Looking Ahead: Q&A with AV Luminaries
In April 2008, two AV integration giants consummated a pretty significant merger. Audio Visual Innovations and Signal Perfection Ltd. became AVI-SPL. So it was a fitting time to take stock of the AV industry. A virtual roundtable sheds light on a still-growing market.
PRO AV: On the whole, the pro AV industry is made of a lot of small firms. In light of the AVI-SPL merger, will there be more consolidation in the future?
WILSON: Yes, but I really believe there is always going to be opportunity for the small- to mid-size specialty company. For some reason, niche companies in our industry that focus on superior customer service and highly trained technicians seem to do well even with mega-companies in the same city.
GOLDIN: Clearly a lot of the innovation and creativity in our industry has come from the fact that there are so many small firms where creativity is king. Alternatively, our industry has suffered from the lack of standardization and economies of scale that come from being in a larger firm.
InfoComm has started the task of developing standards to guide the development, documentation, and measurement of systems in our field, and this will go a long way. As our industry continues to grow, additional business consolidation will clearly occur. The question that remains to be answered is whether they will be more successful than previous attempts, which have not been great examples in the mergers and acquisitions market.
LEMKE: There are many opportunities to do business, and the AVI-SPL merger is one form that will project a national scope. Other alliances between separate companies such as [Professional Systems Network International] and USAV Group also work towards that national scope. The future is always determined by meeting customer needs; providing products and services that help the customer communicate. I am sure AVI-SPL aims to solve those needs just as other large companies and small companies seek to do. Who does it best will determine which model works.
SCHAFFEL: It's very hard for transactions like this to take place. It took two and a half years to do this. … There have been so many attempts in the past by smaller companies in our industry to merge, and they've fallen apart because of everybody's perception of direction, evaluation, other kinds of issues.ON CHANGE
PRO AV: Is there something different about the AV market today that would cause established companies to merge, or would cause traditionally non-pro AV firms to enter the market?
GOLDIN: I think there is a large concern that the products are getting significantly commoditized and this has led many people to be very concerned about the future. Firms are beginning to re-evaluate their value-added services and use that to even further distinguish themselves from the box sellers and Internet sites that an end-user might go to for a specific product. Firms may merge in order to bring together some aspects they may not have focused on before in order to be able to provide the “total package.”
WILSON: Yes, mergers seem to be popping up due to either a missing core technology or skill set, or for the desire or customer demand to provide a nationwide delivery and service program. Entry into this marketplace by non-traditional firms stems mostly from network integration enabling a more seamless pathway from one technology to another. That and some firms see this as more profitable than what they currently do.
LEMKE: While not necessarily requiring mergers, the size and growth of the industry is getting more attention, as indicated in InfoComm's market research studies. The opportunity to participate in growing markets brings in new players and provides existing companies the chance to grow naturally, or perhaps, as you suggest, through mergers and acquisition. In addition to the market size, I believe there is recognition that AV is now mainstream. It no longer takes an early adopter to buy the technology.
PRO AV: So then in general, how has the pro AV business changed in the last three to five years?
GILLENWATER: In 2002 and 2003 we [the AV industry] were successful, but you had to spend a lot more time selling it. Today it's almost a given. Because the technology is better, the experience is better, and the industry is more mature.
In the last five years, the number of multimillion-dollar jobs, $5 million and up, has grown. I had no idea there would be projects that size. IP is forcing companies to come together internally and by doing that, they're being driven to having a unified platform. They want collaboration on that unified platform, and these are big, big platforms, for companies with 90,000 people. … What we hope to bring to the table, at a time when this technology is moving from being investigated to being implemented, is a company that these organizations believe can complete a project like this.
LEMKE: In addition to the change in size and opportunity, AV-IT is at the very top of the technical changes. If companies want to compete, they need to apply their AV knowledge and skills over IP networks. That does not mean that AV companies become IT companies, it means either acquiring the skills and knowledge, or partnering with companies to provide the customer the benefits of IP-networked AV technology.
GOLDIN: Also, the most visible part of our solutions—the displays—have been improving at a dramatic pace, but they have also been devalued at a faster rate. This has caused concern to some that the total cost of the system is no longer headlined or dominated by the display. It's now the total solution and the value-added services that have become more important to the overall solution and a corresponding large portion of the total system price.
PRO AV: More specifically, how has the actual work, the projects that AV pros work on, changed?
WILSON: The products have become harder to repair and the technical work is based more around troubleshooting and far less around bench repair. Our test equipment is now software on a laptop. The size and scope of projects has grown tremendously.
LEMKE: I think the most profound change, and one that needs to be embraced, is that our AV companies need to be engineering-led. Engineering knowledge, with skills in both design and install, determine company capacity in the era of AV-IT and highly integrated systems.ON CONVERGENCE
PRO AV: Has the AV industry been quick to embrace the convergence of IT and AV? What needs to happen to make that transition go smoothly (and profitably) from an AV integrator's perspective?
SCHAFFEL: There's clearly a requirement for our staff to be more and more skilled in IT and to be able to understand the combination of technologies. We've invested heavily in training … . But yes, there's a big need for expanding our skill set.