Barnes Associates/SSN wholesale monitoring survey finds accounts up nearly 11 percent in 2012

YARMOUTH, Maine—The wholesale monitoring industry posted surprisingly strong growth in 2012, with accounts increasing 10.7 percent and average RMR for alarm companies following nearly in lock step, according to a new survey led by Barnes Associates.

The third annual study, co-sponsored by Security Systems News and the Central Station Alarm Association, involved responses from 23 wholesale monitoring companies. It included the biggest players in the industry and added to data tracked since 2007.

The survey showed that the number of accounts monitored by wholesale companies rose by more than 288,000, from 2.69 million in 2011 to 2.98 million in 2012. Accounts have grown from a survey base of 2.17 million in 2007, with 2009 the only year in which the number dipped. The 1.1 percent decrease that year was due to Vivint moving its accounts from wholesale monitoring to its own central station.

Michael Barnes, founding partner of Barnes Associates, a consulting and advisory firm specializing in the security alarm industry, called the 2012 results “a real win for the wholesale monitoring segment.”

“What surprised us was the 11 percent growth rate,” he said. “The several top-100 security alarm companies that use wholesale monitoring represented a disproportionate share of this growth, but even adjusting for this, the smaller-company segment indicates a unit growth rate of just under 10 percent.”

Smaller alarm companies reported slightly stronger growth in recurring monthly revenue in 2012 than the largest companies. RMR among the smaller players increased 10 percent, while the top 100 companies that use wholesale monitoring posted a 7 percent increase, the survey found.

“This unprecedented level of insight into unit and RMR growth allowed us to confidently conclude that the collective monitoring and service revenue—i.e., the RMR and associated service/maintenance revenues billed on a T&M basis—grew by 8 percent in 2012,” Barnes said. “This was a higher rate than I think anyone was expecting and is a very positive indicator."

Barnes said the vast majority of alarm companies have their accounts monitored by a wholesale provider, making it an “extremely important” segment of the industry. He said data from the survey served as a barometer for the health of companies large and small.

“While many large alarm companies outsource their monitoring, it is primarily the many thousands of smaller alarm companies that comprise the majority of wholesale monitoring company users,” he said. “Therefore, understanding the growth of the wholesale monitoring segment provides a detailed collective view into the overall growth of these smaller companies.”

Historically, it has been very difficult to survey small alarm companies simply because there are so many of them, Barnes said. The wholesale monitoring survey provided a way around that.

“There is a huge amount of data and clarity on the top players in the [security alarm] industry,” Barnes said. “The top 100 have an approximate 51 percent share of the industry RMR, but the other 49 percent of the market is controlled by the many thousands of smaller alarm companies. This survey, when coupled with the data on the top players, has given us an unprecedented view on a very large portion of the overall industry.”

USA Central Station Alarm Corp. and AvantGuard Monitoring Centers, two of the larger wholesale monitoring companies that participated in the survey, enjoyed account and RMR growth in 2012 that mirrored or exceeded the industry average.

Bart Didden, president of USA Central Station, said his company posted an account increase that was “generally supportive” of the 10.7 percent figure in the survey. He said RMR growth exceeded that, but he declined to get more specific about either number.

Didden said the gains were based on traditional service, not “reacting to the marketing of ADT … and getting taken in with the current.” USA Central Station handles 100,000 accounts at its monitoring centers in Port Chester, N.Y., Milford, Conn., and St. Paul, Minn. It has about 900 dealers.

“We've been here going on 32 years and we are consistent, high quality and full service,” he said. “No automated attendants, no automated phone calls to customers. We're not the cheapest ones on the block, nor do we want to be. [Our dealers are] creating value with their customers. They're not mere numbers, they're people with names.”

Didden said that many USA Central Station dealers are becoming second-generation companies, and “that's the marketplace we choose to be in.” He emphasized that offers of free equipment or services don't necessarily translate into value or RMR.

“This industry started in the 1850s,” he said. “It's not going to change overnight, and it's certainly not going to become primarily an industry of giveaways.”

Josh Garner, CEO of AvantGuard Monitoring, said personal emergency response systems have been “a big component” of growth for the Ogden, Utah-based company. He said the number of accounts increased 23 percent in 2012, with RMR rising 25 percent.

“Our growth came from some very high-performing dealers both in the security space and the PERS space,” Garner said. “There are certain dealers that are outperforming the industry, and we just happen to be fortunate enough to have some of them using our services.”

Garner said AvantGuard “has kind of made a niche for itself” in the PERS market. The company hosted a PERS Summit last year in Park City, Utah, and it will do so again this year. The event is scheduled Sept. 10-12 at the Deer Valley Resort.

“We see a lot more potential in the PERS industry and we're good at it,” he said.

In the security space, Garner said AvantGuard is capitalizing on some of the same trends that the industry as a whole is experiencing.

“A little more home automation and a little more video,” he said. “We recently partnered with iView Now for video and we think that's definitely a growing segment of the industry.”

Garner declined to specify the number of accounts or dealers that AvantGuard has. A Security Systems News article in February 2011 said the company handled 110,000 accounts at its monitoring centers in Ogden and Tacoma, Wash.

“Suffice to say we're healthy and we're growing,” he said.

Barnes said that given the scale, technology and overall capabilities of wholesale monitoring companies, it is easy to see why they are collectively adding accounts and RMR.

“They are among the industry's highest-quality service providers, and they do so at incredibly competitive prices,” he said. “This combination allows their alarm company customers to have confidence in the monitoring service being provided while they stay focused on the primary activities that create value: selling and installing new systems and growing the RMR base.”

Barnes said next year's survey will be expanded to include retail alarm companies that operate their own central stations but also provide wholesale monitoring. He cited three members of the CSAA's Contract Monitoring Council for their work on the 2012 study: Don Maden, executive vice president of COPS Monitoring; Morgan Hertel, vice president of operations for Rapid Response; and Becky Lane, staff liaison.

“They had developed an interest in the survey and were able to bring much-needed additional support to the effort,” Barnes said.