I have never started a thread before but personally (and I guess professionally) I have been struggling with undeniable issues I see on the horizon, and I see alluded to in other threads.

Reading the Parasound A51 litany really motivated me to start this, I really respect some folks on this forum, and want a national sampling of what people feel the future holds for this industry and smaller custom shops (less than $500K a year, owner and a couple employees).

I am not looking for business advice, my business has hit it's numbers over the last five years (more or less), 95% of my customers from the start are still with us, got a good group of builders...short term is fine and dandy.

I am concerned if in five years, ten years, will it be worth it to stay in this industry.

The two main factors I see as a threat are margins, especially in video, shrinking from a variety of reasons, and the convergence of technologies in seamless ways and being tailored for end user set-up.

Manufactuers do not value us, look at the constant battle we wage for discretes and price protection. When I see 50" HD plasma's at whoredouttv.com for $3.5K and HD projectors for less I don't care if there is 30 points (HAHA) it is not worth it. And I am tired of educating the public in why a Fujitsu would be better than a Dell.

Consumers see receivers that self-callibrate themselves, Harmony remotes (they suck) but will work for a patient DIY'er and others will continue to simplify setup. Digital projectors are marketed as plug and play.....and soon everything will be wireless. That may be the biggest factor.

Sure people will still need plasma's hung, speakers cut in....but box movers with woefully paid staff can handle that
Sure six figure jobs will exist.... but those are not my and alot of your market.

I am not looking again for trite advice... you got to evolve, if you are good at what you do...ad nauseum, just people's thoughts. I have decided to to jump into an even stupider venture, flipping homes and finalizing my general contracting requirements, still doing home theater as needed....I love it.

Alot of this stems from my neighbor that is in his 60's. Over a couple of cold ones he shared with me his years as a TV repairman...some occupations just go away.

I’ve had a lot of similar concerns lately. Starting out in the dbs industry in 96 or so, it has slowly been whored out like everything else. Every day I would read the forums on how Dish or DTV is out to screw us of our hard earned money. What used to pay GOOD residuals and install monies, are now whittled down to the point that if your actually a subcontractor you may as well work at McDonalds, as it at least offers benefits. Now that I am gearing more to the CI aspect of the business, I LOVE what I do, and am EXCITED again about putting together a system, etc. But as I porous (sp?) the forums here, on CI, etc, there is once again the talk of what’s on the horizon. With DBS it was a "need to diversify". I’ve always loved, and known HOW to do A/V, so for me the "diversify", or shift to A/V was natural. On the CI side however, the "horizon" talks seem more of the "Oh shit, what are we gonna do?" realm. Maybe I should just get back into MLM, even though I HATE the idea:) I'd MUCH rather do A/V CI, and am MUCH better at it. Guess Ill just have to continue starving at it!

Ramble off

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Just wait until Fuji sells you out too.

AHEM said...

Thank you for helping illuminate my point.

I'm adicted to this 'job'.

However;

With most of the 'protected' lines on e-bay for cost or less, I've been feeling a little uncomfortable lately.

Business is still great but, I'm begining to see a lot of flags pop up that makes me think I'm a dying breed(thanks manufacturers!)

It will be interesting to see what happens in the next five years!

Sadly,from what I've seen recently, I'm not sure that I want to be a part of it.

The 'number crunchers' seem to be contolling this industry and they don't seem to have a clue as to what really sells there products!(You may have noticed that I don't offer much help on the URC forum lately!).

When I see Creston systems listed on e-bay, I'm out of here!

I will still watch to see wich manufacturer goes out of business first!

After all, If you can't operate the 'product', why buy it!

Sorry for the vent.

That techno convergance thing has been happening for years. It's part of the game. IT won't reach critical mass, or remain static. The whole thing is self regulating and there are certain factors that dictate this such as; service, design expertise, and quality of custom isntallation. There will always be great and innovative new and emerging technologies and products that will provide good margins. And it's very often the emrging and new technologies that provide these traditional healthy margins.

I agree with pretty much everything stated above.

If you are that small you have the advantage of being very lean and able to adapt. Anyone still operating a retail operation that is smaller than $5 million per year is playing with fire. That is where the low margins hit the hardest.

From browsing these threads (Frank were you looking for "peruse"??) most of us have been able to hold firm on pricing, or at least meet the clients in the middle... Retail operations have a hard time adding value in terms of expert advice and service these days when every detail of a product and it's position in the market compared to all of the competition are available for savvy consumers like Mitch to study.

Anyway, I feel that the best way to not only survive, but GROW, is to adapt and pick up new categories and shift the focus away from the areas where margins are slimming. Many here have found solace in automation, and specifically AMX and Crestron. My company has started a relationship with AMX that we hope will pay off in the long run.

I believe that focusing more on automation and control will place me in front of more qualified leads for profitable jobs than spending my energy promoting plasmas and home theaters.

One part of me is pretty concerned that the BB/Mini-Magnolia rollout will have drastic effect on the local custom community, but another part of me hopes that the potential market awareness of a national rollout that includes ANY aspect of custom will have a positive effect on the custom community.

I'm sure you have all heard the saying that "the rising tide lifts all ships". Using the same tidal analogy, I hope that the BB/MHT "tide" will also serve to wash away the detritus that is collecting around our ships (aka: the trunk slamming noobs discountig deeply and working solely from distributor accounts).

Wow, a double use of a single analogy... I am proud of that one.

Anyway, if it means I need to shift the focus from A/V and home theater to integration and lighting control, then that's what I will do.

I will still pitch hard that we do those things better than our competitors, but I may have to rely on another are of expertise to get me in front of those clients.

A lot of us went through the same thing a few years ago when structured cabling went from a specialized field to more of a commoditized profession that electrical contractors and others jumped into. We used to promote that we were the low voltage prewire experts, now I rarely mention it.

I don't fight for dead end TV and tele/data prewires for builders and individuals that are not necessarily interested in our other services. I will defer that area of business to the lowballers that want to do it for next to nothing.

Again, I pitch hard that we do it better than our competitors and that when we are doing other things in the home, we want to wire all of it.
This is partially to make sure it's done right and the wires are where we need them to be, and partially to keep those hacks off the jobsite to keep them from contaminating the homeowners with ramblings of A-Bus or speaker switchers.

Good luck out in Mile High country...

This message was edited by 2nd rick on 06/22/05 03:57 ET.

I see a shakeout coming in our industry, probably tied to the bursting of the real estate bubble everyone is talking about. Every industry has growth and contraction cycles, and we've been on a growth cycle for a long time now. If interest rates spike, or some other economic calamity that stops the real estate ball from rolling, customers will have a much reduced incentive to build, remodel or update their home's electronics.

The shakeout will take some of us out (unfortunately), and will weed out the marginal trunk slammers, etc. Those that will survive will have to get leaner and meaner. During a contraction look for consolidation in the industry, where individual dealers merge for survival and one or two of the Big Guys become the dominant national dealer. Manufacturers will also merge, go away or get bought out by others.

That being said, I believe there is a long term future for this industry, with room for growth and sustained revenue. We will need to learn from other more mature industries like the alarm guys with their RMI (recurring monthly income from monitoring; in our case that might be service contracts or system leasing), or electricians with their labor revenue only model.

No doubt there will be a continuing trend to lower margins on equipment, not just in video but every last thing. Count on that. This will not be completely answered for us by focusing on individual protected product lines. I think the IT convergence trend will bring more and more computer companies into our arena (I-Pods, media servers and the like) and count on zero margin on (but complete involvement with) these items. If a media server is the central "source" of an av system in ten years, we've lost the margin from the DVD's, DRV's and so forth we are selling today. I expect we will always have speakers and other core components for hardware revenue, but it will be a smaller slice of the pie.

I plan to be in this industry until I retire, but expect big changes before I do.

This message was edited by Theaterworks on 06/22/05 08:08 ET.

Tekno-dude spoke of the "self regulating" nature of our business, and that is surely an exciting dynamic. While one moment the manufacturers shoot themselves in the foot by selling out great saleable technologies at next to nothing, they come up with something new that still can be profitable and people crave.

While one company builds a product that seeming DIYs can set up, that previously only the highly skilled or trained could install, it appears that the sunset has arrived on our automation industry. But remember that things like this create new awareness for products that generate new customers that were not customers before. Not everyone has the time to do even what he knows how to do. Or, he may have enough money to sit back with an iced tea and pay us to do it rather than sweat 3 or 4 weekends away just because he "can" do it.

BB/Mag may cause such new awareness that could increase opportunities. Often the big guys spend the ad money and bring in the clients, only to find that their level of knowledge and expertise is not sufficient to close the sale. The client goes down the street or cross town to the specialist, already aware of what's out there, and the specialist shows him the expertise he wants, and the sale is made.

In the mid 80's we were a dealer for Advent loudspeakers. One mile away was a Good Guys store, which at the time was one of the few power retailers in town, also selling Advent. We sold a ton of them. A few years later GG dropped Advent and our sales took a dive. They were increasing the awareness and there were lots of buyers around.

I read in one of the retailing mags about a small town retailer with about 3 stores - all either just across the street or down the street from Circuit City stores. He let them advertise and create the awareness, and he made the sales.

Just make sure you understand one thing. Business rolls over and reinvents itself every 5 to 10 years. (I am in year 30 and can give you an afternoon's worth of examples.) What you are doing profitably today will change or perhaps disappear into thin air in the next 10 years. That's why you are always on the lookout for new products and skills that will carry you into the next iteration of your business life.

The "self-regulating" nature of business.

Ummmm....I do sell a LOT of Abus systems...I suppose that makes me a HACK?



I prefer to think of it as answering a specific need. A nice multizone, multisource system for the average joe sort of thing.

Better I tell the client that either he/she pony up for a high end system, or just do without?

Sorry, but that HACK statement definitely rubs the wrong way.

Oh well, off to commit hari kari.....

So you are suggesting one way to survive is to stop selling video display devices? (sarcasm intended)



Thank You.

Denon, Klipsch and Infocus at Best buy, Paradigm Sony ES, Sony XBR, at Circuit City, Marantz going to distribution, Adcom through Distribution, Distributors selling to anyone with a credit card....where does it end. I have ben in the business for 12 years and have seen the business make a shift. I remember when VCR's were $800, I remember when the Sony 36" Wega was $2500.

Its electronics people, prices go down!! How many of use sold Plasmas five years ago for 25k? How many did we sell at 5k? How many do we sell now? The electronics manufacturers have this mentality that they must manufacture their products and make it as cheap as possible. Has the price of a new Ford car gone down? No. Has the price of Fridgerators gone down? No. Has the price of anything we sell gone up or stayed the same? No. The mfg's need to realize that lowering the prices means less money for everyone. Simple suplly and demand curve stuff. I don't think the time frame that the price of the AV equipment should drop so quickly. I know I have lost customers because I will sell someone a Samsung plasma for 5k and then a year later the same TV is a Costco or Sams for 3k.

We are lucky to also have our own service department. When economic times are tough people will get hteir stuff fixed. When times are good, sales and installs go up. Still there are some people that are not effected by the economy. I just think that it is sad that I am represent product that is whored out by people/stores that blow out the price. And the manufacturer could cares less...it REALLY PISSES ME OFF!!

The best way to keep from worrying about whether you are going to be around is keep you margins in check, provide you customer with the easiest/best equipment, provide great equipment, educated the customer and diversify (security, sales, service, installation, lighting, control, automation, builders, decorators, etc). Not that this is the most indepth business model, diversity is the kep, but keep the diversificstion related.

Mike

Had this discussion with a colleague today. Everyone is cranking out these cheap CD players, DVD players and VCR's. They are doing it because they are in a "gas war" mode except that it's with electronics. However, in order to compete, they can't afford to build them well and the quality of these products is complete crap. This will eventually self regulate when enough people get fed up with the unreliablity factor. Plasma displays etc.? well we are right in the middle of the transition from CRT monitors to the flat panels. This is of course being driven by the advent of the HDTV broadcast mandate which in itself is a huge transition. The time to make money on that curve was right at the beginning when the technology was relatively esoteric. Now it's becoming readily available, and all of the manufacturers are jockeying for a market share. They do this by dropping their pants. The good news is that they won't do it forever (we are in a temporary dip JMHO). And again, not all plasma TV's are crated equal. The discerning buyers appreciate the difference between a Daytek and a Fujitsu. Go after the Fujitsu fans.

If you sell them in 10K+ ft² custom homes, then maybe... (JK, I have read your insights for years, and I would never mean to imply that you are a hack)


No, but when you are working with a client that wants something nicer, I am sure you have the skill to properly qualify them and move them into something more appropriate.

What irritates me is when the new guy that left some commercial alarm company grunt job or superstore sales clerk job gets an A*I catalog and assumes that the entry level Russound ABus system is basically the same as what we sell, and has the NERVE to imply that to the customers that we are overcharging because he has found a system to fit their needs at a much lower price.

He doesn't have the ability to understand how to use anything more complicated and uses it EVERYWHERE.


It's better than not being rubbed at all, I guess...

This message was edited by 2nd rick on 07/11/05 20:29 ET.

There are a number of products out there you don't have to worry about being whored out, I suggest you find products like this and make them your main product lines and support them. For instance, we carry B&W, Rotel, Meridian, and Genelec. You don't find these products in any distributor that is going to sell to anyone. The prices haven't dropped either, they have gone up in some cases. I see alot of people comparing Paradigm to B&W, I won't get into which is a better line, but how many places can you find Paradigm online.

Mike says to diversify, I don't disagree with this but I do see another solution. Specialize. Don't make your company so broad as to confuse clients (or yourself) as to who you are and what you do. Be educated, learn as much as possible about everything you do whether it be security, audio, or video. Become an educator to anyone who walks into your company. By this I don't mean to talk down to people, that's how we get (and keep) many of our clients, they get tired of other sales people who don't want to spend the time with them when they aren't ready to commit. Many of those people come back and become very good clients who tell all their friends about us.

Just some suggestions.

Matt