Editor's Note: No Big Deal?

Back in 2010, Comcast entered the security market, followed in subsequent years by Time Warner Cable and AT&T, and the alarm industry certainly took notice. It wasn’t panic, but it was definitely more than a blip on the radar for industry experts and alarm dealers, who saw this foray of new and large players into the market as both a threat and an opportunity.  

In actuality, this wasn’t a new thing at all. In researching AT&T’s move into security in 2012, Jeff Kessler, long-time security industry analyst and managing director of Imperial Capital LLC, told SecurityInfoWatch.com that many of the telcos initially attempted to make a foray into the home security market about 10 years ago, but they didn’t generate a lot of earnings and most of them eventually sold off their security assets. Could history be repeating itself?

In late June, industry research firm IHS published some interesting — and to alarm dealers, encouraging — numbers as it relates to what it calls “multi-system operators” (MSOs) and their success in the security marketplace. “Although MSOs have made significant inroads into the residential alarm market, they still have a long way to go before they can claim to have truly conquered the traditional security provider’s stranglehold on demand,” writes Jim Dearing, a residential security analyst for IHS.

According to the research, just 0.4 percent of fixed-broadband subscribers in the United States purchased a residential alarm system from an MSO in 2015. IHS intruder alarm equipment shipment forecasts indicate that this figure will not exceed 1 percent before 2020. Further, just more than 343,000 residential alarm control panels were sold to MSOs across the entirety of the Americas region in 2015; whereas shipments of residential panels to the professional security sector in this region exceeded 2 million units in the same time period.

One of the fears that alarm dealers cited as these providers gained market share was the fact they have so much potential reach — money to spend on advertising and enormous customer bases that already purchase some form of service. We have learned, of course, that this is certainly a double-edged sword.

“There are only so many times an MSO can call an existing customer and offer them additional products or services without aggravating them to the point of cancelling their contracts,” Dearing writes.

Starting just a few years ago, the marketplace was flooded with security advertising spearheaded by the “big fish,” and it continues today. And while some security-first companies like ADT can afford to swim in that marketing pool, the vast majority of alarm dealers cannot — so they let the big boys do the advertising for them. The strategy seems to be working, as residential security and smart home awareness has skyrocketed.  Market growth in intruder alarm equipment alone has risen sharply (see the accompanying chart).  

The residential alarm industry would be wise to stay the course —capitalizing on increased awareness to increase its market share by offering the personalized, superior customer service that comes with a product that is perceived as much more important than just an add-on to someone’s television or Internet service.

In fact, a repeat of history would mean we may see a flood of newly orphaned security customers.  

“Huge budgets afforded to the new MSO divisions also come with strings attached by their parent companies,” Dearing concludes. “If they don’t acquire a certain number of subscribers or acceptable levels of profitability by a certain date, companies might close down the home security division, in order to free up budget to pursue other revenue-generating opportunities.”