Smart Home Security & MSOs to Expand Residential Alarm Penetration Through 2023

The residential market for security alarms has historically been limited by the high cost of purchasing the equipment and the monthly costs for professional monitoring services, which are needed to verify threats and disarm false alarms. However, innovative technologies and marketing strategies are changing this dynamic by opening the market up to a new base of consumers – such as millennials and urbanites – who are interested in security systems, but for whom cost has been a barrier.

A new Freedonia Group analysis of the US safety and security alarm market predicts residential market growth of 5.1% per year through 2023. With the rise of smart home security products that can be easily installed on a DIY basis and monitored from end-users’ smartphones – and multiservice operators (MSOs) increasingly offering security equipment and services with bundled cable, internet, and phone packages – residential security alarm penetration is growing, and so is industry participation by new market entrants, including big tech firms and telecoms.

Smart Home Security Market Booms on Growing Affordability & Ease-of-Installation/Use

Smart home security companies are enabling consumers to more easily purchase and install security systems with online ordering and DIY installation. The devices offered by these companies combine key functions of the primary home security equipment types – access controls (e.g., smart locks), alarms (intrusion- and smoke/CO-detection), and video surveillance – with a self-monitoring feature, such as a smartphone app. In addition, consumers are encouraged to purchase add-on devices such as extra sensors and surveillance cameras to enhance overall system performance.

Because cost is such a barrier to consumer purchases of security systems, eliminating recurring charges for monitoring services greatly increases their affordability:

• Cost benefits also derive from the ability of many of these products to be DIY installed by end users rather than requiring professional installation.
• In addition, the average cost of smart devices has decreased significantly in recent years – a trend that is expected to continue as the technologies underlying these devices are refined.

Also, as entry-level smart security products are often less expensive than traditional security products, they can serve as a gateway to purchasing more advanced home security products and services down the road. Accordingly, increased adoption is expected to open up opportunities for upgrade sales.

MSOs Boost Alarm Sales with Bundled Services Deals 

MSOs increasingly offer customers the ability to bundle security equipment and services with their cable and internet packages, often for a lower cost than if the services were purchased separately. This marketing strategy is driving sales growth for both security equipment and monitoring services, particularly among older home-owning demographics such as baby boomers, who are generally more likely to already have a contract with an MSO than younger generations.

As such, a number of MSOs are entering or working to strengthen their position in the security market. For example, Comcast’s March 2017 acquisition of iControl Networks and its Converge software platform enabled the company to take complete control over the technology that powers its XFINITY Home security portfolio, which arrived on the market in 2012.

Impact of New Market Entrants on Traditional Players

As interest in the Internet of Things (IoT) continues to rise, a number of firms – particularly big tech concerns focused on artificial intelligence, machine learning, and other smart technologies – are entering the US safety and security alarm market, placing pressure on traditional vendors to offer more technologically advanced security products that can be integrated with other smart electronics, such as appliances, televisions, and virtual personal assistants like Amazon Alexa and Google Assistant.

The rapid growth of the smart home security market and expanding role of MSOs have driven efforts by traditional security vendors to improve their competitiveness in the evolving security space, such as by:

• forming strategic partnerships with smart technology firms, such as ADT’s with Samsung in 2017 to integrate ADT security equipment with Samsung’s SmartThings IoT platform
• launching their own line of DIY security products – which ADT is planning to do per a January 2020 announcement – through which traditional security vendors can better incentivize consumer purchases of value-added services
• reorganizing their business to focus on different IoT market segments, such as Honeywell’s 2018 spin-off of its Resideo Technologies home systems business, which included the company’s smart home security portfolio, to increase focus on nonresidential applications

Want to Learn More?

New editions of Safety & Security Alarms and Private Security Services are now available from The Freedonia Group.

About the Author:

Peter Kusnic is a Content Writer with The Freedonia Group, where he researches and writes studies focused on an array of industries.