2014 SECURITY INDUSTRY LANDSCAPE

Laura Stepanek, SDM Editor

Securing New Ground – 2013

SDM = The Security ChannelPublished since 1971, SDM provides management and technical professionals with a comprehensive overview of the security channel marketplace – in print, online and in person.

‘The Channel’ According to SDM

Percentage of circulation

SDM Research

SDM Subscriber Market Forecast Study Mail-out and Web-based survey conducted among SDM’s

subscribers that are installing-based businesses, measuring revenue and other business conditions. Conducted annually since 1982.

SDM 100 Report A ranking of the industry’s 100 largest electronic security firms in

the installation, service and monitoring business, ranked by RMR and other results. Conducted annually since 1991.

SDM Top Systems Integrators Report A ranking of the industry’s 100+ largest security systems integrators,

ranked by North American systems integration revenue. Conducted annually since 1996.

The Landscape:Top 3 Factors Affecting Sales

SDM subscribers were asked:

‘Check three factors you feel will most significantly affect sales of security systems by your company in 2014.’

78% ECONOMIC CONDITIONS (compared with 77% in 2013)

47% CAPITAL SPENDING BY BUSINESS (compared with 46% in 2013)

43% CRIME (compared with 40% in 2013)

123

Sales up 38% in 2013

2011-2012 2012-2013

-3%

38%

Change in sales volume Mean sales per-location 2013: $2,182,678

25% of people participating in the 2014 SDM Subscriber Market Forecast Study indicated their 2013 sales would be less than $100,000.

37% of people participating in the 2014 SDM Subscriber Market Forecast Study indicated their 2013 sales would be $1 million or more.

The Landscape: Major Challenges to Channel Companies

SDM subscribers were asked:

‘Check three factors you feel will be major challenges toyour company in 2014.’

55% INCREASING SALES (compared with 48% in 2013)

36% PROTECTING PROFIT MARGINS(compared with 39% in 2013)

29% COMPETING EFFECTIVELY(compared with 30% in 2013)

123 Inability/difficulty obtaining credit

2012: 10% of respondents 2013: 2% of respondents

Toughest Competition for the Channel

National/g

lobal se

curit

y compan

ies

Local

secu

rity co

mpanies

Wireless

phone/broadband provid

ers

Internet-only se

curit

y sites

IT VARs

Summer p

rogram model co

mpanies

Other

36% 32%

12% 11%7%

1% 1%

Sources of competition

Google “do it yourself security”

214,000,000 results

Growth Among Channel Companies

2012 Revenue Among SDM Subscriber Market:$43.6 billion

This was 0.7% below 2011.

Preliminary results from SDM’s Subscriber Market Forecast indicate a 9.9% increase

in 2013… with projections for a 12.2% increase

in 2014.

Company Revenue by Type of Product

Video surveil-lance 28%

Burglar alarms 23%

Fire alarms14%

Access control 12%

Integrated commercial

systems 11%

Home systems other than

burg/fire7%Other5%

Company Revenue by Type of Service

Non-residential sales/installation

36%

Residential secu-rity sales/instal-

lation 16%

Service & main-tenance15%Monitoring/

lease:NON-RES-IDENTIAL11%

Monitoring/lease: RESIDENTIAL8%

Home systems installation7%

Hosted, managed, cloud-based services4% Other4%

RMR Performance in the Channel

Survey respondents were asked:Approximately what will be your recurring

monthly revenue (RMR) – generated by thislocation – on Dec. 31, 2013 and 2012?

2013Mean RMR: $58,986Median RMR: $10,000

2012Mean RMR: $55,955Median RMR: $9,000

Composition of SDM 100

TOP 10 SECURITY DEALER FIRMS:

ADT * Tyco Integrated Security * Protection 1

Monitronics Int’l * Vivint * Stanley Security

Slomin’s * Diebold Security * Vector Security

Guardian Protection Services

RMR range of SDM 100 firms in 2012 was $252.5 M to $191 K.

Grew RMR 16% in 2012.

RMR Growth Among SDM 100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$0

$100

$200

$300

$400

$500

$600

$700

$321.6

$348.1$385.1

$409.6

$413.1

$439.1$466.3

$510.7$552.3

$641.9

RMR Dec. 31 ($ millions)

Average Monthly Monitoring Prices

$15 or less $16 - $19 $20 - $24 $25 - $29 $30 or more

12%

7%

23%24%

34%

Average monthly monitoring price: RESIDENTIAL

Median monthly monitoring price:

$25

Average Installation Prices: RESIDENTIAL

Less than $500

$500 - $999 $1,000 - $1,499

$1,500 - $1,999

$2,000 - $4,999

$5,000 or more

2%

26% 25%

14%18%

14%

Average installation price for traditional resi-dential system among survey respondents

Mean: $1,957Median: $1,200

Average Installation Prices:NON-RESIDENTIAL

18%16% 17%

10%

19% 20%Lowest system

Under $25,000

$25,000 - $99,999

$100,000 - $249,999

$250,000 - $499,999

$500,000 or more

55%

11%18%

6%10%

Highest system

Mean: $3,474Median: $1,100

Mean: $395,766Median: $25,000

Strongest Sales Potential in 2014: Video

SDM subscribers were asked: How would you rate the potential for sales in 2014 in each of the following markets?

(On a scale of 1 to 5, where 1 = poor and 5 = excellent)

Video surveilla

nce

Monitorin

g

Access

contro

l

Burglar alarm

Fire alarm

/ECS

Home contro

l/enterta

inment

3.613.14 3.14

2.8 2.66 2.43

Average rating on a scale of 1 to 5

Equipment Spending Outlook

These are the top 5 equipment categories in which dealers and integrators expect to increase their spending in 2014.

1. Video surveillance/CCTV2. DVRs/NVRs3. IP-network-based video equipment4. Monitoring5. Intrusion alarm systems

Note that 4 in 10 survey respondents expect their spending on video surveillance to increase by more than 10 percent.

Markets Expected to Offer theBest Growth

Top 3 Residential:1. Middle-market homes (existing) – 47%2. High-end homes (existing) – 20%3. New construction (custom-built) – 18%

Markets Expected to Offer theBest Growth

Top 5 Non-Residential:1 Education: schools, colleges, universities2 Commercial office space3 Retail4 Hospitals, healthcare5 Government facilities6 Industrial, manufacturing, distribution

2014 SDM Subscriber Market Forecast

The new SDM 2014 Subscriber Market Forecast contains much more detail including installation

pricing, service pricing, operational practices, expected spending on products and more.

Please watch for SDM’s January 2014 issue for the full report.

Renewathon Results in Donation to AIREF

SDM magazine launched our first ever

Summer of 2013 Renewathon this past June. Through a series of ads in the magazine, email

renewal reminders, e-newsletter links and cooperative efforts with outside partners, we guaranteed a donation of $0.50 to the Alarm Industry Research & Educational Foundation for each renewal or new subscription processed as part of the Renewathon.

We’re pleased to announce that we will be presenting a check to AIREF for more than $1,200 later this month at ISC East.

SDM Congratulates

2013

Systems Integrator of the YearG4S Technology