Earlier this week, satellite television firm DirecTV entered the residential security market with its acquisition of LifeShield Home Security. Based in Langhorne, Pa., LifeShield provides wireless home security solutions and monitoring services to more than 20,000 customers in every major metropolitan market across the U.S. Financial terms of the acquisition have not been disclosed.
According to Brad Bentley, senior vice president of revenue strategy and planning for DirecTV, the home security market was attractive to the company for several reasons.
“From a home security perspective, it’s a high margin, low-churn and a really low-penetrated business,” Bentley said. “We also looked at it as a natural extension of the DirecTV product offering. We do have a national footprint of technicians, consultants, as well as dealers, so we’re in homes everyday and looking to provide additional value. That, coupled with our expertise in delivering an exceptional video experience, we felt we had an opportunity to bring home security in that product offering.”
Although the company looked at a couple of different options, Bentley said LifeShield seemed to be a “perfect fit,” as they offer a completely digital, wireless and easy to install solution. Bentley said DirecTV’s plans for LifeShield moving forward are two-fold.
“We plan to retain the brand LifeShield, that they continue to sell do-it-yourself home security products, which is at the core of who and what they are today, and by extension we would create a DirecTV affiliated brand that we would offer to our 20 million subscribers as part of an upgrade opportunity, as well as to the three-and-a-half to four million new customers we bring on each year,” he explained.
In addition, Bentley said that LifeShield’s management team, including its founder and CEO, will be retained by the company.
“We believe we have an edge from a home security standpoint because we have a premium brand. We have a tremendous sales and marketing engine and that, coupled with our leadership in technology and innovation, we think we can create a truly differentiated experience,” Bentley said.
Marshall Marinace, president of Yorktown, N.Y.-based Marshall Alarm Systems and the incoming president-elect of the Electronic Security Association, believes it remains to be seen exactly how much success DirecTV and other recent market entrants will enjoy as many of them are still feeling their way around the industry.
“Many times, and we’ve seen this with other cable companies or similar providers of bundled services, is that they come out early, make this splash and see how much it holds weight,” Marinace says. “And as we’ve seen with some other similar situations, they don’t even have a product that they will be marketing yet. They’re just trying to get the programs up and running and get familiar with the consumers and so forth.”
Jeff Kessler, security industry analyst and managing director of Imperial Capital, LLC, said that a big differentiator between the entry of DirecTV to the market and that of cable or telecommunications providers is that they obviously recognize the need to have an established service component if they want to be successful.
“The acquisition was, in some ways, a very carefully thought out transaction in that DirecTV made the clear choice not to just jump into the market with discounted pricing on both installation and monthly services,” Kessler said. “They very well may use LifeShield to promote discounted services and equipment, but what is most notable is that instead of deciding to do this on their own, they bought a company with an existing base of highly regarded service and expertise in the five CMS (Criticom Monitoring Services, a division of Protection 1) monitoring stations that LifeShield uses. Whether or not DirecTV/LifeShield will continue to use CMS we’ll have to see, but it is a clear signal that DirecTV realizes the one, huge disadvantage that the telcos and the cable TV companies have in trying to come into this business, which is a lack of customer or potential customer or subscriber trust in their service offering.”