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My 2006 Crystal Ball

Economists are predicting modest growth in the U.S. economy for 2006. This is good news because we depend so much on new construction. But there are real reasons to expect growth in our low-voltage business no matter what happens to the economy at large. We can expect continued growth in our health-care business, especially hospitals, in part because of the impending retirement of the baby-boomer generation. The surging evangelical Christian movement will drive continued growth in religious facilities (new and renovated). The hospitality (hotel/motel) industry continues to rebound. Even public schools should be strong because confident consumers will vote "yes" on school bond issues.

Security Is The Place To Be
Security includes several sub-categories: CCTV (surveillance cameras), intrusion (burglar alarm), access control (card access) and perimeter security (your fences and gates). Every company, every division of government, every hospital, every school, every home needs one or more of these security systems, and they're ready to pay for them. Homeland security money is finally flowing, so there are government projects with funding and grants available for non-government entities. The new category of "mass notification systems" is very interesting.

Customers Will Ask For Systems Integration
If you ask 10 people what "systems integration" means, you'll get 10 different answers. The important answer, of course, is that systems integration is "whatever your customer wants it to be." For example, we have a hospital customer who wants all of its security systems integrated so that the guard on duty can watch everything from outdoor cameras to infant security bracelet status on one screen and get alerts on one pocket pager. This kind of integration can be a technical nightmare, but it will bring jobs and profits.

Commoditization Will Accelerate
A commodity is a product or service that is widely available in a narrow price range from multiple sources. For better or worse, that describes much of what we sell today, and 2006 will see an acceleration of commoditization. There are several things driving this trend. Low-cost Asian producers will increase their market share due to new products and brand-building campaigns. You can also expect a growing number of well-informed customers who will shop internet outlets first and then tell you what price they are willing to pay.

We Will Face New Competitors
Watch for spin-offs from electrical contractors and general contractors. Some equipment manufacturers, like Tyco/Simplex, have always based their businesses around factory-owned contracting divisions. Others, like Siemens, have expanded into factory contracting. Building automation companies like Honeywell may be next. By the way, increased competition like this is another commoditization driver.

Acquisitions Will Slow
Big companies have been buying little companies in our business for a number of years. This trend is yet another part of the commoditization of contracting. However, as I see it, most of the best companies have already been acquired, so acquisitions can't continue at the same rate (or can they?).

Distributors Will Continue Their Amazing Comeback
Over the past few years, AV distributors, like Starin, have made an amazing comeback from insignificance. I would never have expected this. Distributors are even using independent reps. Unbelievable!

DRM Will Fail Due To Market Forces
Will DRM and other content-protection schemes become the rule? The short answer is "yes" but "not for long." If you spend thousands of dollars (or tens of thousands) on an HDTV system and then find out your HD Tivo won't record or store certain programs, you're going to search for an alternative without those restrictions. The market will win this one, but it may take a couple of years. In the meantime, watch out for stealth DRM schemes like Sony's audio CDs with "root kit" installers that hide copy protection on your PC's hard drive. This is just plain wrong!

We Need (At Least) 3 Networks
This isn't a prediction so much as a prescription. I think many facilities need at least three physically separate networks. One for life safety and security and maybe building automation systems, one for business (accounting, e-mail, etc. and one for media (our stuff). The media network may need to be two networks-one for audio and one for video. Yes, you can do all of this on one network. But, do you really want to mix e-mail with real-time audio in that new performing arts center? Are you willing to risk your life safety and security systems on the same network with PCs and computer games?

NSCA And ICIA/InfoComm Will Overlap Even More
Our industry organizations have begun to compete like amplifier manufacturers or security contractors. One of these organizations is redundant. The market will decide which one.

Digital Audio Standards Will Mature-Driven By The Market
Digital audio standards are converging and maturing but market forces, not industry organizations, will determine the directions and the progress. This is the way standards often develop. The S/PDIF standard, for example, was developed by Sony and Phillips. AES/EBU followed later building on S/PDIF.

Video Manufacturers Have Gone Crazy
My contracting firm gets a new price list every month from our primary video projection supplier. Prices and models change that fast. It's difficult to quote anything to a customer more than 90 days before the expected purchase because I can't guarantee the model will be available any longer than that! Unfortunately, this all seems likely to continue.

Consumer Products Will Lead The Market
I remember the days when pro audio and video led the way and consumer products followed our standards. No more. Now, the money is in the consumer market, and we follow in its footsteps.
Blu-Ray Will Win, But I Don't Care The best minds say Blu-Ray will win the HD DVD war, but I really don't much care. No matter which standard wins, these products will almost certainly come with very restrictive DRM attached, and I hate that. Maybe NTSC isn't so bad after all.

Life Is Good
Some of these predictions will be right. Others will be wrong. But, there's one thing I know for sure. I'm having fun in this business. Learning new things every day, meeting and working with a bunch of great people, earning a decent living. All in all, life's pretty good.
Have a healthy and prosperous New Year!