AV and IT at a Crossroads
It may be seem like a marriage of inconvenience, but it's for life. As it did to so many others, information technology?and in particular, Internet Protocol networking?has wedded itself to the audiovisual industry. And many professional AV firms are finding it hard getting used to the new living arrangements.
Act 2: Up for Grabs
By Tim Kridel
The long-term impact on pro av might not have been immediately obvious, but two days last November could mark pivotal changes in the pro AV competitive environment.
On Nov. 10, Circuit City announced it would file Chapter 11 after closing 155 stores the week before (the company has since begun liquidating and closing for good). That's noteworthy because Circuit City was among the retailers that had been targeting the pro AV market. A survey by Menlo Park, Calif.-based Pacific Media Associates found that more than 40 percent of companies planning to add flat panels in 2008 expected to get them from Circuit City and other big-box retailers.
Then at a Nov. 11 press conference, baseball's New York Yankees gave an update on its new, $1.3 billion stadium. It includes $15 million worth of AV and networking gear, including 1,100 displays, from IP networking giant Cisco Systems. The San Jose-based company says its equipment is already in 60 percent of North American stadiums and that it's targeting new venues needing advanced video systems as a way to grab even more market share.
"Wherever stadiums are being built, Cisco is talking to those franchises," said Ron Ricci, Cisco's vice president for corporate positioning.
For now, that 60 percent figure comprises mainly its networking equipment, but that won't be the case for long. Cisco continues to build out its Digital Media System (DMS), a portfolio of enterprise and commercial products that includes enterprise TV and digital signage. Last month, in what it called a move to offer end-to-end systems, Cisco even rolled out its own flat-panel displays, manufactured for the company by Samsung (see "5-Minute Interview," page 23).
"We've gone from zero to a thousand customers in under two years," says David Hsieh, vice president of marketing for Cisco's Emerging Technology Group.
Cisco and Circuit City are just two examples of outsiders that have been targeting the pro AV market. In Cisco's case especially, momentum derives from the convergence of AV and IT. "It's only a matter of time before the IT industry and the AV industry are both the same," says Glenn Polly, owner of VideoSonic, a New York-based integrator.
That convergence is changing the competitive environment. Traditional IT vendors and IT integrators are looking for work in the AV market. Sometimes they go it alone; sometimes they look for partners that have the AV-specific skills, such as understanding room acoustics, they lack.
"In many cases, we're seeing teaming relationships open up because [IT] companies don't want to go into the space because it's outside their core capabilities," says Tom Corzine, vice president of government sales at Tampa-based AVI-SPL. "They also don't want to lose out on a revenue stream and allow their competitors to get access to it. As much as [companies such as Cisco and HP] may go directly and win a project, we're working with them."
And that could be sweetly ironic. Although IT firms increasingly compete with AV integrators, they're also acting as extended sales teams because they have to bring AV experts into jobs that AV pros might not otherwise get.
Telcos Teeming and Teaming
Like IT vendors and integrators, communication service providers–particularly telcos–are expanding into the pro AV market. Companies such as AT&T, BT, and Sprint–as well as some telecom and IT vendors–have begun offering videoconferencing and telepresence products and services directly to enterprises. One reason is because they want to pick up additional revenue, but they also want to drive more demand for bandwidth. But as you'd expect they sometimes lack the in-house expertise necessary to pull off those jobs, therefore it's not uncommon for them to make the sale and then subcontract tasks such as design and installation to an AV integrator. Building relationships with service providers, therefore, is key.
Some integrators say they get called in when a telepresence system, for example, requires customization or when the system has to be made compatible with existing videoconferencing gear.
"That's where we really see the play from a pure AV integrator: We can build telepresence rooms outside of just what the manufacturers offer as their telepresence-in-a-box solution," says AVI-SPL's Corzine.
"They're really taking the low-hanging fruit," says Scott Christianson, owner of Kaleidoscope Videoconferencing, a Columbia, Mo.-based integrator. "What I've seen is those IT guys that are selling videoconferencing solutions are really selling package-oriented solutions. But they're not very good at dealing with interoperability.
The Vendor Factor
There's also a perception, because IT gear is highly visible to end-users through brand-name companies like Cisco and HP, that the channel for certain systems is changing.
One reason why some integrators find it challenging to compete with big-box retailers that try to offer integration services in offices and boardrooms, for instance, is because they bury the price of their services in the hardware markup. And even that strategy falls apart when clients bring their own gear.
"So many more customers are attempting to take the equipment out of the equation and not buying them through the reseller or integrator," says Steve Stubelt, director of system solutions sales and marketing at Sony Electronics. "That's causing [AV integrators] to have to compete not on the sale of hardware as much as on their services and their specialties."
Some integrators say that vendors could do a better job of channel management by setting a price floor that in turn gives the integrator a minimum margin. But the days of burying services in hardware markups may be waning, a trend that some vendors, at least, apparently welcome.
"For us, that's a very positive movement because for the longest time, we've had to balance this tightrope where integrators are trying to make the margins on the equipment to cover, in some cases, the true cost of the services they provide," Stubelt says. "That doesn't give the customer the true cost of their services or what the value of their services is."
Tom Corzine, vice president of government sales at AV integrator AVI-SPL, says his company often partners with IT firms because IT companies usually know what they don't know: acoustics, audio/video signaling, and other things AV pros are expert in.
Credit: Chuck France/WPN
Translation: Some AV integrators need to do a better job of articulating the value of their services and expertise, not just in order to justify their prices, but also to compete with IT firms, musician-supply stores, security-system installers, and whomever else they're up against in a particular market.
Vendors are helping integrators by making them part of package deals that they negotiate directly with large customer. For example, Sony is increasingly selling both hardware and integration directly to entities such as stadium owners. "We're bundling the channel and their services in with our products and providing them to customers," Stubelt says. "We're almost selling [AV integrators'] services."
They're conveying that message in a variety of ways, such as with exhibits at events that attract end-users in a particular vertical and with stories in a vertical's trade magazines that profile an installation. Sometimes vendors don't wait for their dealers and integrators to bring in a high-profile installation that they can crow about, but instead land those deals on their own.
"They're going directly to those performing arts centers, stadiums, or corporate headquarters and saying, 'We're going to bring in our preapproved AV systems designers, but we want to work directly with you to make sure that you get the very best,'?" says John Stiernberg at Sherman Oaks, Calif.-based Stiernberg Consulting.
The tricky part is determining which AV integrator gets bundled with the vendor's products. Sony gets around that by bringing in multiple integrators on the bid and then letting the client pick one.
"They're getting the integrator of their choice, with Sony as the wrapper around it, and it's being provided to them as a package," Stubelt says.
Those package deals also could help the AV industry with another competitive change in the industry: The increasing demand for national-level support. For example, Sony–or Cisco, for that matter–could serve as the main point of contact for a client, which then wouldn't have to line up integrators in each part of the country.
Ultimately, AV integrators also could wind up merging or at least partnering to meet the demand for nationwide service that the convergence of AV and IT brings with it. The kind of service large IT firms already are adept at.
Says AVI-SPL's Corzine, "That's one of the top customer demands."
Tim Kridel is a Columbia, Mo.-based freelance writer, analyst, and frequent contributor to Pro AV who covers telecom and technology.