When will network video surveillance sales surpass analog?

An SSN Q&A with IMS Research's Gary Wong
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Thursday, August 11, 2011

WELLINGBOROUGH, England—According to a recently released IMS Research report, 2014 will be the year that sales of network video surveillance equipment finally surpass analog. The report said that the growth of the network video surveillance market and the decline of the analog market will lead to this transition in 2014. However, the transition in terms of shipments of network cameras themselves will not occur until “far beyond” 2014.

Security Systems News, sister publication of Security Director News, conducted a Q&A with IMS Research analyst Gary Wong. Below, Wong answers SSN’s questions about the report.

 

SSN: What’s pushing the market to the tipping point?

Gary Wong: In recent years, the analog video surveillance equipment market has been in decline whilst the network video surveillance equipment market has achieved strong and sustained year-over-year growth. IMS Research forecasts that global sales of network video surveillance equipment will be greater than those of analog video surveillance equipment in 2014, the tipping point.

Push-and-pull factors are influencing the approach to the tipping point. From the push side, increasing numbers of manufacturers are beginning to prioritize network video surveillance equipment ahead of analog video surveillance (including incumbent analog equipment manufacturers), resulting in greater product variety and availability. And from the pull side, end users are increasingly beginning to actively seek and investigate network video surveillance solutions.

Unlike most electronic equipment markets (e.g. cell phones), [where] the distribution of revenue is heavily weighted towards the mid- and enterprise-tiers of the market, the low-end market remains the least significant in terms of revenue (however, it does represent the greatest revenue potential going forward). In recent years, the demand for analog video surveillance equipment at the enterprise tier of the market has waned significantly. The combination of declining demand at the enterprise tier and aggressive price competition at the mid- and low-tiers of the market has resulted in a sharp decline in analog video surveillance equipment sales revenue, accelerating the transition between technology types.

With regard to declining demand, in a rather perverse way, the economic downturn may have also served to accelerate the transition from analog to network with end users raising return-on-investment and future-proofing on their list of priorities.

IMS Research says that while network video surveillance sales will overtake analog in 2014, shipments of “analog cameras are forecast to continue to outsell network cameras in 2014.”

SSN: Has IMS Research projected when network cameras will outsell analog cameras?

Gary Wong: Whilst IMS Research has not forecast the tipping point for analog cameras versus network cameras in terms of unit shipments (this is beyond the 2015 range limit of the latest IMS Research report), this is not expected to occur until far beyond 2014. Even by 2014, analog cameras are forecast to outsell network cameras by more than 3 to 1.

SSN: How does the North American market compare to the global market in terms of network video surveillance equipment sales?

Gary Wong: The North American market for video surveillance equipment is transitioning towards network video surveillance equipment faster than the total world market. It should be noted that the world market is skewed by continuing sizable demand for analog video surveillance equipment in China and that the EMEA market is forecast to “tip” before the North American market.

SSN: What are some of the stumbling blocks for adoption? What’s been slowing the approach to the tipping point?

Gary Wong: Two of the major factors inhibiting the growth of network video surveillance solutions have been price and end user education.

On price—network security cameras have long commanded a significant price premium over analog cameras. In the past this was seen to be a significant inhibitor to mass-market adoption. Whilst the use of a network video surveillance system offers benefits over that of an analog video surveillance system, the resolutions of network cameras were only comparable (or worse than) those of analog security cameras.

In the last 18 to 24 months there has been a shift towards HD and megapixel resolution network cameras. This shift in resolution capability has led to increasing interest and demand for network cameras as all stakeholders on the demand side can see a tangible benefit.

In terms of end-user education—the “traditional” security industry has been slow to embrace network video surveillance solutions. At the systems integrator and installer level, this resistance to change is partly due to a knowledge gap in the transition from analog to network video surveillance. Furthermore, in the early days of network video surveillance equipment, the expense and lack of apparent measurable benefits also slowed the rate of adoption. At the end-user level, the sustained bias for analog video surveillance equipment from systems integrators/installers has served to dampen grassroots demand/interest in video surveillance solutions. In recent years the level of education regarding network video surveillance has increased (through vendor and internal education) and positively impacted network video surveillance equipment (albeit at the expense of analog sales).

—Compiled by Martha Entwistle