Analog Video: Still King of the Hill?

IP Video products continue to receive the lion’s share of attention in trade magazines, trade shows and new product introductions from security manufacturers. Relative to its older analog CCTV sibling, IP video seems to be more sexy and fashionable. By all accounts, IP video sales are growing faster than traditional analog sales.

However, despite the growth and fanfare, sales of analog video cameras still outnumber IP video camera sales. Why?

Defining IP Video and Analog
In some respects, the distinction between analog and IP video is becoming less clear. Most DVRs support Ethernet connectivity. The DVRs use the network for remote video monitoring and video playback with PC-based video management software. There is a growing class of DVR products that support “hybrid” recording of both analog cameras and IP cameras. Likewise, some video encoders now support storage, further clouding clear distinctions between an NVR, DVR and video encoder.

The best definition of IP video seems to be around the camera. Let’s call it “IP video” if the camera has an Ethernet port that streams compressed video.

Growth Trends: Analog Video Holding On
In June 2008, IMS Research predicted that network video surveillance “will grow well above 30 percent in 2008.” The 2008 third quarter report from Axis Communications seems to support this trend. Axis, one of the market leaders in IP camera sales, reported third quarter video sales growth of 32 percent over the same period last year.

Despite this growth, traditional analog cameras and DVR sales seem to be holding their own. Analog sales are at least flat, if not growing at Pelco, GE Security and Samsung/GVI:

• According to Craig Dahlman, Pelco’s Director of Technology Synergy, the company is seeing growing analog sales in 2008. According to Dahlman, Pelco’s “fastest growth areas in cameras, as a percentage, have been in IP, even with analog still growing faster than industry growth.”

• SAMSUNG | GVI Security’s core analog business is growing by at least 15 percent, according to GVI Chief Operating Officer Joe Restivo.

• GE Security reports that analog sales are flat.

The reported death of analog video may be inevitable, but it is certainly premature.

Why Install Analog vs. IP?
Despite the rationale for IP deployment, integrators and manufacturers consistently cite four main barriers to faster IP growth that push sales toward analog: Cost, complexity, integrator expertise and performance.

Cost: “The relevant question for new installations is ‘why not IP,’” Dahlman says. “The benefit to a potential global footprint, infrastructure leverage and future-proofing should all play a larger role in the analog vs. IP decisions going forward. IP picture quality and system capabilities are quickly approaching analog and have become less of a reason to deploy analog in green fields. In our view of the market today and in the future, the only green field analog decision should be around very cost-conscious applications.”

Dalhman adds that cost considerations and add-ons to existing systems are the principal drivers for analog. He contends that “most cost-conscious applications are typically very small in size. Thus, very small green field systems (let’s say fewer than 10 cameras) may benefit from an analog deployment vs. an IP deployment.”

A cost study sponsored by Axis Communications arrives at the same conclusion. According to the study, on a pure cost basis, systems of 16 cameras or less will favor analog cameras unless an existing IP infrastructure of Ethernet switches and cabling can be leveraged.

The cost difference is primarily driven by the cameras. The average cost of a fixed IP camera remains approximately 33 percent higher than the cost of an analog camera with similar lens, light sensitivity and enclosure characteristics. The relatively higher cost of network cameras reflects the higher device complexity that includes a processor, video compression engine and a network functions.

Complexity: Most IP solutions tend to require more design and installation complexity vs. the selection of analog cameras and DVRs.

Most IP video solutions require a “systems” approach. A typical system requires installation of a network switch, selecting the appropriate server and storage solution, and then installing and configuring video management software. It is also likely that all of these components are provided by different manufacturers.

While this systems approach makes sense for many high-end enterprise applications, it can start to lose its appeal to a security dealer who can provide an alternative surveillance solution by plugging in a DVR and a handful of cameras.

Integrator Expertise: GE Security’s Tom Cashman, General Manager for Video Products, points out that “integrator experience” is still a growth barrier for IP video. While many security dealers have upgraded their expertise and IT capabilities, there is still a general knowledge gap of IT technology.

For this reason, many manufacturers of IP cameras and video management software simply have not targeted their sales, education and training efforts on traditional security dealers. Companies like Axis focus marketing and training efforts on IT channels rather than traditional physical security channels.

Performance: Although IP cameras have made tremendous gains in overall quality and performance, some doubts remain. Specific concerns revolve around video streaming latencies. The process of compressing video, transporting video over a network and de-compressing the video for live viewing can introduce latencies that make coordination of pan/tilt/zoom control difficult. The latencies seem to vary widely from product to product.

Dahlman points out that the image quality of standard-definition IP cameras “has not met some customer expectations when compared to analog.” The quality concern is more prevalent for live video monitoring. For local monitoring of analog systems, typically there is no video compression — analog video is looped out from a DVR or video matrix switch to a video monitor without being compressed and without reducing video quality. Typically, the analog video is not digitized and compressed until it is recorded by a DVR.

Dahlman expects that IP cameras with megapixel resolutions will “take picture quality apprehension away and help to eliminate this barrier.” In fact, megapixel cameras may be the killer application that tilts the price/performance curve away from analog — even for smaller camera systems. The value proposition for many megapixel camera purchases is the reduction of the number of cameras required to provide surveillance coverage. Megapixel cameras can cover a much larger viewing area vs. NTSC resolution cameras, reducing the total camera and installation cost of a surveillance system.
The most common applications for megapixel cameras are outdoor locations (parking lots, public transportation areas) that involve wide areas. Depending on the application, a 1.3 megapixel camera can replace 3-4 analog cameras while providing equivalent coverage.

What About the Economy?
The slowing world economy, credit crisis and low consumer confidence are putting pressure on many vertical markets for video surveillance. The banking and retail sectors may be hit the hardest.
Peter Wilenius, vice president of Investor Relations and Corporate Development at March Networks, sees banking and retail as strong vertical markets for analog video. For starters, these verticals have an established history with CCTV and an established analog infrastructure. The current economic situation provides more incentive for these verticals to extend the life of their analog infrastructure.

Wilenius sees banking as a hybrid application. “While DVRs may make sense for branch banks, complete IP systems may make sense for the corporate office or data centers that are already equipped with an extensive IP network and IT infrastructure,” he says.

Dahlman agrees that “add-ons to existing systems paint a different picture, since analog infrastructure may already exist, and the end-user may be unwilling to make a technology jump and compromise his investment or capability of the existing system with the addition of IP. Here, analog may be the only logical choice.”

Conventional wisdom is that many IP systems are placed into new commercial buildings without existing analog infrastructure. A recession with slow-down in new construction would appear to have a more negative impact on IP systems. In fact, IMS Research’s 30-percent growth projection for 2008 is down from its 45-percent growth assessment from 2007.

There is reason to believe that the current economic slowdown may have a bigger impact on video sales than the last economic downturn. Wilenius points out that the renewed interest in security immediately after the Sept. 11 attacks sustained the video surveillance market during the previous economic downturn in 2001.

Technology Trends
Analog system technology has not been stagnant. Many of the same technology advances in IP cameras have been applied to analog systems:
Wide Dynamic Range (WDR) Sensors — WDR sensors such as Pixim’s Digital Pixel products have been integrated with both analog and IP camera models to improve video quality in a wide range of challenging lighting conditions.

H.264 Compression — H.264 is the successor to MPEG-4 compression. It is being rapidly embraced and deployed by DVR manufacturers. Relative to MPEG-4, H.264 offers up to a 50-percent reduction in data rates without a reduction in video quality.

Video management software — Products like March Networks’ VideoSphere Visual Intelligence provides central management for thousands of DVRs, health monitoring, firmware upgrades and “hybrid” features that integrate IP cameras, encoders and traditional DVRs.

Prospects for the Future
Economic realities, price/performance, existing infrastructure and the simplicity of analog video systems are likely to sustain analog video sales in the near future.
Despite these factors, sales growth for IP cameras will continue to outpace sales growth for analog cameras. IP camera prices will continue to become more competitive. Megapixel resolutions will improve video quality and in some camera placements will allow reductions in the number of cameras to lower the total cost of ownership.

Tom Galvin is a network video specialist for NetVideo Consulting (www.netvideoconsulting.com), a provider of software tools, security consulting services and product evaluations that enable successful networked video solutions.

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