Volume 1, Issue 1

Table of Contents
Introduction: Our First New Newsletter Volume 1, Issue 1 Editorial: Service Contracts are Easy to Sell: Sell Job Security News: 1. Bob Hana Leaves NEC; Ron Gillies Takes Charge 2. Super-Bright Portables – Already Here? 3. Has Hitachi Caught Up? Where's Philips? 4. ClearOne Denies Allegations 5. 14,000-Unit Order From China – A Sign of the Future? 6. Crestron Isys Touchpanels Get an Even Better Image Feature: My Predictions for 2003 – Part 1 of 2 Review: Sharp's Jewel Introduction Our First New Newsletter!!! Volume 1, Issue 1 Welcome to the inaugural issue of my new (still un-named) newsletter. As you'll see, it's focused not just on the news, but the meaning behind it. The opinions are based on my experience in the industry but what is most interesting is when the opinions inspire debate. Be sure to agree or argue with me on any issue by writing to me at gkayye@kayye.com. You never know – your letter could end up in a future issue! I don't intend to report on all of the news. I only intend to report on the news that I think has high impact on manufacturers and the dealer channel. I'll have feature articles from time to time, and sometimes product reviews examining a particular manufacturer claim, or a particular exciting product feature. And sometimes I'll have special editorials on issues that are on my mind. This is going to be a topsy-turvy year for the industry. While sales should be good, profits may be harder to come by as the financial markets provide less fuel for growth and as competition keeps lowering the entry prices. As projector prices keep dropping, the market will eventually saturate and we'll see projector manufacturers either diversify their offerings or merge corporations. I see no end to how high the display market can skyrocket, however. The only question is whether plasma and LCD prices come down enough to make them the top sellers in most markets. And with videoconferencing growing, will the bulk of corporate users adopt low-cost, desktop systems such as Microsoft's NetMeeting or will the true VTC systems manufacturers benefit most? So, we'll be watching it all together, here, a couple of times a month. I hope you enjoy it! And don't forget to send in a suggestion for a name for my newsletter. We're giving the lucky winner a TiVo Series 2 and a home networking kit. Send your suggestions to gkayye@kayye.com – by March 10th! –Gary Kayye, CTS Editorial Service Contracts are Easy to Sell: Sell Job Security By Gary Kayye, CTS If you're a regular reader of my columns, you know that our firm works with dealers to help them become more profitable. In some cases, it's a box company wanting to learn how to sell systems. In some cases, it's a systems integrator trying to sell design/build contracts. In some cases, it's a design/build firm trying to get better cost accounting on jobs. But, in almost all cases, they are all equally frustrated at the level of success they have selling their most profitable product: service contracts. Service contracts (especially proactive oriented ones) are much more profitable than selling products. I won't go into the details about how profitable they are as I wrote a three part series on service contracts a couple of years ago with the help of two of the industry's service gods: Barry Haligan and Jay Rogina. You can refer back to that article later, but rest assured that even a poorly run service department is almost always more profitable that a well run sales department. Margins for service run between 50-80%! But, selling them, for a sales person, is often an obstacle. Even the best sales people have a hard time selling something that is not tangible. If they can't see it, touch it or demo it, they often find it hard to sell it. Why would a customer buy something like service? No one buys extended warranties, right? Wrong. Although I don't equate an extended warranty with a service contract, the fact is that even extended warranties sell well. Even retail electronics companies like Best Buy and Circuit City have "hit" rates selling extended warranties about 20%. Imagine the profit potential if over 20% of your systems came bundled with an extended warranty. Now, imagine that same 20% with a true service-content-style extended warranty! Wow is right! First of all, think of it as selling job security to your client. OK, you can't use those exact words, but isn't that what you are selling them? Job security. If the system breaks down; if the president of the company who just spent $80,000 on a new boardroom AV system walks in there and it doesn't work right away, all the time, who loses their job? Not you. You might lose a client, but your client may lose his/her job! A good service contract means that he/she (your client) doesn't need to ever worry about the system working as you'll insure them that with some type of guarantee. And, of course they'll pay for it. But, they'll be paying for it with their company's money. So, they use their company's money to save their own job. Cool, huh? Second, it's always easier to sell a service contract before going over the client's budget rather than after. Line list a service contract and its benefits (not features; benefits) on the bid/quote itself–up front. Finally, bill it monthly. Don't show the cost of service on an $80,000 system at $6000. Show it as $500 per month – that's a lot easier to swallow. So, they get to save their job spending only $500 a month of their company's money? Yep. To really understand this, you need to understand the art of proactive service contracts and the benefits to the client. So, if you don't, learn how to do them. Then, sell them. And a side bar to the ProAV industry's consultants out there: Please either stop listing a requirement for a first year's service on each and every system you design to be performed by the bidding ProAV dealer OR, give them a formula for calculating what to charge (i.e. 10-12% of the cost of the serviceable equipment). Too many times dealers bidding jobs you design are not calculating the cost of the service – they are throwing it in. We all know that you cannot "throw service in" so the "good dealer" loses the bid and worst of all, the client loses faith in our market's ability to service their own gear. Back to top News 1. Bob Hana Leaves NEC; Ron Gillies Takes Charge Bob Hana, a 20-year NEC veteran, announced that he is leaving NEC. Although he won't say where he's going, I have a feeling it won't be too long before we see him reappear in the projection market. He has a lot of experience in both the ProAV and Consumer markets in projection. I spoke to Bob this week and he asked me to deliver the following message to the ProAV market: "I have enjoyed my time at NEC having spent 8 years in the consumer side of the business and 12 years in the professional side. I had a lot of great opportunities, gained a lot of experience and made a lot of relationships that turned into friendships – a big bonus for me. Thank you to everyone in the ProAV industry." Bob can be reached at robhana@yahoo.com. Good Luck Bob! Ron Gillies is taking over for Bob. Ron's a personal friend of mine and I have to say they couldn't have picked a better guy. He is NEC's new senior vice president of its Visual Systems Division. Ron is extremely well known in the projection market as he's been in it since virtually the beginning. In 1984, he was a regional sales manager for Proxima and then quickly moved up the ranks, eventually becoming VP of Sales for Proxima. Then, when Proxima merged with InFocus, Ron held the title VP of Sales and Marketing for the US and Latin America. Personally, I can't see Ron moving out of San Diego, but I am sure he'll either have a second home in Chicago or spend 80% of his time there. On Monday, I caught up with Ron and he explained his vision: "My vision is to refocus attention on the ProAV channel by working in lock-step with our partners to ensure mutual success. NEC's leading projector and plasma display products, robust channel programs and top-notch support services provide a powerful and profitable combination that is ideal for the overall growth of the ProAV industry." Congratulations Ron!!! Click here for NEC 2. Super-Bright Portables – Already Here? Epson surprised many in the market recently with its announcement of a 4-lb. 2000-lumen projector. Epson is one of those companies that typically doesn't stretch on ANSI lumens specifications, so if this is true, a 4-pound, 2000-lumens projector, this is significant – a new bar for the market. I wrote about these impending super-bright portable, install projectors being the wave of the future – well, maybe they're here. The Epson PowerLite 735c is a 3-panel LCD projector with WiFi wireless connectivity. It also uses its own PC card that frees you up from having to connect to a computer – a feature, I have to say, that's virtually useless as no one is using this functionality. But, that's just my opinion. Click here for Epson 3. Has Hitachi Caught Up? Where's Philips? Where's PLUS? Only 16 months behind the rest of the projector market, Hitachi finally introduces networkable projectors with its XGA CP-X885W and CP-X880W. With that announcement, that leaves only PLUS and Philips without networkable projectors, so far. But, can they be far behind? Probably not. Not only do I expect to see PLUS with a networkable projector later this year, but also they will enter the install-projector market, too. Although PLUS denies it now, I have preliminary specs on the projector and it's fairly small, bright and uses a single-chip DLP engine that's going to have some interesting installation features. But, it uses the new IT DLP chip that everyone is waiting for. So, don't expect it until Q4 2003. What this shows is that the install-market, already getting crowded, is going to become a central focus for a lot of projector manufacturers. Why? It's more profitable, not saturated and surely not a commodity – like the portable market has gotten. But, the big story will come later this summer when a BIG, BIG name gets into the install-projector market with a "killer" box. I can assure you that this will be a giant-killer. This is a huge company with sights set on maintaining profitability for the ProAV channel while delivering a unique projector. I will have more to say about this projector manufacturer as they debut their systems projector line, but rest assured, they should become a market leader rather quickly. Click here for Hitachi's XGA CP-X885W and CP-X880W 4. ClearOne Denies Allegations I am intrigued by this ClearOne mess. OK, I have to admit, I am far from an insider when it comes to ClearOne or anything they have done or not done, but I can tell you, from personal experience having worked for a small public company, this is a serious issue. The SEC doesn't file stuff like this against a company often and this seems like an issue that will have an impact on ClearOne -either way. I'm hoping ClearOne is cleared of all this, and quickly, and that it won't have lasting impact on their business. Still don't know what I'm talking about? Well, in January, the SEC shook up ClearOne (formerly Gentner Communications) with complaints that the company improperly reported revenue by placing products into the distribution channel before requiring payment and misled outside accountants. Last week, ClearOne issued a statement denying the allegations. ClearOne said the SEC didn't give the company, chairman/president Frances Flood or CFO Susie Strohm, who were named in the complaint, "any meaningful opportunity to rebut or even respond to the SEC's allegations prior to filing its complaint." One report said the allegations stemmed from the testimony of a disgruntled employee. Flood and Strohm were put on leave in late January. The company appointed Greg Rand, COO and Mike Keough, chief strategy officer, as acting co-chief executive officers and outsider George E. Claffey as interim CFO. Claffey is a former Deloitte & Touche accounting and auditing pro. Company spokesman Bryce Benson told me he assumes that Flood and Strohm will come back, if/when the allegations are proven to have no merit. Most recently, ClearOne denied all allegations and said the SEC's complaint investigation was deficient, lasting only three weeks, including the Christmas and New Year holidays. Click here for ClearOne 5. 14,00-Unit Order from China – A Sign of the Future? The largest Chinese TV exporter signed a deal to buy more than 14,000 display units in January. Although this company is NOT a ProAV manufacturer, a lot is foreshadowed for the ProAV market. If projectors weren't already cheap enough, with NEC introducing the first under-$1000 projector this month, expect to see them get even cheaper when China gets into this market – later this year and early in 2004. We will see sub-$750 projectors, $2,500 install projectors and even semi-portable (or moveable) 10,000 ANSI lumens projectors next year! 6. Crestron Isys Touchpanels Get an Even Better Image I really like the direction Crestron is taking its touchpanels. They added multi-window real-time video that makes these systems extremely versatile. They're saying home security and videoconferencing are typical applications, but they could be used for any security, really – and could be a boost to the videoconferencing niche. The new systems ramped up the video quality with an image rendering algorithm and gamma correction. Whereas their previous system allowed only one video window, you can now have as many as three real-time videos going at once on the TPS-5000 or 6000 model using a TPS-VID-2 card and a Crestron TPS-XVGA card. That opens up a world of possibilities for Crestron dealers. They also have anti-aliased 3D objects including buttons, frames, gauges and sliders. Anti-aliased text options include standard, embossed, beveled and fringed. There are 11 Isys touchpanel models and all new ones have active matrix displays and the high-resolution multi-window video capability. I wouldn't be surprised to see these become hot-sellers. The many different applications just need to be identified clearly for the dealer channel to get creative. Click here for Crestron Back to top Feature Article My Predictions for 2003 – Part 1 of 2 By Gary Kayye, CTS Unlike previous versions of my annual predictions for the upcoming year, this year's edition is different. Instead of focusing on specific manufacturers and products that I believe will have an impact on the ProAV business for 2003, I will, instead, focus on technologies and trends. In addition, I will focus on how those technologies are likely to affect the ProAV market in 2003 and even into 2004. Finally, I will explain how you can take advantage of these technologies and market changes to grow your businesses. First, I'll start with a review of last year's predictions. As in years past, I want to at least review what I predicted for 2002 (in the December 2001 issue of Sound and Communications magazine and January issue of KNews) if not for you, for me. Simplification of Systems Integration: Last year, I predicted that there would be a trend towards simplifying systems integration in 2002 and there is no question that this happened. Not only are projectors smaller and easier to use but all the new, new features that we promote (for example, network-enabled) are designed to simplify not only operation but also support of those projectors. But it didn't stop at projectors. Manufacturers such as Kramer, Da-Lite, Crestron and Extron have introduced all-in-one solutions designed to package systems in a way that makes them easier to design, install and service. And some manufacturers are even offering simple, complete systems-in-a-box solutions such as 3M with the Digital Wall Display, and Smart Technologies with a killer product called Sympodium. Early Majority Buyers Will Emerge: There is no question that we are now selling to early majority buyers. People are now buying both projectors and systems because they need them, not because they just want them. And they are buying them for reasons unrelated to technology. Over the past 10 years, I'll bet you hardly ever had a sale of a projector where you didn't tell the buyer of the ANSI lumens or the resolution of the box in front of them. But now, you have people who are buying projectors who could care less what the ANSI lumen value is or what resolution chip is inside of it. They are buying them because they want to watch DVDs. They want to present PowerPoint slides and watch the news at the same time. Bye, Bye Over-Engineered Systems: Some of the large, traditional integration firms have felt this one more than others in 2002. Right now they are blaming it on the economy but, guess what? It's all the economy. There has been a shift toward simpler, smaller systems. And, fast ones at that. There is now a value proposition for an integrator to be able to tell a client that it will only take them two weeks from time of PO (purchase order) until completion of installation of the system. Yes, you are sacrificing some of the bells and whistles that made systems so cool over the years, but you know what? Buyers are buying what they need, not just buying the cool factor anymore. The fastest growing integrators of 2002 were former box houses. That's right, former box houses. They used the box sales model to sell packaged systems. A New Generation of Salespersons will Emerge: Well, this one is questionable. I am not sure this one has been realized as there aren't a lot of people hiring right now. But I truly believe when they do start hiring again, sales will be a service function rather than a product volume function. Therefore salespeople with relationship capabilities (not technical skills) will rule the world of selling ProAV gear. All-in-One Means One-for-All: I predicted the emergence of the all-in-one product from all angles of the industry. Well, that one I hit perfectly. Has anyone not used Crestron's powerful MP2 yet? It's the buzz in the control world. It's a quad-switcher and control system in one. All for a price that's half of what it cost a year ago. How about Kramer's VP-720? That's a seven-input switcher-scaler (yes, switcher, scaler and seamless switcher) that handles video, s-video, RGBHV, DVI and audio, all in one box for less than $2,000. And, Extron's MPS 112, although it may look familiar, is a four-in-one switcher (video, s-video, RGB and audio) for under $2,500. And now we even have projectors with built-in seamless switchers and scalers with Barco's IQ series. DLP Systems Projectors: Although still not in the ProAV market just yet, the DLP projector has taken the home theater systems market by storm in just the past six months. InFocus' X1 is promoted as the office projector you can take home ($1699!!!) and their ScreenPlay 7200 is the new standard for home theater installation. It uses a new 16:9 aspect ratio 1280×720 resolution DLP chip that is as close to CRT imaging as I have seen since the CRT. And now Sony, Sharp and everyone except Epson have a DLP projector. But in reality we'll see the DLP projector being installed in boardrooms, conference rooms and training rooms at near the same rate as LCDs by the end of the year. IT will Dominate: The new, new thing in AV was IT. No doubt about it. It hasn't yet yielded the sales drive that projector manufacturers want, but IT companies are embracing it quickly and are getting into AV. I expect to see AV companies integrating AV/IT installs regularly by the end of 2003 and into the first quarter of 2004 helped by Linksys, Microsoft, Crestron and 3Com. A Technological Breather: At the end of 2001, I predicted that 2002 would not be a big year for sheer quantity of techno-gadgets. That one was easy to predict considering the economy was firmly in a slowdown. It's therefore not hard to guess that a slowdown in R&D spending would occur. And we've hit about as high a technological curve as we need, perceptually, to be noticed by the majority of potential buyers. We are far from saturation, but technological innovation won't drive this market again for a while (maybe 2-3 years). Marketing and simplification will, and people will. More on that later. So, that's a review of 2002. OK, on to the 2003 predictions. First of all, there is no doubt that networking and IT/AV convergence will be a central theme pervasive throughout the ProAV market again in 2003. It all started in 2001 with Sony's bold introduction of their eConference initiative and InFocus' ProjectorNet strategy. In 2002, virtually every major projector manufacturer [sans Philips] added network-enabling projection to their product lines. Now, it's real. But, if you are a regular reader of my monthly column, Sight Lines in Sound and Communications magazine, you also know that there has been marked resistance by ProAV integrators to embrace IT-enabled AV products. Sure, IT companies have, universities (the ultimate early adopters) have, and even some traveling presenters have, via new product offerings from Linksys and Komatsu. But traditional ProAV integrators have decided not to do it, yet. That's all about to change. New control interfaces from Crestron, AMX and even Microsoft's eHome division (aimed, as it says, to the home applications) will validate the technology by providing a simple user interface and control protocol to integrate both networkable and non-networkable AV gear. Networked systems are about to go prime-time. "Commercial and residential actually have similar applications where control is concerned," remarks Dave Silberstein, Crestron's Training Manager. "RoomView allows people to monitor, via Ethernet, switchers, routers, cameras, recorders, DVD players, audio and video processing gear and all sorts of AV stuff are already rolling out or beginning to appear hosting Ethernet RJ45 jacks – all designed to take everything and allow it to be controlled and managed via a dedicated "AV network." In fact, Crestron is touting their eControl2 interface as the future, and it will certainly raise some eyebrows as they are now giving users the ability to control ANY room, anywhere via the Internet (on a PC or via any PDA). So, you can use any device to control a home or office system using a PC, an iPAQ, a TabletPC or virtually any computer connected to the Internet (wired or wireless connection). So, like it or not, you AV guys out there need to become network savvy. I know you've heard this a million times. I've been writing about it, most of the manufacturers are now promoting it, and you even use it each and every day in the office and at home. The common complaint, from the dealer, is: "I can't make any money at it. Where's the revenue stream?" Well, that's the value. The fact that you haven't figured it out is why there is a value proposition for it from IT companies. But, let's lose the black art and identify for you where the money's located. It's simple: proactive monitoring. An IT-enabled system allows you to proactively monitor a system FOR the customer INSTEAD of the customer doing it. It's not going to take a corporate or university IT manager long to figure out that he doesn't need six AV guys on staff to monitor this when it can be done automatically, OR, better yet, he can outsource it to an AV company for half the salary budget. Finally, there's an ROI on videoconferencing. Everyone knows I'm not a big fan of videoconferencing as I haven't seen too many applications that weren't troublesome, and where the user of the system itself was even happy. Don't get me wrong, the idea and the technology is cool, but the application of it is thus far unimpressive – too many problems interfacing with the phone lines and companies. But, it's getting close. I recently saw some cool software upgrades to current systems, and new hardware systems that use compression technology that even works on bad lines. I think this will set the industry in motion. In addition, the emergence of the ever-present, eventual wireless network that's eventually going to float around us at all times will solve most, if not all, the connectivity issues we have with VTC systems. There's eight times more bandwidth on the slowest wireless system than from a wired T-1 line! Speaking of wireless, network-enabled systems can even be controlled, distributed and accessed wirelessly. Wireless network gear will converge into AV stuff quicker than you know it, and with bandwidth four to five times that of what we need to route everything from XGA to MPEG2 video. So, don't stop learning about networks at the wire. Go wireless. Today's wireless systems use an industry standard transmission protocol known as IEEE 802.11b (common name is known as WiFi – for wireless fidelity). The current WiFi standard is capable of transmitting wireless data at a speed of 11Mbps, but on the horizon is an upgraded version of WiFi, known as WiFi5 and IEEE 802.11a. But the real deal is a standard hitting the market in 2003 known as IEEE 802.11g. It's capable of transmitting data at 5 times that of 802.11b (54 Mbps) and is also downward compatible to both 802.11a and 802.11b standards. When we hit the "g" standard sometime this summer, we will truly be in the proverbial information superhighway. This 54Mbps system will not only allow for transferring the highest resolution data we typically use in the average ProAV system, but it's wideband enough to transmit HDTV, wirelessly. About 40% of the projector manufacturers support wireless data transfers today, but expect that to jump to virtually 100% by year's end. Stay tuned next issue for what I predict to be the biggest trend of the year! Back to top Review Sharp's Jewel I just had the privilege to evaluate the fairly new Sharp XG-P25X projector and I must say, I am impressed. Although this box debuted soon after InfoComm 2002, real volume shipments of it didn't ramp up until recently and since Christmas I've been swamped and didn't have time to take a look at it until this week. But, don't let my lack of attention to this be any indication of my evaluation. To the contrary, I came away excited about not only the performance, but also its connectivity, ease of use and especially its video processing. At 4000-plus ANSI lumens (and yes, I verified that myself) the XG-P25X is a native XGA (1024 x 768) resolution 1.3" 3-panel LCD projector that includes almost everything you need in a fixed-install systems projector. At a new lower-list price of $7995, its input panel includes RGBHV, DVI, video, s-video, XGA, component video and even HDTV. But, it does lack a network port. Sharp promotes a third-party solution to accomplish network-control, but it's not integrated into the projector as, in my opinion, it should be. That aside, this projector is a powerful bundle and includes the closest thing I have seen to date that rivals Sony's built-in DRC video processing for video scaling and enhancement. Dubbed ImageACE, the technology's been integrated into most of Sharp's projector line for a couple of years. This version also includes what Sharp calls Enhanced Three-Two Pull Down that allows this projector's video quality to rival that of other LCD projectors designed exclusively for video and Home Theater environments. Finally, with the addition of two new custom lenses for the XG-P25X, Sharp is positioning this projector for virtually every kind of installation with lens options ranging from a long-throw 6.1:1 to a short-throw 0.9:1. To learn more about the P25X, go to http://www.sharpusa.com/products/ModelLanding/0,1058,880,00.html. Well, that's it for the first edition! Thank you for spending time with me as we muse the industry happenings. To continue getting my newsletter, or to sign up a friend, go to www.kayye.com and click SUBSCRIBE NOW. To send me feedback and news tips, write to me at gkayye@kayye.com. A little about me: Gary Kayye, CTS, founder of Kayye Consulting. Gary Kayye, an audiovisual veteran and columnist, began the widely-read KNews, a premier industry newsletter, in the late 1990s, and created the model for and was co-founder of AV Avenue – which later became InfoComm IQ. Kayye Consulting is a company that is committed to furthering the interests and success of dealers, manufacturers, and other companies within the professional audiovisual industry. To read more about my background, our staff, and what we do, go to www.kayye.com. Back to top This newsletter is the opinions of the author only and does not necessarily reflect the opinions of other persons or companies or its sponsors.