Surround Sounds

For distributed audio system providers, the advent of digital technologies has brought a greater awareness of what the homeowner can do, and whole-house audio is becoming a more popular option in both new and existing homes. Integrators can create different zones within a home controlled by a central unit that gives listeners the ability to play different music in different sections of the house, and customers are taking them up on it.

"It seems like everybody wants whole-house audio, especially with the advent of the iPod and other portable digital music things. Everybody likes to have background music," said Jeff Galea, owner of Boca Theater and Automation in Boca Raton, Fla. "Music seems to be the given, right up there next to smoke detectors, security systems and networking."

Boca Theater and Automation is a quintessential example of the trend. It is capable of providing "pretty much everything that takes a battery or needs a wire in a house," said Galea, from structured writing and networking to pool alarm systems to central vacuum systems. Boca also provides broadband Internet access to its new-construction customers.

The options for customers and the products available are expanding, and integrators have more ways than ever to generate revenue in the digital home. Vendors are also stepping up to meet demand and have released a wide variety of new products that cater to both the analog audiophile and the digital guru, giving integrators the tools to make each customer's solution one that matches their expectations.

"We've come sort of at a convergence period," said Adam Zolot, owner of Entertaining Spaces, a San Francisco-based integrator founded almost five years ago. "We basically started our business at the infancy of the digital era, and have sort of evolved with the digital era. We're not beholden to the old-school mentality of distributed audio, which I think works to our advantage."

As technology evolves, so has Zolot's business.

"We started off using the analog systems but immediately realized the potential of the digital stuff," he said. "The analog mentality creates a camp that believes that the quality and reliability of analog devices is better, but the rewards of the digital system are so far greater than these possible negatives that it's a slam dunk for a business like mine."

Frank Sterns, president and COO of Niles Audio, said his company has evolved from one mainly focused on the analog and passive distributed audio market to release its own digital media server. The Niles IntelliControl ICS media server was developed over three years, and the company is banking on its success. "We could pretty much see that if we didn't have a digital system, we faced decline," Sterns said.

Leading audio vendors like Russound, Elan, Niles and Crestron have been joined by relative newcomers like Control4 and AMX, which are expanding their lines of remote and touch-screen controls, and Sonos, whose wireless digital music system is gaining traction in urban markets like London and Manhattan, where customers are more likely to rent than to own their homes and tearing down walls to install wiring is not an option.

Sonos, Santa Barbara, Calif., recently released the ZonePlayer 80 bundle, combining two of the product's wireless music units and a controller. In its first few weeks, the product sold out.

"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 and 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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