Will Control4 Survive In The Home Automation Market Up Against Google + Apple?

Written by David Richards     01/06/2014 | 15:19 | Category: AUTOMATION

With Apple and Google tipped to about to enter the home automation market along with the likes of Samsung and LG, the big question now is will loss making Companies like Control4, who stripped business away in the home market from the likes of Creston and AMX with their innovative wireless networks survive.

Will Control4 Survive In The Home Automation Market Up Against Google + Apple?

According to Len Wallis the CEO of Len Wallis audio an installer of Control4 automation gear the market for home automation gear is under pressure as new homes are constructed with low cost automation systems built in.

 Also impacting the traditional automation is a new generation of low cost wireless security, lighting control and sound management control systems that eliminate the need for a Control4 type system that needs to be installed by a certified Control4 dealer. 

In Australia Control4 home automation gear is expensive in some cases up to 60% more expensive than the USA where the Company is located.

Advanced Audio who distribute the Control4 home automation kit in Australia and is one of Control4's most successful dealers in the world has never explained why they charge Australians significantly more for the Control4 automation controllers.

Last week in New York Control4 management held an investor briefing, they claimed that the Company was confident that Control4 had a future despite the advent of new low cost wireless automation systems that allow consumers to control their homes using technology that is a third of the price than what Control4 charge. 

This new technology allows users to access home security systems, as well as their entertainment systems, from a tablet or smartphone for sub $150 compared to thousands for a Control4 install.    

Chairman and CEO of Control4 Martin Plaehn claimed that Control4 had a "huge opportunity before us". 

He claimed that the company's two controllers, priced at US$750 and $1,500 are the key to the Company's success. In Australia owners are paying up to 60% more for the same controllers, one also needs a professional installer to install the controllers. Users are also charged for programming the controllers. 
Rumours of Apple's upcoming "Made for iHome" API in iOS 8 has seriously exited builders, installers and home owners. 

According to sources Apple will launch a simple automation management system this week at their World Wide Developers Conference with developers left to add new features that enhance the system.  

The move to home automation will be more about fighting fragmentation, reports GigaOm, than creating an entire home experience. Apple's home efforts will just focus on easily connecting devices to WI-Fi and tossing in voice control over Bluetooth. The rest will be down to partners said a reliable source. 

"What we're likely to see this week is a roll out of participating partners, devices and chips that support the MFi standard, all set to assure people who purchase those devices that they will work with their iPhones and iPads, with the promise of a few special features." Said GigaOm executives. 

Apple could eventually overlay software controls directly into iOS 8 but it's not looking to make its full home automation just yet. For now it looks like it's simply laying the groundwork.

The move by Apple and other major brands who are already building connectivity into such devices as TV's, appliances, lights and sound systems will impact Control4 said analysts from IDC. 

Control4 is expensive and their systems need to be programmed and installed, this costs thousands Vs a new generation of out of the box systems that can be easily accessed via a smartphone or tablet.  


Control4 claims that they are already seeing penetration into households with incomes of just below $100,000, expanding the market to such people as young adult's professionals buying their first home.

SmartHouse believes this is not happening in Australia. 

Control4 CEO Plaehn claims that he does not see a threat from Google entry into home automation via its recent Nest acquisition or from Apple's rumoured entry into the home-automation space.
 
Their entry "validates a large opportunity," he said. "Our business will get much bigger before we see a slowdown." For the year ending December, the company posted a 17.4 percent revenue gain to $128.5 million and swung to a net profit of $3.5 million compared to a prior-year net loss of $3.72 million. 

The company who went public in August 2013 reported that for the first quarter ending March, the company posted a 19 percent revenue gain to $31.9 million, and its net loss of $539,000 shrank from a year-ago net loss of $1.47 million. 

The company expects 2014 revenues to rise by 16 percent to 20 percent in 2014 to anywhere between $149 million to $154 million. That compares to $57.1 million in 2008. 

The Company revealed that 37 percent of revenues come from sales of controllers and 63 percent from sales of such solutions as in-wall dimmers, smart door locks, HVAC controls, multiroom-A/V systems, and security cameras. 

The company's controllers connect to other-brand solutions as well. As for product margins, "We sell [controllers] at 40 points off MSRP," said Plaehn. Their margins are about the same as those on such solutions such as $125 in-wall dimmers and $400 smart door locks.
 
Control4 sells these products through 3,100 dealers.

They include a mix of A/V installers, security dealers and lighting installers. The top 10 dealers worldwide of which Advanced Audio is one of them generate 6 percent of the company's revenues, and the top 100 such as Advance Audio deliver 22 percent. 

Plaehn claims that continues to see opportunities for the installer channel. He cited a "short list of products capable of self-installation," including high-end door locks that can take a DIY installer one to two days to install, including multiple trips to the hardware store. 

Baby cams could be self-installed, but most consumers will shy away from installing exterior-mounted security cameras, he said. 

Small installations averaging $4,200, including installation charges, account for 52 percent of Control4 installations, with medium-size installs with an average price of $10,600 accounting for 33 percent of installs. 

Plaehn said about 80 third-party companies have added Control4's Simple Device Discovery Protocol (SDDP) to more than 300 home products. SDDP streamlines installation by enabling Control4 controllers to automatically discover the products and their IP addresses and add them to a home-automation system. 

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