AV Magazine
Supply chain pressures, a looming recession, labour
shortages and a Covid backlog are hindering AV recovery across the United
States.
article here
It’s been a tough start to the year in the United States.
Although it remains the largest country in terms of pro AV spend ($76.7 billion
in 2022) growth in 2023 is tracking at 7.5 per cent, relative to 10.2 per cent
last year. When AVIXA updates these figures, mid-year, it is likely to show an
even stronger 2022 and an even lower 2023 growth rate.
“Two primary factors are impacting the market right now,”
explains Sean Wargo, vice-president of market intelligence for AVIXA. “The
first is supply chain, which remains challenged, thereby limiting sales.
Recession threats also loom as interest rates continue to rise and corporate
spending slows. This has not yet impacted pro AV, but it may as we move towards
mid-year. We think the project backlog and continually rising demand in some
strong segments, like hospitality and venues/events, will help bolster the
industry against declines in other areas.”
Datapath’s sales director, Mark Bohs describes the market as
“recovering and robust.” He says: “We’re seeing projects moving faster than in
the past several years as supply chain issues that have slowed project
timelines have subsided and SIs have adapted to using alternative solutions.
There is a feeling that the worst is behind us and, on the whole, the market is
buoyant.”
High import tariffs introduced during President Trump’s
years remain in place. “This drives overall costs up for the entire project
lifecycle and means consumers often look for cheaper alternatives that don’t
necessarily check all of their needs,” says Holli Hulett, co-founder of
Texas-based video conferencing manufacturer, Boom Collaboration.
Christie is starting to see “consistent recovery” from
enterprise, federal, and entertainment markets as the economy stabilises.
“Federal Government spending is as strong as it has been over the past decade,
even higher in some sectors that may have been affected by the pandemic,” says
Martin Waverley, director of sales, North America. “Major projects from all
sectors that were placed on hold in 2020 have finally been redesigned,
respecified with current products, and are starting to go out for bids, awards,
and eventually fulfilment by government contractors by year’s end.”
Peerless-AV’s vice-president of sales, Brian McClimans
assesses the climate as “dynamic and evolving”, especially in relation to
integrator consolidation. “Integrators are getting larger and stronger in what
seems to be a race to see who’s the biggest. Clients are using their buying
influence to move from one integrator to another. They’re also stretching
projects over several months, even years in some cases.”
Listen Technologies, which is based in Utah, alerts us to
greater market volatility. “These past couple of months have been off the map
with upheaval from inflation, threat of recession, tech layoffs, and lingering
effects of the supply chain crisis,” reports Sam Nord, vice-president of global
sales. “We’ve seen many large projects come through, which has been terrific,
but less of the typical day-to-day smaller orders. As things settle down, I
predict we will see a return to more predictable patterns of business,
hopefully along with those big orders too.”
Frank Pellkofer, co-founder and president, Utelogy
Corporation also believes the next 18 months are “going to be a bit of a slog”
for certain AV integrators. “Those who say they have ‘managed services
accounts’ but have not aggressively and proactively adjusted their business models
for service management recurring revenue, including appropriately compensating
sales teams, will be in trouble. Those that do will have higher margins, more
no-bid contracts, and many multi-year MSAs in place. For those integrators that
haven’t taken managed services seriously the past five years it’ll be a
continued race to the bottom in a crowded market.”
For Pellkofer managed services represents the largest CAGR
across most segments. He predicts corporate real estate will shrink while
collaboration tech unifies the hybrid workforce. “As part of this, we will see
those mid-size and larger IT VARs and MSPs continue to capture a very
significant share of this business,” he says. “And it’ll be different because
they aren’t going after the ‘project-based’ business (the 100-room refresh in
one of 50 buildings the customer occupies). No, the IT VARS and MSPs are going
after the enterprise and locking it up for three to five years with an MSA and
using that hundred-room refresh as the pilot.”
AVIXA also highlights managed services as having a large
upside potential thanks to the rise of cloud-based offerings. Most growth is
still coming from the markets that are in a recovery mode out of the pandemic
as consumers return to in-person activity including hospitality,
transportation, and venues/events.
“Retail had a strong end of year and beginning of this one,
though March was slower,” reports Wargo. “Government spending in the form of
infrastructure and energy bills also offers some growth opportunity. Innovation
is a bigger story since the disruptions in a market like corporate may yet
cause further waves of growth as companies further evolve in their support for
hybrid work. AI is a big candidate here, as the technology is advancing
rapidly, and so it may show up in evolutions of managed service offerings from
pro AV providers.”
Drive to hybrid work
Covid dented AV spend in office and educational spaces throughout 2020-2022 but
Clear-Com president, Bob Boster is among many anticipating strong growth. He
cites “comprehensive corporate communications” as a driver to connect
office-based and remote staff and “broad awareness of the importance of rich
video production to message resellers, customers, influencers that continues to
inform buying decisions.”
AV tech for classrooms and boardrooms are closely linked
with both business and education sectors looking to cement hybrid
communications solutions. “Government entities in every county are outfitting
their spaces with equipment designed to bridge the gap between those present
and those online,” reports Hulett. “Universities are offering courses to a
global student base while local students return to campuses. This is great for
their bottom line and amazing for educating those in rural areas or with less
means to travel far to attend the university they’re most interested in.”
Demand for video conferencing rooms within the corporate
market is the main driver behind the very strong end of 2022 experienced by
Lightware. “There’s been some uncertainty, especially with large tech companies
that have had some major layoffs, but the momentum at the start of Q2 2023
indicates a return to the incredible growth pace we experienced last year,”
notes Clint Hoffman, the company’s vice-president of business development.
AVIXA believes hybrid work is more of a factor in the US
versus the rest of the world in terms of the days out of the office. “A desire
by some companies to bring people back to the office also creates a need for a
reimagination of office spaces in the form of a ‘magnet not a mandate’,” says
Wargo. “In all, this has meant we see more of a perpetual beta mode for
companies as they experiment with different approaches. A softening labour
market may further change this dynamic as well.”
Tide turning
More evidence that the tide has turned comes from Promethean where its
executive vice president of global sales, Matt Cole says a hybrid
work-from-home model has become the new normal in many organisations. This is
driving investment and further adoption of AV systems, he says, as office
spaces must now be equipped to handle remote employee collaboration. AV plays a
significant role in these investments, such as interactive touch displays and
VC equipment.
“Classrooms, specifically, will continue to modernise and
integrate edtech into daily practice to increase student engagement,
personalise learning, and streamline user experiences,” he adds.
Puerto Rico, an unincorporated territory of the US, had barely recovered from
Hurricane Maria when Covid-19 hit. Unreliable internet plus quarantine
implementations left local teachers and students without the ability to
continue ‘normal’ learning activities. The country’s Department of Education
looked to its public TV station, WIPR-Channel 6, for a solution.
“Ultimately, teachers were selected to broadcast lessons for
students across the island,” explains Cole. Promethean’s Puerto Rican partner,
Case Solutions, was able to deliver, install, and assist in the introduction of
ActivPanels to WIPR’s station. (The ActivPanels helped educators to deliver
nearly 3,000 at-home lessons.)
“Some of the biggest drivers we hear from customers are
scale and ‘meeting equity’,” says Sam Kennedy, director of product marketing,
Crestron. “In order to drive that equity of experience, there is significant
demand from customers and organisations for multiple-camera solutions.”
Babson College in Wellesley, Massachusetts is an excellent
example of this, he says. Its multi-cam, AI-driven comms system “keeps every
student engaged, no matter where they are. Every attendee should be able to see
those nonverbal cues that we all give, seeing people as they speak, their
gestures, their expressions — all of that info is key to an equitable
experience.”
In addition to the massive growth predicted for government
and enterprise markets, the AV industry has made inroads with themed
entertainment applications as more resources are being invested in experiences.
According to Waverley, these projects include interactive and experience-driven
attractions in Orlando, Toronto, Las Vegas, and LA – all four are hot spots for
the entertainment industry.
“Knowing that these interactive and experience-driven
applications require higher levels of technology to impress guests, this is
where Christie thrives.”
Most metro areas are ripe for business but K-array
highlights Miami and New York as two hotspot locations. The company’s Nicole
Fisher says both cities display “a certain exclusive image, and are most often
occupied by celebrities and tourists who are also looking for a unique
experience shared through luxury.”
Security operations
Threats from cyber attack has seen large build-outs of security operation
centres across the US which social media giants, banks and other large
companies use to track and monitor network security.
“Because of heightened security, we’ve seen mass adoption of
the Trade Adjustment Assistance Program (TAA) in defence contracting, command
and control, and even some security operations centres and network operations
centres across the US,” says Ron Rundell, US sales director, Matrox Video.
“There’s been a big increase in the need for AV solutions to
be TAA-compliant or TAA-certified — meaning manufacturing and final assembly
must take place in a TAA-compliant country. Matrox Video made that move several
years ago. In terms of AVoIP, there’s a lot of growth in military facilities
across the US.”
Datapath’s strengths are in Command and Control, and sports
betting venues. The former “has been standing up pretty robustly into 2023,”
says Bohs. “Applications like Real Time Crime Centers (RTCC) and Emergency
Operations Centers (EOC) are expanding the C&C markets. The use of AVoIP
within Command Centres is increasing as sources are being driven more and more
over a traditional IP network to be shared around video walls and
workstations.”
With the relaxing of legislation in many states around
sports betting, Sports Books (betting sites) have increased considerably. Bohs
says: “Video walls are an important component for on-premises Sports Books that
keep the customers involved – showing multiple games and betting odds. Casinos
need to keep the betting public engaged and entertained during the Super Bowl
and NCAA March Madness so there has been AV investment to support this.”
Live bigger and broadcast
Producers of live events are pushing to decentralise activities, which implies
the need for wireless and/or IP-based solutions. Simultaneously, there’s a
trend towards providing a bigger, more impressive show.
“We are seeing increasing activities in live pretty much
across the board,” says Boster. “Broadcasters have brought staff back into
their facilities, concerts are back on the road, media production is ramping
up, and churches are expanding their production capabilities. During Covid,
many companies who faced the reduction of live performances and corporate
gatherings repurposed their equipment by creating small studios for streaming
programmes and group virtual meetings.
“The desire to distribute communications across networks has
resulted in increased intercom to connect on-site, across the country.”
NAB live broadcasts
Attending the broadcast tech show NAB in April, McClimans noted many vendors
broadcasting live presentations to online viewers with over 100 people also
watching on the booth. “Live broadcasting with AI was also really interesting
to see, highlighting the opportunity to use virtual studios for product
launches, using dvLED as the virtual production backdrop. Digital signage is
the buzzword of the moment and we’ll see more at InfoComm.”
Hulett also observes greater interest in broadcasting live
from government and business sectors, sports and performance venues on a small
to medium scale, including among vloggers, cooking classes, yoga and pilates
studios. “All these users want to level up the overall experience by
integrating multiple cameras for various angles to engage their audience.”
Sustainability not a hot topic
With its addiction to cars and air-con Americans are the most carbon-emitting
population on the planet, measured by the International Energy Agency, but
sustainability is slowly beginning to cut through.
“This is a huge growth area as well as a significant value
proposition in the managed services space. The new integration is taking a
system of systems and tying them to enterprise systems like Enterprise Resource
Planning and Digital Twin platforms. The result of those enterprise
integrations is managing and automating sustainability initiatives,” says
Pellkofer.
Matrox notes process control builds related to solar are big
in Arizona and California, while wind buildouts are occurring along the coasts.
However it’s also selling into oil and gas plants in the Texas region.
Most respondents opted to share their own green credentials
rather than talk about client’s actively prioritising sustainability. Hulett
says interest varies between organisations. “I think where this intersects is
in saving on the overall bottom line of expenses and time. Saving on airfare,
hotel, and hours/days spent travelling adds up to a lot of savings for any
organisation and makes the case for quality meeting equipment so users can
maximise productivity and collaboration even when they aren’t meeting in
person.”
Election watch
It’s 18 months to the 2024 presidential election and while there’s expected to be
little direct demand for AV sales as a result, the outcome of the vote could
have a significant impact on business.
“We will see a push to have projects funded and completed before the
elections,” says Waverley. “I believe a lot of state and federal projects are
going to be green-lit in light of the new leadership, followed by a hold on
projects until the new administration gets a foothold in their new office.”
Making it in the USA
The US is not prone to “pocketing” says Hoffman. “If AV activity is up in the
US, it is up everywhere equally.”
That said, the size of the market “can be difficult to
navigate for smaller companies,” says Hulett. “Taking a regional or segmented
approach could be a great way approach.”
“I would say doing business in the US is easier than
anywhere in the world,” says McClimans. “The biggest challenge is cost of
freight. Some vendors are struggling with stock shortages.”
Bohs also reports that SIs have been “struggling” with long lead times from
certain vendors that have extended projects and therefore drawn-out revenue:
“Having product available in stock makes the SI’s life easier and you will
probably pick up business from your competitor.”
Pellkofer agrees with this adding, “if you’re going to enter
the market, start with managed services, enterprise application integrations,
and automation using actual IT tool sets and tech stack. If you don’t, you’re
setting yourself up for failure. It’s much easier to learn a technology than it
is to change a business model.”
Christie’s Waverley notes that the industry moving towards a
‘just in time’ inventory model, which means ordering products as needed and
keeping as little inventory on hand as possible. “This change is a result of
the larger firms requiring more products to fulfil projects, while closely
watching warehouse space, and efficiently managing their available credit. The
‘just in time’ model has trickled down to firms of all sizes in the US market.
He advises companies looking to do business in this market
to plan for additional coordination to fulfil orders and keep up with demand,
and more accurate demand forecasting.
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