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Analysts Predict Smart Home Slow Down

Mari Silbey
6/19/2015
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The future looks a little rocky for the smart home market.

According to a new report by Argus Insights, consumer demand for connected home devices like smart thermostats and door locks has slowed dramatically in the first half of this year. Argus estimates that demand is actually 15% below where it was in May 2014 thanks in part to reliability issues, consumer confusion and the fact that early adopters have already made their initial purchases and have no need to spend more money right now.

"Consumers are not seeing the value yet from these home automation devices," said John Feland, CEO and founder of Argus Insights. "There is a lot of confusion about standards with Google introducing Brillo and Apple's new HomeKit. Add in WiFi, Bluetooth, Zigbee and Z-Wave and there is a lot for any consumer to grapple with during installation. Until things become easier and consumers don't have to cobble together a total solution, I believe we will continue to see this stagnation continuing for the rest or 2015 unless a new offering addresses these issues and revitalizes the market."

Source: Argus Insights
Source: Argus Insights

Veteran analyst Michael Wolf of Next Market Insights is seeing a similar trend. In a blog post this week, Wolf predicted that "we're in for a little turbulence in the smart home market." Wolf's reasoning is that early success with individual products hasn't translated into sales of broader systems with smart home hubs, suggesting that consumers aren't ready yet for the broader vision of a connected home.

At the same time, makers of standalone smart home products are likely now at risk because many are not yet connected into a larger ecosystem.

"If you don't already know (but I think you do by now)," said Wolf in his post, "hardware is hard folks. It can eat the best entrepreneurs alive, and in new categories that require market education, it can be doubly treacherous."


Want to know more about the smart home market and the Internet of Things? Check out our dedicated IoT content channel here on Light Reading.


Wolf likened the smart home market in some ways to the early days of streaming video circa 2004, saying "we in the industry knew at some point consumers would stream video and other great content to their TVs and around the home, but the consumers didn't yet know it."

As for the process of building up the necessary ecosystems to make the smart home market successful, both Feland and Wolf acknowledged that it's not yet clear how efforts like Apple Inc. (Nasdaq: AAPL)'s HomeKit framework and Google (Nasdaq: GOOG)'s Brillo operating system will play out.

There is also serious work underway in the broadband provider market to develop next-generation smart home services that link to lots of connected devices. AT&T Inc. (NYSE: T) announced this week that it will be begin testing integration with the Nest Learning Thermostat in July for its Digital Life Platform. And Comcast Corp. (Nasdaq: CMCSA, CMCSK) said in May that it is introducing a new "Works with Xfinity Home" certification program later this year. Comcast plans to support a slew of new retail products including the thermostat from Nest Labs , smart door locks from August and connected lighting devices from Lutron, among others. (See Comcast Opens Up the Smart Home.)

There is a lot of money being thrown into the smart home space, but it may be a while yet before those investments deliver significant returns.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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mhhf1ve
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mhhf1ve,
User Rank: Light Sabre
6/24/2015 | 4:21:09 PM
smart home standards?
I'm waiting for the smart home devices to settle on standards, so that I'm not committing to a requirement to buy all Apple HomeKit approved sensors/devices or all Google/Nest-approved hardware when I decide to get a replacement smoke detector or whatnot. 

If my choice of having a PS4 or an XBox affects the "smart" ecosystem of my home, I think that's a unsettling future for the IoTs and other hyper-connected stuff. Here's hoping that "smart" stuff won't necessitate a strange brand loyalty plan. eg. I have an Apple thermostat, so that means I need to keep my iPhone and wireless provider and get an Apple Car and an Apple home security system and an Apple TV and an Apple Watch, and an Apple belt, shoes, hat, socks, forks, dishwasher, stove, fridge, cabinetry....
VPMarket81184
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VPMarket81184,
User Rank: Light Beer
6/23/2015 | 2:35:15 PM
Smart home growth continues
Our research doesn't show a slow down in these markets. Here is another analyst perspective - we have been researching consumer adoption for many many years and wanted to provide this different perspective to consider   http://www.parksassociates.com/blog/article/connected-home-market-continues-to-expand 
DHagar
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DHagar,
User Rank: Light Sabre
6/22/2015 | 9:03:45 PM
Re: Park Associates Disagrees
Ariella, great information and excellent vision!  Thanks!

I would further add that even the $5,000 (as you say, costs will come down) would still cost less than more intensive care or living facilities.  I can even see the Health Plans paying for some of that in that it will be an attractive cost savings - let alone the improved quality of life!
Ariella
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Ariella,
User Rank: Light Sabre
6/22/2015 | 8:42:11 PM
Re: Park Associates Disagrees
@Dhagar that reminds me. I once heard about smart homes particularly for older people living alone. Here's something on it. http://school.eecs.wsu.edu/node/830 :

Schmitter-Edgecombe, who has been doing work with aging and dementia, says she's interested in finding ways to increase the feeling of independence among older adults, and keeping people functioning in their homes as long as possible.  "My contribution is more the understanding of mild cognitive impairment and dementia and the types of intervention that are likely to prove most helpful," Schmitter-Edgecombe says. She works more directly with the participants in the research and their families and tests the participants. She and those she does research with make decisions about what activities of daily living are going to be tested, she says.  "From my side, we're going to have to make sure people are comfortable with it," she says.
Also, she says, "We want to encourage people to continue to use their cognitive abilities. If difficulties are detected, then that's when we want technology to assist them."  Cook estimates that it will be about five years before a monitoring system like the one she and Schmitter-Edgecombe are working to create will be available for sale to the general public. She estimates that currently, it would cost about $5,000 for total deployment of such a system in a person's living area.  "It's out there being used now for research purposes," set up in homes of older adults who have memory loss, Cook says. 
Some aspects of a smart environment system need to be refined, and others, such as monitoring whether someone has taken their medication, need to be developed. That work will take several years, the researchers say.
Ariella
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Ariella,
User Rank: Light Sabre
6/22/2015 | 8:32:18 PM
Re: Park Associates disagrees
" and only cool for early adopters." @mendyK exactly, there's quite a way to go to really hit the mainstream market stride.
DHagar
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DHagar,
User Rank: Light Sabre
6/22/2015 | 7:31:57 PM
Re: Park Associates Disagrees
Ariella, that is a key value to "Connected" Smart Homes.  I see Smart Homes as not only being technologically functional but also "connected" with "alerts" and/or summons for help or information for specialized services.  I think we will find "Smart Homes" will have multiple utilities, just as we have found mutiple applications for smart phones.
DHagar
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DHagar,
User Rank: Light Sabre
6/22/2015 | 7:21:24 PM
Re: Park Associates Disagrees
MordyK, I am seeing it the same way.  It will take someone showing the "art of the possible" and they will open up the market.  Note:  Cisco could also be a player? 
MordyK
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MordyK,
User Rank: Light Sabre
6/22/2015 | 5:19:50 PM
Re: Park Associates disagrees
The way I see it, somebody will have to build a hybrid of an Apple store designed as an interactive demo smart home.

The cost of something like that and teh ecosystem required, effectively says its gonna be either: Apple, Google, Microsoft or even someone like Samsung. It can obviously also be telco's or cable co's but I just don't see that happening.
MordyK
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MordyK,
User Rank: Light Sabre
6/22/2015 | 5:10:44 PM
Re: Park Associates disagrees
The mHealth component is in effect the industrial utilization of sensors and big data for operational efficiency, although in this examples it affects users daily life. integrating this with on-body data sources as they become available is the obvious next step.

Back to the smart home. The distinction of a gadget vs. a full-on connected home is an important factor in the development of the connected home. A gadget while limited in its capabilities can serve customers really well as it does precisely what is expected of it, wheras in a connected home one still needs to program things to do the things you want it to do, and that is beyond the capabilities of most users. This ultimately leads to the users being disappointed that the system doesn't live up to their expectations.

What is needed IMO is an interface platform that makes it easy to deploy profiles and services either by suggestion or as a store for recipe's, as well as an easy user interface to allow an easy mix and match of pre-built components for a custom recipe. I know that IFTTT sorta already does this, but if we're honest its extrememly limited and only cool for early adopters.
Ariella
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Ariella,
User Rank: Light Sabre
6/22/2015 | 10:37:32 AM
Re: Park Associates disagrees
@mendyk yes, time is criticial in those cases, and even a minute can be the difference between life and death. I've written about analytics systems that expedite the emergency responses routes to improve the odds of survival. 
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