Contrary to popular belief in the home-technology channel, the business of making money on equipment is not dead. That is one of the messages conveyed by a panel of industry peers at the CE Pro Summit in Atlanta this week.

Dave Pedigo, vice president of emerging technologies at CEDIA, touted HDR and immersive audio as potential boons for integrators.

“It is myth that the business model based on equipment margin is going away,” he said emphatically, citing CEDIA data that show dealers earned 56 percent of their revenue from equipment in 2015, up from 50 percent in 2012.

Pedigo joined fellow panelists Bryan Gorog of BCG Concepts, Patrick Hagerman of cyberMANOR, and Terence Murray of AudioVisions on a panel at the summit moderated by David Rodarte of Changing Velocity. The overall sentiment of the group was extreme bullishness.

“HDR or enhance color space is the most visceral experience I have ever had watching TV. It was lifelike,” commented Pedigo.

He noted that HDR, not 4K, will be the driver for consumers to buy more TVs, primarily because 4K is not really noticeable to the untrained eye unless the viewer is sitting really close to the screen, while HDR is noticeable wherever you sit.

“I am incredibly bullish that dealers will be able to sell HDR TVs at higher price points going forward,” Pedigo says.

Gorog chimed in, noting the Dolby Atmos and DTS:X immersive audio experiences “finally allow us to make money on interconnects and wiring again.”

DIY, DIFM and the Network

Meanwhile, Gorog spoke to the broad opportunity he gains from carrying “do it for me” low-margin products like Nest, Sonos and Ring.

“The margin is not great, but we layer margin-laden systems on top of those, telling customers it will alleviate the ‘app soup’ from those products. Some buy, some don’t,” he says.

Network security was also a topic on the agenda. Pedigo says the recent DDoS hack was “just a dry run” for a bigger attack: “The securing of the network will be a significant selling point for dealers.”

Murray noted that AudioVisions “leads and ends all its sales with the network.”

Gorog was quick to point out that it doesn’t matter how secure an integrator makes the network if the default credentials are not reset to strong passwords. He uses LastPass, a free network management system to create, manage and change all his clients’ passwords on a regular basis. Access to the files can easily be cut off if an employee leaves his company.

Ashton Kutcher, Mila Kunis & Voice Control

Because CyberMANOR is based in Silicon Valley, the company works closely with local high-tech vendors and fairly tech-savvy clientele. That is one reason Amazon chose to work with CyberMANOR to deploy Echo in large celebrity homes on a beta-test basis. One of the homes belongs to Ashton Kutcher and Mila Kunis.

“Voice control was never designed to control a 10,000-square-foot home,” says Hagerman. “There is still lots of work to do to get voice control to work well in a big house.”

Hagerman says Alexa is a great one-room solution but down the road will require things like invisible microphones, for example, so you don’t have to place boxes everywhere in the house. Other issues persist with multiple commands and multiple users.

Having said that, Hagerman is still very bullish on voice control.

“We get to ride the coattails of some very big marketing budgets bringing awareness to home automation,” he says. “Echo is an enabling technology that gets us into the home. We have a conversation with the client about how we need to make a fair profit for the work we do and since the equipment does not have margin, we need to make that up in labor.”

He noted that Kunis was initially a naysayer about having Alexa in the home, while Kutcher was gung-ho. In the end, CyberMANOR ended up controlling 130 Lutron light switches in the home with Amazon Echo.

NEXT: Google Home, Assistant, Nest and Cast Present One Unified Smart Home Ecosystem

But Echo is not alone in the space any longer. Pedigo says the voice-control market is going to get “very congested” with the $129 Google Home now shipping, plus Josh.ai at the high end.

“I expect Apple to very soon follow with its own voice control solution. There is going to be lots of consumer confusion. It is going to come down to which of the big three technology companies you and your clients trust: Apple, Amazon or Google … and I don't know why you would trust Google,” he deadpanned. 

The biggest problem dealers might face from voice control is setting expectations for the technology with clients, according to Hagerman: “It is not just a plug-it-in-and-it-works thing,” he comments.

CyberMANOR layers all its support into four categories: network, subsystems, control and then interface. Hagerman explains, “All of those better work perfectly before you get to the user interface level.”

Pedigo says integrators need to make sure voice control is offered as a complementary product to other UI options, not as the sole control interface.

Murray agrees, asking rhetorically: “Who has sworn at Siri? I know I have. The same thing is going to happen with Alexa when it does not enable the command.”

Gorog says the key is that Echo is “still an app to app” communication, which can be problematic. “We go to our existing clients with Alexa and tell them that it is a $200 device, but it is going to cost them $600 for us to come in and tailor it to their home,” he says.

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