Traditional security will secure you, but how secure is their future?
If there’s one industry that’s susceptible to disruption from the coming smart home revolution, it’s home security and intrusion protection.
Not only are the old-school home security companies under attack from large and deep pocketed broadband service providers like Comcast and AT&T, but they also now face growing competition from DIY security products that could entice more budget conscious consumers.
Now, I know there’s a vast difference between a monitored home security solution with call center support and, say, a Canary sensor box. One doesn’t equate with the other. But while most consumers say they like the idea of living in a secure environment, not everyone is willing to pay for home security services, which means the explosion in new offerings gives them plenty of options to choose from rather than the usual $40 a month monitored solution.
In the end, the consumer will do a calculus that weighs their own desire for things like call center monitoring, monthly and up front costs vs. their ability to oversee a DIY solution and make a choice. These choices, in my mind, could change over time as their family and personal situation changes and new technologies come out.
The result will be a fluid market were the core customers of monitored home security customers either grows as big-budgeted cable and telco companies lure them into the fold, or eventually the capabilities of self-installable DIY security improve to the point where they are “good enough” to siphon off some of those customers that have soft allegiance to monitored home security.
This might be best illustrated using a visual. Below is a chart that shows a continuum of consumers from the “core” home security buyer all the way up to the large mass that never will likely buy a home security services. These percentages are not based on any survey but my understanding from conversations with smart home and security companies for the past few years.
Figure 1: The Home Security Demand Intensity Continuum
If you look at the bottom layer, you see the core customer of traditional security service providers, the unshakeable “bedrock” on which their business stands. These customers want and trust traditional home security. They like and believe in monitored solutions. They put value in brand names like ADT, Protection 1, Vivint.
I would estimate this segment at 15% of US households. The penetration of home security stands at around 20% today, and I think it’s fair to say three quarters of this group is fairly firm in their allegiance.
Above this foundation is the wavering core, meaning folks who will always have home security services but are open to alternatives. They are likely easily enticed by the cable company’s bundled security offers and may even think about lighter-weight security as part of smart home centric offerings from the like of someone like AT&T.
Above that layer is the Flexible 15%. This is the portion of the market that Comcast and other broadband providers have been eyeing as the broader addressable market, the ones they felt they could entice by offering lower-priced monitored security and marketing heavily to them. And they’re having some success here, as all indications are Comcast and Time Warner are growing their security service customer base quickly.
However, I think long-term this group is just as likely to “go light”, meaning they’ll likely look at lower-end DIY solutions that may involve self-installable door and window sensors (like a SmartThings or Scout) or a multi-sensor single box solution like Canary.
The worrisome part for someone like ADT is that any growth for them is dependent on eating into this segment of security-curious/soft-demand, but I think they’re going to largely get shut out here. Comcast and others will siphon some of this part of the market, but I think even they’ll struggle as newer DIY solutions offer “good enough” sense of security.
Above that are the “prove-its”, folks who likely would never pay for security but would take something free or low-cost (think a motion sensing camera like a DropCam) that allows them to monitor their home when away. I think this may be an important piece of the market for casual security packaged in a different skin - a wolf in sheep’s clothing, if you will - since home security can be a nice feature offered in a product sold to the consumer on the promise of some other key benefit or feature.
So, looking at this market, I would say it’s going to change drastically in the next five years. Incumbents should be worried if not petrified, but also should be motivated to explore new offerings to entice the casual and security-curious consumer. If there’s one thing I”m certain of, the market for “home security” will grow, but the mix within this larger market will shift over time towards more self-managed solutions.