Home Integration Business Still Going Strong

As thousands of digital integrators, custom AV installers and vendors pack their comfortable shoes and extra aspirin for CEDIA Expo in Denver next week, they've offered us a quick peek into the general state of the home integration biz, including the current market climate, technology and challenges.

George Wagner is CTO of Home Technics, a system integrator in Naperville, Ill., which focuses mainly on high-end new construction, an area most integrators and manufacturers say is insulated from the soft building market and tight consumer spending.

"The market segment we play in is buffered from housing slowdowns and high gas prices. I don't want people driving their cars anyway. I want people staying at home," he said. "If they're not taking a $3,000 vacation, maybe they'll buy the plasma or a projector. Once they sit in front of a 110-inch screen, they'd rather do that than drive their SUV."

Bob Farinelli is president and CTO, of Elan Home Systems, a manufacturer of distributed AV solutions. The company recently moved to larger headquarters in Lexington, Ky., to accommodate its growing business.

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"There are more and more people getting into the marketplace, there's pressure from competition and housing starts are down. But people who spend on systems want high-quality, well-designed systems," he said. "What's great about this marketplace is that when more players come in we're not biting into each others market, we're helping to increase awareness."

Paul Starkey, Elan's executive vice president. "There is a lot of activity now with inner-city MDUs (multi-dwelling units). That expansion is caused by empty nesters and baby boomers getting their condo or second or third home. That's an ongoing trend in almost any city I've been in. Many of the builders have started to see technology as an important part of the home in delivering IT and entertainment. Even though housing is slowing down, we still see very strong activity in the middle- to high-end markets. That's probably tied more to the stock market than to home mortgage rates."

Herman Cardenas is CEO of Netstreams, an innovative Austin, Texas-based manufacture of of cost-effective IP-based audio distribution systems.

"How a spending slow-down affects the market depends on the dealer (integrator). Most dealers are working on $500,000 to $1 million homes, so the consumer has built up his wealth and is not spending his paycheck," he said. "There is also more remodeling being done because interest rates are up. That creates a whole new opportunity for smart CEDIA guys who will help the homeowner upgrade his cocoon. CEDIA members who recognize that will do well even when housing slows."

John Prince is president of Atlantic Home Technologies, Jacksonville, Fla.,is an integrator that focuses on the production home market. Although his sales are flat due to the housing downturn, he still considers business to be good.

"We haven't seen traction with (Microsoft) Media Center (Edition PCs) yet. I'm not sold on it. I want to see more of a track record. I don't like to be version one or two," Prince said. "What we see is a lot of distributed audio, (physical) security, and deeper penetration of front projection systems. We don't sell dedicated theater rooms, but we'll add a theater to a multi-purpose room. That's opened up a whole new market for us. We're also getting into a lot more retrofit, but we're not sure how to market it. We're doing more email campaigns to existing customers. If you have a customer in your database that you're already selling to, then that's a good customer. It's still early, but that's help us."

Avi Rosenthal was a system integrator and is now national program manager for OnQ/Legrand, a Middeltown, Pa.-based manufacturer of home networking solutions.

"Right after 911 people wanted to cocoon and they ended up increasing the entertainment value of their homes. But if people perceive they're spending more on necessities, then they will back off on spending on home entertainment (solutions). CEA (Consumer Electronics Association) doesn't see a downturn because everyone wants high-definition televisions. My opinion is we won't see a downturn at all. People want what's cool and will pay for it. We're seeing a decrease in building but an increase in dollars spent per home; people are concentrating on increasing the value of their homes. Technology dollars per home has been increasing over the last eight months. And we're also seeing that reflect a new-found focus by the builders because they realize they must optimize the value of homes."