Reflections on CEDIA and the Nature of our Industry

By Paul Starkey
Published on: October 6, 2017

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Wow, my 25th CEDIA. Still a great event for seeing old friends, talking to new ones, and scoping what’s going on. More than ever, perhaps, this EXPO gave insight to the complex, fractionalized nature of our industry.

Gone was Crestron (old news). Some might say no loss because the world has changed as the shift continues to the Internet of Things. Amazon wants integrators to provide home services and buy products through them. Big boys in the traditional CI space – Sony, Epson, speaker manufacturers and others – are  adding less expensive products to expand their respective footprints in what looks to be a significantly lower-end market. Not sure where FaceBook, Apple and Google were… they figure they can get along without CI’s?

Meanwhile, dealers shared success stories about a revived, vibrant marketplace. Major exhibitors reported a busy, well-attended show ex of Floridians and Houstonians smarting from the hurricanes. Everybody seems to be feeling good about the action.

So, what does this mean to the future of the high-end, luxury-focused dealer? Their business is about more than just products and technology, as these are only half the gross profit equation, literally. For all but the most high-end projects, the other half comes from labor and parts revenues.

Projects under $8K put pressure on the margins you can extract for product, labor and parts.  I suppose you can build a business model around this but it’s not the luxury segment we strive to serve.

The rest make a living upstream from here; projects that are $15K and up with a good share coming from $100K lifetime clients. Customization, personalization, and the sheer size of the homes being served require more design, more installation, and more service than the smaller projects. The attention required for each client is much greater than the low-end counterpart.

So is the luxury segment safe? Is it growing? Is it strategically important?

I say YES, YES, YES.  It continues to be the breeding ground for new technology and new category creation. Love those golf simulators. Love that shades are a fabric of our business and lighting is firmly in our camp and not the electricians’. Managed networks are part and parcel of the high-end business model.

My biggest concern is: are we in a position to grow it? Or, will the strain on management bandwidth, limited access to people, and an un-optimized profit model keep luxury segment growth at a slower pace?

If the top 500 companies in CI did 20,000 projects this year at $30,000 average, how does this $600M retail business move forward in the wake of IOT?

Our belief: this market can grow $60M to $75M a year for as long as:  1) we can make luxury dealers more visible and able to reach more affluent clients, and; 2) luxury clients continue to seek the best of the best, not down-market solutions.

We believe the rate of growth to be supply-side restricted and that more demand than is being served is available.  Better performing companies will tap into more of the luxury segment demographic.

Will the 2027 CEDIA be different? Ten years out, you can count on it. Will luxury CI dealers be part of it? With more than a doubling of the market turnover, perhaps an umbrella organization emerges; more focused and more valuable to the CI dealers serving the most affluent clients in the world. There is a tremendous opportunity to develop a luxury position that is unique and clearly different than the middle or mass markets.

My question is: Which flag do you want to carry?

Stay Vital.

Paul Starkey

Paul Starkey

Paul Starkey is a 23 year CI industry veteran who led control manufacturer ELAN from infancy to a 150 person company. He is a visionary, keen on innovation, pioneer of on-line training, and numerous product innovations. He is co-founder of Vital Management and Executive Director of BRAVAS Group.

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