia Pacific.
NORTH AMERICAN END-USER SURVEY
IHS, in conjunction with the CABA project steering committee members, developed an end-user survey to assess consumer attitudes towards the connected home and associated features, pricing models, and other interesting issues (such as data privacy and value-added services). This consumer survey was completed online by 1,000 North American respondents.
PREVIOUS IHS RESEARCH STUDIES
Importantly, the analysts responsible for this report used IHS’ extensive library of both internal and published research studies in related areas. For a full list, please see Appendix 5 - Bibliography.
ES3 CONNECTED HOME MARKET OVERVIEW
North America is projected to continue to be the largest market for connected home devices over the coming years, despite growing signs of deployment in both Asia and Europe. Within North America, home monitoring is expected to continue to be primary driver of system installation within the mass market. However, energy management, as well as comfort and convenience applications, are expected to grow significantly in North America as secondary value propositions (Source: IHS, Connectivity
Opportunities in the Smart Home – World – 2012).
Cloud-based home control systems for mass market consumers are set to be the key catalyst for much of the growth in the connected home market (in terms of device shipments). A number of key trends expected to mold the connected home competitive landscape over the coming three years:
- The range of existing companies offering connected home systems and services to consumers will continue to increase. In the past, most cloud-based home control systems have been offered through dedicated connected home players, such as Alarm.com. However, over the past few years, existing service providers – such as ADT, Verizon and Comcast – have moved into this market. Now, other types of companies – such as retailers – have started to enter, offering their own platform-based systems. The provision of connected home systems and services is open to a wide variety of companies; in many cases there is an opportunity for partnerships which can enable the monetization of different aspects of the connected home for different parties.
- Suppliers of standard or ‘non-connected’ devices will increasingly release connected alternatives of traditional product ranges (such as thermostats or appliances), as well as connected home-specific products, such as smart plugs. In addition, a range of new device OEMs will emerge aimed at the creation of unique product offerings specific to the connected home, as Nest has done with its smart thermostat and smoke alarm products.
- More device suppliers will start to offer their own customer-facing connected home systems, using a variety of pricing models. In some cases, the associated service costs could be included as part of the upfront hardware cost, in order to differentiate from other systems available from existing service providers, which typically have an on-going service element.
Interestingly, results from the end-user survey suggested this may be a viable alternative, with a significant proportion of respondents indicating a preference for higher upfront costs rather than subscription contracts. Should this latter pricing model occur on a widespread scale, this could prove highly disruptive to a market which many are already monetizing based on recurring service revenues.
- Many consider platform providers to be the backbone of the connected home value chain, enabling much of the functionality which is driving connected home value from a consumer perspective, such as the ability to receive automated alerts and to manage in-home devices from a smartphone or tablet. As other company types start to enter the market – from retailers to existing service providers or device OEMs – many of these companies will utilize thirdparty platform developers. Current dedicated service providers (such as Revolv or Nest) may leverage the software and platform requirements from the growing number of entrants to the market and reposition themselves as platform providers, developing the backend platform supporting third-party connected home initiatives, as AlertMe and Alarm.com have previously done.
- As the market evolves, a number of related opportunities will become more evident, spanning multiple company types and associated markets. This could range from telehealth monitoring (creating a platform to enable device data to be shared remotely with institutional healthcare networks), to demand-response (assisting utility companies in the deployment of residential load management programs, including dynamic pricing programs) or commercial building automation (leveraging connected devices and the associated data to ensure efficient building operation).
It is important to note, however, that features which have a wider audience outside of those interested in home automation and remote home control are projected to play an increasing role within the future connected home market, such as remote diagnostics and e-commerce options (for example, automatically ordering new device peripherals, like filters, when required). These value added services represent a method of monetization beyond the initial upfront system costs or on-going service fees.
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