SE2: The Business

Pyle sold his stake in Aurant in 2005 to found SE2, although he and his former colleagues had been working on an all-purpose box for years.

A prototype ITC was shown to a few dealers in January 2006, where feedback was “phenomenal,” according to Pyle.

Some local Salt Lake City integrators have installed the product already, but SE2 will make its official debut at the CEDIA Expo, where the company will begin accepting dealer applications. “We don’t see a problem with market demand,” Pyle says. “It’s about how fast we want to grow.”

He anticipates selling about 500 units in 2008.

Four people including Pyle work full time at SE2, but the company also works with about 30 contractors. Pyle expects to have about 15 full-time employees by CEDIA. The company has 11 patents.

The next product in the line will be a cheaper box in a plastic case—ideal for classrooms and boardrooms, Pyle thinks. He does not anticipate coming down much in the home theater market; in fact, a higher-end solution, maybe in the neighborhood of $30,000, would be the next extension in the ITC line.

SE2 has gone through a couple rounds of funding and now has a larger VC on board.

The Good & Bad of a Theater-in-a-Box

The SE2—and the effort that went into it—is a remarkable achievement; however, this product isn’t for everybody. The purists will want to pick their own components and customize their own remote controls, probably one with a touchscreen or at least an LCD display. (No, the touchscreen on the ITC chassis is not removable for use, just for servicing.)

Many dealers will want to incorporate the ITC into a whole-house system, but you really can’t. If the doorbell rings, you can’t get a picture of the visitor in a PIP on the screen.

There really is very little tweaking that integrators can do on their own.

Then again, that’s the beauty of the system, which can solve so many problems for integrators: dealing with dozens of different vendors, even getting access to certain vendors, storing piles of components, building racks, dealing with discrete codes, crimping cables, and generally getting everything to work. The ITC just works. SE2 burns in every system for 36 hours before shipping it.

Many integrators will see the complete integration as a margin-killer. Cables, racks, fans, remotes, and programming can be a nice boost to the bottom line. But what dealers lose in accessory sales, they gain in higher-volume installations. What’s more, if the home theater electronics are only $20,000 total, the client can put more money into higher-end screens, furniture and acoustical panels—things that don’t tend to break.

In addition, dealers will save plenty in the service department. They won’t get calls because a cable disconnects from a component. They won’t get blamed when the Internet goes down. They won’t have to fret about a system overheating.

And here’s a good one: How hard is it to find good A/V installers? With the ITC, you won’t need so many of them to install and troubleshoot a system.

If there is a problem with a system, SE2 can tap in remotely, diagnose the problem and fix it. If they can’t fix it, now that’s a problem. The company voids a lot of warranties with the ITC. Pyle says SE2 itself warranties the system for five years.

So what if SE2 goes out of business? That’s a whole lot worse than if the manufacturer of your broken A/V receiver goes away. Just buy a new receiver. Putting so much faith into a non self-serviceable system could frighten more than a few integrators.

Bottom line: If I were an integrator, I’d sleep a whole lot better the night before the Superbowl if my customers had integrated home theaters where little can go wrong.