Audiovisual technology is evolving into a consumer market. As home owners demand more hi-tech gadgets and more integrated entertainment systems, there could be a profitable market opportunity for resellers. Nick Booth reports in the first of three special features on home entertainment
A couple of years ago, Rory Fidler started up his own reseller business, Magenta Solutions, determined to make his fortune. At the time, the prevailing wisdom was that storage was going to be the next big thing. With a bit of investment in a few SAN training courses, and some time to learn the technology, Magenta would clean up. That was the theory. There would be so much work out there it wouldn't be able to cope. The same story was being peddled by the security vendors. How they bored us all to death with their endless projections of market growth, and gloomy forecasts about viruses and hackers ready to wipe out anyone foolish enough not to buy intrusion detection.
As an expert in security, storage and networks, Fidler rightly expected to be rolling in money by now. Instead, the going has been very tough. "The first two years were a bit of a disaster," says Fidler. "It's been a learning experience. But things are picking up."
However, the upward turn has not come through selling storage or security. Those markets never lived up to their promise. Salvation has come from a completely different source: home entertainment.
Magenta Solutions began importing something called the Ethernet HomePlug Adaptor. Not a name that rolls off the tongue, and in the flesh it's even uglier than its name. But the beauty of this gadget is that it turns the electrical wiring of your house into a ready-made network. Buy one adaptor for each device you want to network. Plug them into the mains. Run a cable from each PC and plug it into the respective adaptors. Now the PCs are networked over the cables of your electricity supply. At £54 for two adaptors, it's cheaper than wireless, easier, safer, and has a faster throughput. You can network up to 50 PCs or Xboxes this way.
It's the game players that have really gone mad over these adaptors, because they are the most effective way of networking games machines. You can take your network with you. Wherever you see a couple of electrical sockets, there's your network. Magenta is now shifting about £30,000 worth of kit a month, mostly by word of mouth.
The analysts didn't predict this trend, but home entertainment is becoming a lucrative market for resellers. Who would have thought it?
In retrospect, it all seems quite logical. Commercial technology is getting cheaper and cheaper. Take plasma screens: they are becoming bigger and also cheaper by the week. Each month sees another distributor dropping its prices further. Steljes, for example, has repeatedly cut the prices of its own-brand screens to see off competition from the likes of Sharp and NEC. The upshot is that home users can afford the equipment now.
As a distributor of audiovisual equipment, Steljes originally concentrated on trade. Now it has two divisions: Steljes, which caters for the consumer market, and Steljes Trade. Similarly, Norfolk-based distributor Midwich went with the flow of demand and opened a Home Entertainment division in January. Where once Midwich's warehouses were full of dot-matrix printers and bog-standard DOS PCs (Midwich has been around for 15 years), it now has products with names such as Boston Acoustics, Elonex Media Centre and Acoustic Energy.
Not surprisingly, there's a lot of competition at Midwich to get into this new division. Which would you rather be dealing with all day: high-definition TVs, supplied by Samsung, or high-density storage?
"We're only catering for demand. There has been a gradual convergence of home entertainment and audiovisual technology. Entertainment is stored in digital format, which was obviously shaped in the commercial market for IT products," says Darren Lewitt, business development manager for Midwich.
It's all well and good for distributors to adopt home entertainment. They're not as heavily reliant on adding value as resellers. Indeed, some would argue that most distributors don't add any value. The test of whether the home entertainment market could be exploited by the channel is if resellers are making money from it. And they are, according to Lewitt.
"Lots of resellers who sold audiovisual products into the education market now want to sell home cinema into the same customer base," says Lewitt.
Resellers could sell home entertainment to consumers too, he argues, because for the amount of money people are spending on technology, they wouldn't begrudge someone coming out and installing the technology for them. Why pay £2,000 for a top-of-the-range cinema and plasma screen and not have it configured to the best possible settings? Midwich runs an installation service for end-users, which is proving popular.
Home entertainment is not just converging with audiovisual technology. Home entertainment and home security are also coming together. The recent Smart Homes exhibition at Birmingham's NEC was a mix of home entertainment and home security. The amazing thing about both is that they end up travelling on the same networks and being controlled by the same management console, the PC.
The networking infrastructure is a lot cheaper now too. One of the contributory factors has been the work done by companies such as Newbury-based vendor Scion Technologies, which has invented a signalling system that enables it to provide cheap but powerful home multimedia distribution systems.
Scion has produced a switch, the ID-1000, that can handle video, audio and infrared input and output channels, and convert them to a format that can be used by Cat 5 cabling. This slashes the cost of large-scale audiovisual communications and has won Scion multi-million-pound orders from three top UK retailers. It's also helping it to conquer the home market. A 'baby switch' for the home market allows for 13 input channels and six output channels, so that any room in any part of a house can be connected to a terrestrial TV channel, DVD, Freeview box, video or CCTV input.
The same connectivity with an analogue switch would cost about £3,500, whereas Scion resellers can offer a solution for £730, claims Mark Brown, marketing director at Scion. "Affordability will make this a mass-market product," he says.
Jonathan Pengilley, commercial director at Steljes, says the home market is a massive opportunity for resellers because the products are at the right price, but they are often too complicated for most home users to implement themselves. "There are real opportunities for our resellers with this product range," Pengilley said.
Home networking is about building the infrastructure for Smart Homes, which are the platforms for home entertainment and audiovisual wizardry. Other vendors, such as Exterity, are getting in on this act. Exterity has won a number of contracts in corporations, where it uses a corporate network to distribute TV images, which is a lot cheaper and of a higher quality than the video images currently being pushed.
Having developed this skill in the commercial sector, the firm is beginning to deploy the same skills in the consumer market. "Smart homes are being built as standard these days. The technology is really going into the mainstream," says Colin Farquahar, managing director of Exterity. "Having all kinds of gadgetry is no longer thought of as flash. It's affordable and no big deal."
Not that long ago people used to think that heating in a car was an extravagance. "If God had wanted us to have heating in cars, he'd never have invented driving gloves," went the saying. Until very recently, many of us thought air conditioning
for cars was just silly. Now we can't live without it. The same principle applies to home technology.
Attitudes are changing fast, and companies such as Exterity are winning deals to install networking infrastructures in newly built homes. Exterity's inaugural project was to supply the infrastructure for a trendy development in Manchester known as Urban Splash. Every one of these houses is networked up and can receive a Triple Play service (internet access, telephony and video/TV) over the same IP network. The content is sold as a subscription service and delivered by Point1Digital, which now has a licence to offer 67 different channels.
Point1Digital is a case that illustrates how resellers are getting into the home entertainment market. The man behind the company, Simon Crumplin, spun it off from his bread-and-butter business, Data Integration, which has thrived over the last seven years installing Ethernet networks.
"This is a good market to be in, but it's not for everyone. We're going to be very selective about who we work with. If you want to sell this service to the property market, for instance, you have to be pretty clued up about how the property industry works," says Crumplin.
All this entertainment content has to be controlled somewhere, and the mechanism for exerting this control is the PC. Microsoft is at the heart of this with its Media Center PC software. The question of which PC supplier gives the best platform for running Media Center creates a debate that divides the channel. The best platform is the Elonex Media Center, says Midwich's Darren Lewitt.
But San Sethi, development director at ConvergeX, disagrees. His firm is a specialist reseller of home entertainment and smart home solutions. ConvergeX supplies the software and the integration that makes it possible to put any home appliance on a network and control it remotely. The only platform to manage this challenge properly is Evesham Micro's Ebox, says Sethi.
ConvergeX's software integrates with Media Center and adds an extra item onto the menu. It enables the Media Center to manage any household device.
The game is to get consumers to buy devices with a chipset that allows them to be controlled by Media Center. When they buy a lighting system, an air conditioning system or even a kettle, whatever control functions they have can be manipulated remotely. It means the householder can turn the air conditioning up, say, from their desktop. Or operate and view a remote camera. So, for example, if you were at the airport, and you wanted to know whether you'd left your passport on the kitchen table, you could go to an internet cafe, access your household network, and view the images of your kitchen table to see if the passport was there.
More importantly, it means that end- users can build an intelligent network by increments. Every time they buy a new item, they make sure they get one that can be networked. "It makes building an intelligent home environment affordable," says Sethi. It also means users will probably buy the technology from ConvergeX, as at the moment there aren't too many vendors of this type of technology. Yet.
Security is a big driver of sales. Not because consumers are scared of viruses and worms and hackers. They are worried about real intruders. People want to be able to check who's at the door, using cameras linked up to their PC. If there's a noise in the middle of the night, they will want to rush to their PC and check the remote camera that's focused on the garden. At a few clicks of a mouse, they can see if that disturbance is being caused by the people that the Daily Mail told them to fear, or just foxes going through the bin bags again.
If you wanted to let someone into your house when you're not there, you could control the locks remotely. You could be on a PC in an internet cafe at Heathrow Airport, say, and issue directions to your front door to a mini cab driver to go into your house. Then you could use the cameras in your house to watch him like a hawk as you talk him through your house to the kitchen table.
By clever use of the remote control you have of your lighting system, you could flash the lights on and off that look down over your kitchen table. Once he's picked up your passport, you could re-lock the door using remote control too.
There are all kinds of home entertainment possibilities that ConvergeX pushes. You can change everything about your home environment ? music, lighting, heating, curtains ? through your Media Center system. The selling point seems to be that end-users can use technology to control the elements to create the right mood.
Watching war movie Platoon tonight? Your PC can help you create the mood by dimming all the lights and turning up the heating, while it constantly fills and boils the kettle to create an authentic level of tropical humidity.
If the DVD you're watching is Scott Of The Antarctic, however, the PC might be configured to turn all the lights up and crank the air conditioning up to 11.
The point about all this home entertainment and home environment technology is it's very more-ish. It's affordable now, and people can get hooked quite easily. But once their home network gets complicated, they will want resellers to install and configure it.
"Some of the products we've taken on recently, like the universal remote control, are products you would expect home users go to Comet for. But we've found that a very high proportion of end-users want to buy from resellers," says Pengilley at Steljes.
Ken Groves, vice-president of international sales for URC, which sells universal remote controls, says: "The problem for many homes and businesses is not so much the number of devices they have, but the complexity of fine-tuning them all. A reseller can custom install and configure these so that anyone can get the setup they want by tapping on a few icons."
There's no escaping technology and its armies of networking resellers. Technology for the home will continue to march forward and consumers will continue to make this a lucrative market.
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