From Hardware to Services: the Future of the Connected Home

by Elizabeth Parks | Sep. 28, 2022

The consumer electronics industry has migrated from producing and distributing hardware to distributing OTT content, providing intelligent home function and control services, programming, and licensing software, and leveraging advertising models and in app commerce models to connect consumers with desired products and services.

Smart TVs and smart speakers are now mainstream with 60% and 53% of households now having at least one respectively. Adoption smart speakers with personal assistants such as the Amazon Echo and Google Home has skyrocketed since 2017. Smart home device adoption has increased at a slow and steady pace and now 37% of US Internet households have a smart home device.

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Hardware as a Service

An increasing number of hardware devices are tied to additional subscription services. These new device types range from smart speakers to connected exercise equipment to streaming media players. Smart speaker growth is tied to increases in digital media subscriptions, in particular increasing subscription and use of streaming media services, podcasts, and audiobooks.

In the exercise world, companies such as Flywheel and Peloton pioneer a new business model combining exercise equipment ownership and subscription to online fitness classes. Parks Associates consumer surveys reveal that 11% of US broadband households own at least one piece of connected exercise equipment—such as a treadmill, elliptical, rowing machine, exercise bike, or bike trainer—with built-in app support.

Streaming media player makers have launched new device functionality, allowing users to sign up for over-the-top video services directly on the player itself via various Channels. The service typically splits a percentage of the recurring revenue with the device maker, and the device maker showcases the service in the streaming media player’s UX and helps to drive new sign-ups and subscriptions.

The primary point of home entertainment consumption has moved from service provider set-top boxes to consumer-owned streaming devices, and smart TVs are now consumers’ preferred streaming device. TV companies are now aware that the smart TV has now become a treasure trove of data – data that can be leveraged to generate an additional long-term revenue stream via advertising and/or audience measurement. This dynamic has made the one-time short-term transactional revenue generation attached to the sale of each smart TV, now only one component of the total potential smart TV revenue model.

Hardware companies continue to experiment with new business models that can help extend new services, allow for personalization, new revenue generating opportunities and ultimately placing more value on future partnerships.  

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More and More Devices Driving Opportunity for Networked Services

The adoption of smart home, entertainment, energy and connected health devices also puts an increasing burden on home networks. With this increase in connected devices, home networks are open to greater vulnerability. As a result, new network monitoring opportunities are emerging.

Network monitoring companies focus on improving network performance and ensuring that devices remain connected and secure, increasing consumer confidence about purchasing and using smart home devices.

Network monitoring solutions providers are entering the space to provide support on behalf of various partners, with targeted services aimed at business models. Many solution providers target builders, integrators, and property managers who may want to implement smart home devices to drive up appeal of their services but are restricted by a lack of technical capabilities to support their customer with smart home products. Many service providers – both new and experienced – do not have the technical expertise to efficiently support their customers, given the increasing complexity of broadband households.

Services from network monitoring providers are enabled by placing a hardware agent on the consumer’s router, which is used to provide visibility to the home network. Using this agent, companies can provide some level network monitoring to minimize connectivity and security breaches and visibility to make troubleshooting device and network issues more efficient.    

This is an excerpt from Parks Associates vast library of research and insights and from research presented at our events. Thank you for sharing any feedback and your support of our research. We welcome all comments and feedback! Our team is onsite at CEDIA in Dallas this week if you want to meet!

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