Understanding the Connected Home Market and How It Will Develop

Ron Zimmer, President & CEO Continental Automated Buildings Association

October 28, 2009 New York, NY

Understanding the Connected Home Market and How It Will Develop

Ron Zimmer, President & CEO Continental Automated Buildings Association

1. 1. Bell Canada Bell Canada – – Chairman Martin Chairman Martin

2. 2. Tridel Tridel Corporation Corporation – –

3. 3. Honeywell International Honeywell International Kolasa Kolasa

4. 4. Alcatel Alcatel­ ­Lucent Lucent ­ ­ Lindsay Ellis Lindsay Ellis

5. 5. BAE Systems BAE Systems ­ ­ Steve Steve Teubner Teubner

6. 6. Cisco Systems, Inc. Cisco Systems, Inc. ­ ­

7. 7. Direct Energy LP Direct Energy LP ­ ­ David David

8. 8. Hydro One Networks Inc. Hydro One Networks Inc.

9. 9. Leviton Leviton Manufacturing Co., Inc. Manufacturing Co., Inc.

CABA Board of Directors Chairman Martin Chairman Martin Cullum Cullum

Vice Vice­ ­Chair Leo Chair Leo DelZotto DelZotto

Honeywell International Honeywell International – – Vice Vice­ ­Chair Roy Chair Roy

Lindsay Ellis Lindsay Ellis

Teubner Teubner

­ ­ Tony Wan Tony Wan

David David Dollihite Dollihite

Hydro One Networks Inc. Hydro One Networks Inc. ­ ­ Tom Tom Semler Semler

Manufacturing Co., Inc. Manufacturing Co., Inc. ­ ­ Tom Leonard Tom Leonard

CABA Board of Directors

10. Microsoft Corporation 10. Microsoft Corporation

11. 11. National Research Council/Institute for National Research Council/Institute for Research in Construction Research in Construction

12. 12. Philips Philips ­ ­ Dr. Dr. Satyen Satyen Mukherjee Mukherjee

13. 13. Procter & Gamble Procter & Gamble ­ ­ Orly Orly

14. 14. Siemens Building Technologies, Inc. Siemens Building Technologies, Inc. Haeberle Haeberle

15. 15. Trane Trane ­ ­ Gene Gene Shedivy Shedivy

16. 16. Vantage/ Vantage/Legrand Legrand ­ ­ Andrew Wale Andrew Wale

17. 17. Whirlpool Corporation Whirlpool Corporation

18. 18. CABA CABA ­ ­ President & CEO President & CEO

CABA Board of Directors

10. Microsoft Corporation 10. Microsoft Corporation ­ ­ Jonathan Jonathan Cluts Cluts

National Research Council/Institute for National Research Council/Institute for Research in Construction Research in Construction ­ ­ Dr. Dr. Morad Morad Atif Atif

Mukherjee Mukherjee

Orly Orly Cocco Cocco

Siemens Building Technologies, Inc. Siemens Building Technologies, Inc. ­ ­ Brad Brad

Andrew Wale Andrew Wale

Whirlpool Corporation Whirlpool Corporation ­ ­ Carol Carol Priefert Priefert

President & CEO President & CEO – – Ron Zimmer Ron Zimmer

CABA Board of Directors

“The knowledge­based forum for industry leaders who advance the use of technology and integrated systems in the global home and building industry.”

CABA Vision

based forum for industry leaders who advance the use of technology and integrated systems in the global home and

CABA Vision

Remote Home

TV TV

HSS

VoIP

Thin Set­top

DMA

IP Camera

Offsite Storage

Uber Set­top

Modem

How do we connect all of this stuff?

USB Storage

Touch Panels

DMA

TV

Connected TV

How do we connect all of this stuff?

Realties of the Smart Home

• Smart Home Vision of 10 years ago:

– Did not happen for the masses – Did happen for the “Rich and Affluent” – Networked box in the garage – CAT5 wiring was just starting to sell, but not for the masses

– Sensor modules – Multi HVAC systems – Central touch pad (Home Controls) – Media server room with rack – Lighting, window treatments and cameras – Smart home today is main stream for the “Rich and Affluent” and extreme upper income levels

Realties of the Smart Home

Smart Home Vision of 10 years ago:

Did not happen for the masses Did happen for the “Rich and Affluent” Networked box in the garage CAT5 wiring was just starting to sell, but not

Central touch pad (Home Controls) Media server room with rack Lighting, window treatments and cameras Smart home today is main stream for the “Rich and Affluent” and extreme upper income levels

• Smart home today for mass market is a connected home that has varied networks developing:

­ Computer, gaming and TV ­ Wired and wireless ­ HVAC programmable thermostats ­ Security pack from companies like ADT, GE, Honeywell, etc. ­ Very basic web cam systems

Realties of the Smart Home continued

Smart home today for mass market is a connected home that has varied networks

Computer, gaming and TV

HVAC programmable thermostats Security pack from companies like ADT, GE,

Very basic web cam systems

Realties of the Smart Home

Advisory Board Members (6) Advisory Board Members (6): :

Affiliate Members (17) Affiliate Members (17): :

Connected Home Research Council (CH­RC) Members Connected Home Research

RC) Members

The Connected Home Research Council provides opportunities for research project collaboration conceived and executed by Research Council members. The resulting research reports, white papers and executive summaries are made available to Research Council members and industry stakeholders.

CABA’s Connected Home Research Council (CH

The Connected Home Research Council provides opportunities for research project collaboration conceived and executed by Research Council members. The resulting research reports, white papers and executive summaries are made available to Research Council members and industry

CABA’s Connected Home Research Council (CH­RC)

CH­RC State of the Connected Home Market Study Research

• Study was completed in June of 2008 • Divided into three ecosystems (family, entertainment and career)

• Web survey of over 800 North America people – Home owners ­ 25 and older – Responsible for managing the household

• Industry benchmark study 3 rd • Funded by companies who are CABA’s CH • Found that a home with sensors and “smartness” never took hold for the masses due to: – Cost of system and components – Not being user­friendly

RC State of the Connected Home Market Study Research

Study was completed in June of 2008 Divided into three ecosystems (family, entertainment and

Web survey of over 800 North America people 25 and older

Responsible for managing the household study in eight years

Funded by companies who are CABA’s CH­RC members Found that a home with sensors and “smartness” never took hold for the masses due to: Cost of system and components

CH­RC State of the Connected Home Market Study Research continued

• The study did determine that entertainment is “king of the dollars” ­ TVs, gaming and computers connecting together in a “plug and play” environment

• The safe, secure and comfort areas are lagging behind in consumers minds because: ­ Price is higher than payback for investment ­ Too complicated for the non ­ “I already have to much technology in my home” or “I do not want my home to run my life” or “technology only complicates my life, so I don’t want any more”

Complimentary Executive Summary at: http://www.caba.org/2008connectedhomestudy

RC State of the Connected Home Market Study Research continued

The study did determine that entertainment is “king of

TVs, gaming and computers connecting together in a “plug and play” environment The safe, secure and comfort areas are lagging behind in consumers minds because: Price is higher than payback for investment Too complicated for the non­tech person to deal with “I already have to much technology in my home” or “I do not want my home to run my life” or “technology only complicates my life, so I don’t

Complimentary Executive Summary at: http://www.caba.org/2008connectedhomestudy.

The Realities Total Online HHs

Primary Market

Mass Market

A B C

Definitely/somew hat appealing (6­7)

23% G 51% HC 2% I

Might or might not be appealing (3­5)

61% D 48% 71% FB

Definitely not/somew hat not appealing (1­2)

16% 0% 28% B

Base (n=1,849) (n=1,378) (n=471) (n=1,834)

Appeal (Q14B)

U.S. 2008

Appeal of Connected Home Concept

Note: Remember the consumer adoption curve. Innovators and early adaptors will purchase technology that others will not, until it becomes more mature and consumer friendly.

The Realities Total Online HHs

Primary Market

Mass Market

Total Online HHs

Primary Market

Mass Market

D E F G H I

22% G 51% HF 1% 14% 44% I 0%

57% 48% 63% E 64% D 56% BE 68% H

21% A 1% 36% CE 22% A 0% 32% H

(n=1,834) (n=921) (n=913) (n=649) (n=455) (n=194)

U.S. 2005 Canada 2008

Note: Remember the consumer adoption curve. Innovators and early adaptors will purchase technology that others will not, until it becomes more mature and consumer friendly.

Connected Home Backbone

Options Purchased When Current Home was Purchased, Among Homes Built 2000 or later

2008 U.S. and Canada Total Online HHS n=60

60 % Wired security system

59 % Programmable thermostat

Home energy monitoring/control 18 %

Centralized lighting control 12 %

Built­in high­speed Internet throughout the home

Structured wiring

56 %

45 %

•Remodel •New construction •House built during the last housing bubble

Connected Home Backbone

Remodel New construction House built during the last housing bubble

Family Ecosystem

Total Online HH

Primary Market

Mass Market

A B C

Yes 43% D 53% EC 35% F Base (n=1,761) (n=1,324) (n=437)

Wireless (Wi­Fi) 74% DG 75% E 72% F Base (n=841) (n=702) (n=139)

Laptop in home netw ork 68% D 69% 67% F Base (n=880) (n=727) (n=153)

Have Home Network

Wireless Home Network (Wi­Fi)

Laptop in Home Network

Computer Behavior — Home Network

U.S. 2008

Family Ecosystem

Market Total

Online HH Primary Market

Mass Market

Total Online HH

Primary Market

Mass Market

D E F G H I

28% 40% F 19% 40% D 54% EI 33% F (n=1,768) (n=899) (n=869) (n=620) (n=429) (n=181)

51% 56% F 43% 63% D 68% E 58% (n=484) (n=339) (n=145) (n=266) (n=219) (n=47)

60% 68% F 48% 66% 63% 69% F (n=520) (n=358) (n=162) (n=288) (n=234) (n=54)

U.S. 2005 Canada 2008

Family Ecosystem continued Total

Online HH Primary Market

Mass Market

A B C Using technology to help you automate or control basic home systems like lighting, heating, ventilation and air conditioning (HVAC) in general*

13% 28% C 2%

Using technology to streamline routine tasks like preparing meals, arranging family members’ schedules and paying bills in general

15% 29% C 4%

Using technology for home security in general

15% 29% C 4%

Base (n=1,849) (n=1,378) (n=471)

Interest in Family Ecosystem Application Areas % Very Interested; Top­2 Box

U.S. 2008

Lack of interest because of issue around: • Set up ­ 51%, • People in the mass market are technology challenged • People are overwhelmed by dealing with technology at work and home

Family Ecosystem continued

Market Total

Online HH Primary Market

Mass Market

Total Online HH

Primary Market

Mass Market

D E F G H I

13% G 28% F 2% 9% 26% I 2%

14% 26% F 4% 12% 25% I 7%

— — — 11% 27% I 3%

(n=1,834) (n=921) (n=913) (n=649) (n=455) (n=194)

U.S. 2005 Canada 2008

Lack of interest because of issue around:

People in the mass market are technology challenged People are overwhelmed by dealing with technology at

Family Ecosystem Continued

Home network phone & on­site support

Wireless appliance monitor

Home zone sensors

Energy­saving power strip

Professional home network installation

Remotely administered home network repair services

U.S. 2008 Total Online HHs (n=319)

Remotely accessible door lock

42%

35%

36%

37%

39%

32%

32%

31%

Programmable thermostat

30%

25%

Remote A/V equipment & home lighting control

Service combines contact list for

home & cell phones

Maximum Total Addressable Market (TAM) for Family Mini­Concepts

Family Ecosystem Continued

Total Online HHs Canada 2008 Total Online HHs (n=143)

42%

35%

36%

37%

39%

32%

32%

31%

30%

25%

Maximum Total Addressable Market (TAM) Concepts

36%

32%

33%

31%

35%

28%

28%

28%

22%

25%

If I buy or rent it, I want to watch it anywhere

Home Theater

Content Aggregator

Media Center

Media Extenders

Sling Box

Slide Courtesy of Entertainment Technology Center @ USC

If I buy or rent it, I want to watch it anywhere

Home Theater

Home Projection

Gaming

Portables

Media Extenders

Mobile

Car A/V

Slide Courtesy of Entertainment Technology Center @ USC

Entertainment Ecosystem

43% B

58% B

87% B

U.S. 2008 Total Online HHs (A)

2 or more computers

Home Network

Broadband Internet

Connected Home Foundational Technologies

U.S. 2005 Total Online HHs (B)

n=1,849 n=1,834

n=1,761 n=1,768

n=1,829 n=1,824

43% B

58% B

87% B 70%

53%

28%

Entertainment Ecosystem

90%

54%

40%

Canada 2008 Total Online HHs (C)

Connected Home Foundational Technologies

U.S. 2005 Total Online

n=1,834 n=649

n=1,768 n=620

n=628 90%

54%

40%

70%

53%

Entertainment Ecosystem continued

U.S. 2008 Total Online HHs (A)

U.S. 2005 Total Online HHs (B)

Canada 2008 Total Online HHs (C)

2% (n=60 4)

0% (n=21 1)

Fiber­optic TV service

TV with built­in Internet

connection

3% (n=26 5)

5% (n=88)

HDTV 13% (n=21 1)

Media server 3% (n=60 4)

7% (n=21 1)

5% (n=61 0)

11% B

(n=60 4)

DVR 21% (n=60 4)

23% (n=21 1)

High­definition DVD player

(standalone or in other device, net)

19% (n=60 4)

18% (n=21 1)

NA

NA

24% ( n=618)

Ownership of Key Multimedia Technologies

NA

NA

Customized Universal remote

29% (n=60 4)

29% (n=21 1)

NA

Entertainment Ecosystem continued

Ownership of Key Multimedia Technologies

Built­in home theatre/ surround sound

36%

Purchased with Homes Built in 2000 or Later Total U.S. and Canada n=60

Entertainment Ecosystem Interest in Audio Entertainment

Interest in Listening to Internet Radio at Home by Room

Dining room

Family room

Living room

Bedroom

Kitchen

Home office or den

Other

U.S. 2008 Total Online HHs (n=282)

Canada 2008 Total Online HHs (n=98)

14%

12%

12%

8%

27%

29%

2% 1% 4% 8%

Entertainment Ecosystem Interest in Audio Entertainment

Interest in Listening to Internet Radio

Bedroom

Home office

Canada 2008 Total Online HHs (n=98)

16%

17%

24%

24%

8%

What Ecosystem is most interested in Smart Home/Connected Home? • Answer the Career Ecosystem • This is a Ecosystem of people who work from home at least part time or telecommute

• They use technology differently and are more likely to be using technology in a early web 3.0 environment to solve problems

Works at Home Outside Regular Business Hours

U.S. 2008 Total Online HHs (n=618; A )

Self Employed

What Ecosystem is most interested in Smart Home/Connected Home? Answer the Career Ecosystem This is a Ecosystem of people who work from home at least part time or telecommute They use technology differently and are more likely to be using technology in a early web 3.0 environment to solve problems

47% 52% B 43%

U.S. 2008 Total Online HHs (n=618; A )

Canada 2008 Total Online HHs (n=215; C )

U.S. 2005 Total Online HHs (n=604; B )

15% 15% 14%

Career Ecosystem

QC48. Letters denote statistically significant differences among segments.

Dining room

Family room

Living room

Bedroom

Kitchen

Home office or den

U.S. 2008 Total Online HHs (n=346; A)

Canada 2008 Total Online HHs (n=97; C)

U.S. 2005 Total Online HHs (n=310; B)

3% 2% 8%

2%

4%

5%

9% B

1%

15%

15%

20%

21%

When working from home, in which room of the house do you typically work?

Career Ecosystem­Work at Home

Canada 2008 Total Online HHs (n=97; C)

22% BC

13%

2%

43%

57% A

47%

When working from home, in which room of the house do you typically work?

1. Home Networking Study 2. Digital Youth Study 3. Laundry Time 4. Digital Kitchen 5. Senior Living 6. Interactive Television & Advertising Study (IPTV) 7. Microbusiness & Small Business Managed 8. Services Needs Assessment Study 9. Going Green – Energy Efficiency 10. State of the Connected Home Market Study 11. It’s Just Magic! 12. Connected Home User Interface 13. Video Convergence

CABA’s Connected Home Research Council ­ Successful Projects

6. Interactive Television & Advertising Study (IPTV) 7. Microbusiness & Small Business Managed 8. Services Needs Assessment Study

Energy Efficiency 10. State of the Connected Home Market Study

12. Connected Home User Interface

CABA’s Connected Home Research Successful Projects

Complimentary Research Report: Complimentary Research Report:

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