Industry Consolidation is on the Horizon

When comparing the video surveillance landscape to other technology markets, it becomes clear: Change is inevitable


4. The impact of new standards: The emergence of new standards can alter the competitive landscape swiftly. The early television industry presents an interesting example of this pattern. In the 1930s, a couple of firms were experimenting with new technology, and as it evolved and became increasingly attractive, more companies entered the industry and the amount of firms peaked at 85 in 1952. In 1951, disputes about technical standards were settled by the Supreme Court and, two years later, a nationwide standard was adopted. Radio Corporation of America and a couple of other large firms had supported this standard and, needless to say, they benefited extensively from these events. From the early 1950s on, the number of firms decreased rapidly and the industry became increasingly consolidated over the next 30 years.

The emergence of the HDTV standard for IP cameras in 2008-2009 created a similar, temporary shakeout. As many IP camera manufacturers joined in a megapixel race, they struggled to compete once standards-based HD format and compression technology (H.264) emerged as the standard of image quality. When the megapixel race subsided, these companies whose unique selling point was “more pixels” struggled because it was no longer interesting. Similar changes in standards may in the future contribute further to a shakeout.

 

Conclusion: Increased Consolidation is Coming

Based on historical examples, economic theory, and the current state of the surveillance market, the industry will become more consolidated in the future. Currently, analog and IP coexist, though one technology is clearly gaining momentum. Analog firms will need to reinvent themselves to stay competitive, and some are likely to exit the industry altogether.

Furthermore, the increase in firms offering IP cameras can be regarded as temporary. As competition intensifies, some firms will be forced out of the marketplace when economies of scale become more important. Changes in standards and new technologies can be regarded as wild cards in this game as such shifts are difficult to predict, yet may have a large impact on the competitive dynamics of the industry.

Those who attend ISC West in 2016 will see whether I am right or not.

 

A public speaker and academic researcher, Christian Sandström wrote his doctoral disseration on how new technology affectes established industies. Among other things he studied the shift to digital photography and its implications for incumbent firms.

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