The raft of smart home devices displayed at CES 2016 highlights the growth and potential of the smart home market. Over the next 12 months, smart home devices sales will nearly double year-on-year, as the groundwork and service offerings developed over the past few years provide solid impetus for wider adoption. However, while hardware sales will continue to drive smart home revenues over the next five years, a transition to recurring service revenues is well underway. In fact, by 2020, recurring service revenues will account for close to a quarter of smart home revenues, up from under 20%. In its latest market analysis, ABI Research, the leader in technology market intelligence, segments a range of key smart home market trends and developments, a bellwether consumer market for the Internet of Things.
The transition to recurring revenues is fueled by the growing adoption of managed smart home systems from a range of players, including home security, telco and cable companies, and retailers. Vendors include ADT, Vivint, AT&T, Deutsche Telekom, Comcast, Lowes, and Staples. In addition, a new generation of self-install devices and systems from dedicated startups and tech giants like Google and Samsung are also fueling recurring revenue services such as remote data collection and storage.
“As the smart home functionality continues to push into new homes, vendors are benefiting from initial device and system revenues but the goal is to bring these sales into long-term recurring revenue services,” says Jonathan Collins, Principal Analyst at ABI Research. “Managed smart home system pricing, like traditional home security services, is geared to win new consumers with reduced device and equipment sales in return for long-term recurring revenues.”
While security players lead in the deployment of managed smart home systems, by 2020, telecom/cable companies and retail offerings will all share similar subscriber bases. The ability for those managed service providers to smoot the transition of DIY installations into their managed system subscription services will provide a valuable pathway for much of that growth.
“Smart home service providers are increasingly bringing the most popular DIY devices, such as the Nest thermostat, into their managed service offerings,” says Collins. “However, increasingly consumers will expect that integration to be available in an ad-hoc nature.”
Source: ABI Research