Kayye’s Krystal Ball – 2009 HomeAV Edition

By Gary Kayye, CTS

Welcome to my annual Kayye’s Krystal Ball!  This is where I, unlike the other editorial wimps out there, take a stand and make specific predictions about where the HomeAV market is heading for 2009 and what to look for — and, most importantly, who to look for – the statement-making manufacturers and products of 2009.

This is a fun column to write, annually, and, as I said earlier, I will take stands, make predictions and not waffle in my evaluation of products, technologies and companies to watch for and against.

In past prediction columns, I’ve addressed issues like Blu-ray vs. HD-DVD — yes, I said Blu-ray would win and got hundreds (literally, hundreds) of e-mails from HD-DVD lovers that disagreed.  Come to think of it, I haven’t heard from any of them in a while…

In past columns, although not as bold a prediction as the one above, I predicted that 3LCD from Sony and Epson would be good enough to put into home theaters, even when everyone was specifying DLP.   And, by 2005, it was.  I also predicted and warned that service-oriented custom installers would survive the impending recession while box-focused one’s would collapse – we’re in the middle of that coming true.  And, back in 2003 when everyone was debating 720p vs. 1080i vs. 1080p, I predicted that all three would win out, but that the upcoming high-definition DVD format would be 1080p.

But, then again, last year, I predicted that the University of North Carolina Tar Heels would win the National Championship in Basketball – and they got thumped by Kansas.  So, I can be just as wrong, too.

So, as you read this, keep in mind, these are my predictions and opinions based on what I see and hear, and my personal experience having served in the AV market for 20+ years.

What Were My 2008 Predictions?

IP-IP-IP:  I started my predictions for 2008 by saying we’d see a proliferation of IP-enabled AV devices.  I specifically named the digital signage market as being the driver of this in 2008 in the ProAV world and new Internet-based Video-On-Demand (VOD) boxes in the HomeAV world.

Well, the HomeAV market has JUMPED in on this ahead of the ProAV market in 2008.  Apple – with AppleTV, DirecTV, Dish, Netflix, Amazon, Sony’s PlayStation3 and even Blockbuster all launched network-based VOD programs using set top boxes that receive content via the internet and connect directly to your TV — SD, HD and some even Super-HD (1080p).  And some are even completely wireless!

Where does this leave Kaleidescape?  Well, if you want to own all those movies rather than just rent them, Kaleidescape’s your product – if you don’t mind renting them, the plethora of aforementioned set-top boxes will do the trick!

My point?  Well, remember all that gear, gear and gear you used to stuff into a rack to allow home theater owners to watch all sorts of different kids of content – this is a look into the future:  It’s on its way to becoming virtual. 

Control is KEY:  I predicted that the control market was close to an evolutionary REVOLUTION. There are just too many things lining up in favor of it.  I know that Crestron WILL be part of this evolutionary revolution, but I’m not so sure about AMX.

The control system is the user interface to the entire AV-enabled room.  You walk in a room full of thousands of dollars of AV gear and to turn it on, the first thing you’ve got to do is use the control system.  Whether it is a keypad, a touch-screen or a handheld remote, you have to use something that simplifies the use of the AV room.  But, as technology has allowed for sleek software features (see just about any Crestron touch panel at their trade show booth), nice aesthetic designs, and the use of Windows-enabled drivers, many clients are wondering,  “why can’t I use a $1,000 tablet PC to control all this stuff in the room and save myself $5,000 on the price of a traditional touch-panel or even a $200 touch-screen like the iPod Touch?”The answer is simple: The key to a successful control system isn’t in the hardware; it’s in the software.  Actually, you can use a tablet PC, and by doing that, you will save $4,000-$5,000, but who’s going to manage all the control protocols for each of the devices when they’re installed (much less a year later when the customer wants to add a new source to the system)?

Ah, but what about this revolution?  Well, for 2008, I predicted that more and more products would become IP-enabled (meaning they can be controlled via an Ethernet network port and without custom protocols or stupid RS-232); there is standardization of control functions in devices.  As that occurs, you will see more control options that are totally network-based. But, this transition is NOT going to be complete in one year.  Over the next three years, you will see every AV system built go from being primarily RS-232, I/O and IR based control to exclusively IP-based control.

Well, I was only partially right.  The control market has clearly gone towards simplification — look at what Extron has done in the past 12 months, for example, in the ProAV market — why couldn’t it be done in the HomeAV market too (oh yeah, like it or not, it has been with Harmony). But, that revolutionary change hasn’t occurred, yet.  It may be because the cloud-based control system companies haven’t finished engineering their software yet, or it may be that Crestron and AMX haven’t decided to go totally network-based. Extron is already, though in the ProAV market — but no HomeAV stuff.  But, I stand behind this prediction and believe it will fully come more to fruition in 2009. And, I think Apple and/or Microsoft might even have a hand in it.

Gaming Projectors drive prices (and profits) down even farther:  There have been a plethora of sub-$1000 projectors that have driven sales in places like Best Buy, Office Depot and the Internet. This trend of sub-$1000 projectors has destroyed the margin opportunities on the entire entry level and mid-level systems market (at least where projectors are concerned) and will hit the higher end of the market with sub-$2000 projectors in 2009 that are in the 4K light output level!  And, I haven’t even mentioned the pico-projectors (pocket projectors) – those will come below in my 2009 predictions.

Plasma comeback or death? I predicted that 2008 would start the decline of plasma sales that would eventually spell its death by 2011. 

The first half of 2008 saw the rapid increase of LCD and a decline of plasma sales.  But, as the recession took hold in the later half of 2008, most sales tracking firms cite plasma sales increasing as people want bigger for less — and plasma is as much as 50% that of LCD in same-size configurations.  I think this is truly driven by the recession and will eventually come to an end.  But, as 2009 will be a full-year of a recession and will likely see plasma sales increasing all year long.  And, the new super-flat plasmas (1” thin) will help keep them alive a while longer.

Will InFocus survive?  I questioned their ability to make it through 2008.  Well, they’re still here! But, in October, they announced a third quarter loss of $4.2 million (compared to an only $3.8 million loss of Q2 2008).  But, the telling sign is that their gross margin is down another 2.1% in the quarter compared to 2007 — a trend noticed by everyone in the box-projector market.  And, InFocus’ President and CEO, Bob O’Malley, summed up the bad news in their Q3 results saying, “Obviously, we did not meet our plans for Q3.” However, I was contact by someone from InFocus’ Marketing Department as lately as yesterday who said to me, “I think you will be pleased with our efforts including product and routes to market with the new platforms.  Last year when Bob O’Malley came on board, we got back to basics. However, turning the ship takes time. The final leg in the strategy that is integration for InFocus (Product, Place, Price, Promotion) will be announced in June of this year. The high value-add dealers that offer professional design and integration services are a key piece of our success in 2009 and beyond. Partnerships are also crucial. Vendors that offer control systems, mounts, screens, and design services are all on the radar. We will be offering products not seen since the premerger days of Proxima.” That sounds promising, right?

Distribution:  I noted how big and strong Electrograph had grown in 2007 and predicted that they, and the other distributors would get more of the HomeAV business in 2008.  Well, this has happened.  More and more dealers are relying on distributors to help them manage inventory needs and cash flow — not directly, but indirectly. Using distributors means that a dealer doesn’t have to make large commitments to manufacturers and can get discount pricing on just about anything. I see 2009 being a good year for distributors — at least for the good ones.  Without mentioning a specific name, there is one distributor out there that SUCKS.  They will likely fail in 2009 as not only do they miss-ship products, mishandle orders and provide terrible customer support, but they actually blame you, the custom installer, most of the time for the mistakes they make. We all know who they are. Bye, Bye bad guys…

Oh, and since they will disappear, consider replacing them with Electrograph.

Finally, the economy:  I predicted that the economy in 2008 didn’t look good and that although we would have growth, it would be less than 10%.

Well, this one was dead-on too. The economy still sucks. 2009 will see a recovery, but not until the second half of the year.  But don’t give up! Watch expenses carefully, but don’t disappear. Cutting marketing is NOT the way to wade through a recession – spend money better and smarter and cut out the fat and the (I hate to say this as blunt as this, but it needs to be said) people that should have been cut a long time ago. Work smarter and manage your past relationships better.

And, what about 2009?

Projectors will become smaller:  The so-called pico-projector is here. Some are even sub-$300. Sure, image quality leaves a lot to be desired, but most gamers (not the elite hardcore gamers, but all the other we-love-our-Wii-and-our-iPhone-game-app-gamers) don’t care. The days of shooting for perfection in projection are almost over. Sure, we want an incredible image in our dedicated home theater, but for the game room, portability, simplicity and a cool factor will rule 2009. Get into the business of promoting the Game Room again.  But, this time, it’s totally high-tech! The coolest looking pocket-projector out there is the Microvision SHOW WX (848×480). As more and more people have “staycations” rather than vacations — saving their money in 2009 and staying home, there’s a good chance that money will be spent ON the home.  No, not total renovations, but for fun and play.  We need to build that High Tech Game Room into a market position simplifying it all and making it so that many can be going on at once – Nintendo Wii, PlayStations and iTunes – all streaming content simultaneously.  Promote yourself as the ultimate gaming room integrator like you do a home theater company.  Paint screens on the wall, use lots of color and make it cubical where each kid or game gets his own space.  Be creative!

Laser projectors will debut in 2009:  We will finally see the debut of the laser-based projector.  Promised for years, laser projectors are supposed to bring us an option to UHP lamps and are said to bring us much better colorimetry.  Currently UHP lamps only deliver about 40% of the color gamut that we (as humans) can see.  Everyone from the laser industry claims that using laser as a light source will bring us up to 90 percent of the color gamut. Mitsubishi’s pushing the limits with theirs and it looks awesome.If this happens, we will see even better color from rear and front screen projectors.  Using metal-halide lamps, we have images that are on the blue-side of the color gamut, but we will have a white-point that is closer to white than red (like halogen), green or blue colorimetry. 

The first of these came from a Japanese manufacturer (Mitsubishi) with everyone watching them to see if they are successful or not.  If it works, expect to see laser become a big deal and probably most talked about new projection technology since TI’s debut of DLP in the 1990s.Flatter Flat Screens:  2009 will bring us super-flat flat-screen TVs.  Mirroring more like what you see with a laptop’s LCD screen, you will see flat-screen LCDs that will be in the 1-inch thin range.  This will be BIG for Professional AV.  One of the inhibiting factors to LCDs actually competing with front-screen projectors is the weight.  Take away the thickness and you will take away a lot of plastic and electronics that will eliminate a lot of the weight.  One pioneer here is Sharp — one of the leading LCD flat-panel TV manufacturers.  Sharp and Sony both showed 52” LCDs at CES that are less than 0.5” thick.  We will see super-thin LCDs by the end of 2009 and they will totally overtake the flat-screen market by 2010. 

GreenAV:  Going green will be THE trend of 2009 in the HomeAV and ProAV worlds.  Although many of you are tired of this hackneyed cry of the environmentalists, the time has finally come to make this a mantra of your company.  Mark my words, you will see every HomeAV manufacturer make some commitment to some power-saving standard (certainly ENERGY STAR is the leading one) that will make it a marketing tool for sales departments all over the market.  And, rightfully so, to be honest.  Have you ever taken the temperature of an AV rack with gear full of cooling fans?  It’s staggering.  Then, throw in a few CableTV DVRs and you don’t need a coffee maker or microwave during installation. 

Going green will be a big theme of the next few years — especially with President Obama. And, I’ll bet it would have been that way for McCain too. No matter who you are, the gas pricing scam of 2008 forced us all to wake up to the energy issue.  And, saving energy will be something that everyone will harness. You will see LCDs go green, projectors redesigned to deliver stand-by modes that sap up less than 1-watt of power and people buying AV that is green when given the option. They may even ask for it in 2009.

CloudAV Systems: If you’ve heard of cloud computing, you’ll understand this. 2009 will bring us the debut of the Cloud-based AV systems. What are they? Well, right now, we pack racks with AV gear to provide content. Imagine if the projector had a network-device in it (like a browser) that could navigate to anywhere and get its content from anywhere. Well, it’s coming. Network-enabled projection will break out of the box and go many, many places in 2009. DirecTV’s already done it, Dish is doing it, Apple’s got AppleTV and every display manufacturer says they will be selling Internet-streamed content directly to the TV by year’s end. 

What’s this mean? Well, TV will change forever. It’s no longer an appliance for watching primetime. With the exception of sports and news, it’s likely that within a few years, we’ll all be watching TV when we want to watch TV (wow, bold prediction there, huh?).  We’ve all known that’s going to happen — and already has if you have a TiVo or DVR.  The real future is unlimited content on your TV– imagine ANYTHING on the Internet available to you on your TV.  Sure, web browsing isn’t that exciting, but watching You Tube, grabbing movies and TV shows from random sites that have already stripped them of commercials and gaming without the game — not to mention videoconferencing, Internet-fed, live stats running simultaneously integrated into the football game as you watch, the ultimate PiP (picture in a picture) with the ability to watch a show and chat/IM at the same time on the same screen.

All this is coming in 2009.  Look, I understand that most of you reading this don’t think this is a big deal or don’t think you should care — but copy this paragraph and take it home to your kids and ask them about it — they will simply respond, “cool.”  They want it — and they’ll get it in ‘09.  So, we need to learn to leverage content delivery systems into manageable systems as content will be coming from all sorts of places. Who do you think will design the best user-interface for it? 

If you thought it was tough to explain to your wife (when you’re out of town) how to turn on the DVD player to watch a movie when something’s gone amuck in your own HomeAV system, imagine if it now includes Internet content on many levels.

The user-interface and control of it all is the KEY.

Control Systems will be dumbed-down to work better:  Many control systems today are just too darn complicated.  I am sure AMX and Crestron would disagree, but they are fulfilling their own prophecy.  Actually, even they might agree as they are starting, along with Extron who pioneered simple control with MediaLink, to build simple control systems that don’t take an engineer to program and can be configured on-the-fly. 

2009 will bring us even simpler control systems.  The success of these simpler systems and their capabilities to be networked and managed via one head-end will drive their acceptance.  If you aren’t already looking at ways to put in a sophisticated touch-panel-less control system that is simple to program and operate, you will in 2009.

This trend of dumbing down control systems will continue and you will have PLENTY of inexpensive touch panels out there so that you don’t have to build everything around a $3000 color LCD that’s mostly used for lowering the screen and turning on and off a projector. For example, what about the iPhone?iPhone/Android Control:  Speaking of the iPhone, Google’s launched their own iPhone-ish phone operating system called Android.  These two products make touch screen phones fully functional $300 control interfaces. Couple them with a CPU or a plethora of network-enabled AV gear, and you get a whole new way of controlling AV. Watch for 2009 to be the year a few totally new control system companies enter the market with their own iPhone- and Android-like interfaces that will allow you to build fully-functional rooms and control them seamlessly with iPod Touches, iPhones and other inexpensive multi-touch color screens.

The Year of 3D: I predict 2009 will be a boom for 3D in both the theater chains and then, later in the year, the home. 3D projection and TVs will start shipping by Q3 or Q4, 2009 and by then, there will be plenty of content to make it the new high-end, margin-packed technology for HomeAV integrators. And, you will even see at least one part-time 3D TV network appear on DirecTV and Dish in 2009. Finally, the Microsoft Rumor: There’s a rumor that Microsoft is trying to buy a manufacturer in the AV market. Of course, as Microsoft is a public company, they will not confirm anything, but I believe it makes sense for Microsoft and 2009 could be the year they enter AV. The movies-on-demand segment of the market is growing leaps and bounds with Netflix, Apple and CableTV providers dominating that segment right now.  And, there’s the Apple-envy. Their new CEO is smart and if they do come here, watch out!