Surround Sounds

"Our original driver for our growth has been the iPod. It just turns people on to digital music," said Tom Cullen, co-founder and vice president of sales and marketing at Sonos. "Once people have their music collection on a hard drive, they don't go back. That's where we fit a really nice opening. Frankly, I thank Apple every day because I don't know how we would have changed that many people's habits that quickly."

"Our biggest competition is a trip to Hawaii," Cullen added. "These are splurges, so people are going to splurge on this or they might do something completely different."

While a Sonos system is a treat for the apartment dweller, the majority of the distributed home audio sales are in new homes. Ian Popkin, director of product development at Russound, Newmarket, N.H., agrees with Cullen that Apple's iPod has helped spur the digital market, and his company is thriving as the whole-house audio business expands.

"It's a big market, but what you find in this market is that it's still quite an emerging market," Popkin said. "There's just a beginning realization of customers that this is possible when you buy a new home. A lot of it is being driven by some of the builders and the way that you build your home."

"We want to make the awareness that whole-house audio is an option for customers who are building a new home. That's what is making Russound so popular," Popkin added. "It's that they're not incredibly high-end homes like you would think where this type of system can be put in quite affordably," he said.

While once reserved for the millionaire, the whole-house audio system has been moving downmarket, and Popkin said the company sells products to developers building houses in the $250,000 market with distributed audio.

Russound has come out with several new products recently including the ComPoint intercom system, the ST2S Sirius Tuner to integrate Sirius satellite radio, and the iBridge Dock, which allows users to play their iPods in whole house systems. It also makes its own line of custom speakers and media servers.

Known for its high-end products, Rockleigh, N.J.-based Crestron, another leading vendor, has also jumped on the midmarket trend and recently released the Adagio whole-house audio control product line that includes the Adagio Audio Distribution System, the Adagio Entertainment System and the Adagio Audio Server. All can be incorporated into a whole-house solution that includes Crestron's touch-screen control panels, lighting controls and thermostats.

Bill Schafer, director of product and channel development, said Crestron plans to release several other Adagio products, but it doesn't consider its lower-priced offerings to be cheap goods. "I wouldn't say we're moving into the lower end, I'd say we augmented our line with the entry-level solutions that people were looking for," said Schafer.

While Crestron used to consider control manufacturer AMX its biggest competition, he said that it's now up against more than 40 different vendors. Despite increased competition, however, Schafer said he expects Crestron's revenue to top $300 million this year, showing more than 25 percent growth.

Integrators are also benefiting from this market explosion and seeing revenue grow. For Galea at Boca Theater & Automation, the biggest revenue generators in terms of margin are touch screens and speakers. In other words, "the things the [customers] don't think they can do themselves," he said.

"That's when you need somebody that knows how to do it," Galea said. "I wouldn't say we make a whole bunch of money on the source stuff [like radio tuners and distribution hubs]. The music servers are profitable, but I see the numbers on those coming down as media PCs become more stable and in vogue."

Margin inevitably drops on many products, but integrators agree the latest audio technologies still deliver high profits.

"Audio is profitable, and when clients are into it they're willing to spend a lot on it," Zolot said. "The video sector is a frenzy with so many different competing technologies—DLP, plasma, LCD. The margins are very tight comparatively on video products."

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