in 2003 IT/AV Report
Billion Business by ’07
By Neal Weinstock
Heat up a business in lots of little increments,
and eventually things come to a boil.
AV over standard IT infrastructure:
What’s the point of that, from a business perspective?
Is it a business at all, or is it a natural technology progression
within our established business? Or is it not even that,
just a few hyperbolic buzz words? A new study sees a wholesale
technology change- over that leaves equipment sales flat
in dollars, hugely larger in units, and sold through a strengthened
and more profitable integration channel.
The buzz words certainly are
coming fast and furious. Sony, the biggest professional
AV equipment supplier of all, themed its appearance at this
year’s NAB convention, “AV IT.” JVC did
the same for its new industrial video products. But the
products are coming fast and furious, too. JVC, for example,
is highlighting cameras that record in MPEG4 [see page 22]
and output over IP.
On the sound side, Peak Audio’s pioneering CobraNet
had the field of quality networking over Ethernet to itself
since the mid-‘90s. But now, as part of chipmaker
Cirrus Logic, Peak finds itself competing with Gibson’s
MaGIC, which is supported by 3Com. Meanwhile, Yamaha’s
mLAN, Texas Instruments’ first 1394b PHY (finally
making possible long-haul networking over 1394), and others’
contributions are making IEEE 1394 a respectable medium
for audio networking.
And multiple vendors now offer solutions for transmitting
quality AV over power lines or phone lines, basically aimed
at home networking—but also applicable to some professional
uses. Suddenly, there is a large and competitive business
in creating special silicon meant to bring high-quality
AV to common IT standards.
Of course, IEEE1394’s
main use is as a video-camera connection, for both consumers
and professionals. Video servers and post-production workstations
have long made use of nonstandard adaptations of Ethernet,
too. There is a long history in professional AV of cobbling
together systems on the back of technology basically meant
for consumer and IT markets. So what’s different now?
To some extent, it’s
merely the intensification of the old “adapt mass
technologies” trend. But heat up a business in lots
of little increments, and eventually things come to a boil.
‘Ride the Cost Curve’
Building AV systems on top of standard IT components allows
those systems to “ride the cost curve of Ethernet
and mass-produced chips and Cat5 or optical cable,”
in the words of Peak Audio co-founder, marketing vice president
and IT/AV pioneer Rich Zweibel, rather than continue to
pay the costs of the specialized electronics and multiple
multi- core cables still most typical of AV installations.
Building AV on standard IT infrastructure allows labor savings
and increased reliability by carrying AV and control signals
over a single wire—maybe even over the wire that also
carries a facility’s data network, for additional
And it offers opportunities
for digital audio amplification and equalization, or digital
video imaging and processing, to be built into the same
chip (or chipset) as the network interface.
This would allow loudspeakers,
cameras, video monitors and other devices to become network-controlled
devices—possibly plug-and-play network devices—and
allow the junking of lots of heavy, power-hungry analog
systems in the process.
But this trend is not only
about cost, and it’s also not only a one-way reaching
out from AV to IT. IT is also reaching out to AV, thereby
enabling many new applications that promise to bring new
opportunities for us all. Power over Ethernet (up to 30
watts), voice over IP (VOIP) and Session Initiation Protocol
(SIP, which now competes as a conferencing protocol with
the more established H.323) are all developments that aim
to allow telephone conversations and AV conferencing with
quality of service guarantees over Ethernet LANs and the
Just how much of the traditional
switched telecommunications network will change over to
VOIP is debatable, but the VOIP market is already worth
multiple billions of dollars by any of several widely varying
counts, and is growing rapidly. And VOIP is an enabler for
AV over IT.
New Technologies, New Applications
The new technologies bring
new applications to our market, which simultaneously bring
new ways to sell those applications. What’s it all
worth? Weinstock Media Analysis (WMA) estimates that installed
IT AV equipment is now worth about $412 million in North
American sales, plus about $105 million in integration and
contracting services. We expect those numbers to grow to
about $3.15 billion in equipment sales and $2.11 billion
in services in five years. Here’s how we arrive at
the data and how it breaks down.
Prognosticators look at replacements,
first of all. VOIP forecasters expect those systems to grow
rapidly to replace up to 10% of the $3 trillion world switched
telephony business in five years. Insight Research Corp.,
for example, recently published a report showing VOIP services
worth $13 billion in 2002 and growing at about 72% per year
to $197 billion in 2007.
Basically, they expect cable-system operators and VOIP application
service providers (ASPs), such as the Cisco Systems-backed
Vonage, to take some business away from local telcos, while
a fair number of large enterprises put voice on their data
networks to save costs, and long-distance and enterprise
service providers (such as AT&T) do likewise.
These VOIP revenue projections
include almost nothing of the IT-based replacements for
current AV applications, and almost nothing of the new applications
that may allow the installed AV business to grow strongly
in the near future. Desktop-controlled voice and videoconferencing
are included, but not high-quality music reproduction or
MPEG video distribution to thousands of nodes in an enterprise
network or across a wide-area network, and not all the applications
that can be built on top of those capabilities. Insight
and the other VOIP forecasters simply don’t include
distributed AV information systems, digital audio public
address, digital video signage, and all the great hopes
that AV companies have from IT networking.
The current market for installed
audio gear is about a $1.1 billion business in North America,
according to WMA. About $71 million worth of that is either
CobraNet-compatible or mLAN-compatible, or is Peavey’s
MediaMatrix custom variant of CobraNet (actually, Peak Audio
developed MediaMatrix first under contract to Peavey).
These data are based on interviews
with industry buyers and integrators. Projecting forward
from other interviews with manufacturers, we expect IT-based
solutions to grow toward almost 100% of this equipment market
by the end of this decade but, because of the cost savings
the new technology brings, we expect that equipment market
to stay flat overall at about $1 billion.
The pro video equipment business is much bigger, at about
$2.5 billion annually in North America as we measure it,
but it has been declining at a rate of about 8% per year
in dollar value since 1998. It also entails a much smaller
system integration and contracting added value in relation
to equipment sales, at about $800 million annually.
Most of the video system integration
business has been in the core broadcasting area, which hit
a wall a few years ago. Including video servers, digital
video distribution systems to digital displays, and a few
other products, installed IT video gear is now about a $341
million market in North America. (We are not including workstations
and software used in AV graphics, animation and post-production
for audio or video IT-based systems. That’s IT AV,
too, but it is a rather separate business from installed
audio and display and conferencing systems.)
Expected to Grow, But.…
We expect this business to
grow to about $2 billion in installed video sales in 2007.
But much more interestingly, as systems are customized for
sports, religious, educational, medical, financial, retail
or any of many other vertical markets, and must be integrated
with the specialized IT systems in use in all of those markets,
we expect that system integration revenues will rise from
almost nothing associated with installed video today up
to about $1 billion in 2007.
Combining audio and video for both equipment and integration
services, we’re expecting a $5.144 billion market
in North America in four years. Companies that now separately
integrate either IT or AV systems for all of these vertical
markets will fight over that pie. After all, it isn’t
newly budgeted money. In most cases, it is money coming
out of either the IT or AV budget, now directed toward integrating
Established IT suppliers may
not know much about AV, but they know their customers, they
are adept at writing enabling code for their applications,
they often manage clients’ data centers under long-term
contracts and they want to keep those contracts. So, they
will be difficult to displace and, today, they typically
are no longer tiny, local companies but are divisions of
huge computer companies.
For AV systems integrators,
the challenge will be to both partner with these IT integration
giants—which may also be the original IT or AV equipment
providers (companies such as IBM and Cisco Systems and Sony
are among those IT integrators)—and to compete with
them. AV integrators must do this by leveraging their expertise
in acoustics, the requirements of real-time media delivery,
cost-effective systems design and installation, and customer
Meanwhile, IT integrators and manufacturers of all stripes
will leverage their expertise. Bets will have to be placed
on technologies: H.323 or SIP; CobraNet or MaGIC or mLAN
or some other 1394 or some other Ethernet variant; cooperation
with incumbent telcos on wide-area solutions or with a wholly
IP-based CLEC; Windows or Apple OSX or Linux; the potential
bets go on and on.
Some of those bets will be losers. Some will be tremendous
winners—all of which will add up to tremendous additional
value for end users, and strong market growth.
Source: Weinstock Media Analysis
Installed IT AV Equipment and Integration Services
In US$ Millions
|Audio Integration Services
|Video Integration Services