Video Surveillance Trends for 2012

The video surveillance industry has changed dramatically since IMS Research published its first report on the market in 2003. Over the years, the team of market analysts have expanded our video surveillance research to cover every aspect of the market, from network camera trackers through to dedicated reports on video analytics, storage, VSaaS (Video Surveillance as a Service) and PSIM (Physical Security Information Management).

The following predictions for 2012 serve to provide some guidance on the key trends and opportunities in each of these areas. IMS hopes you find them useful in planning for the year ahead. IMS top 10 predictions are:

• 1) Refocusing on Image Quality in 2012
• 2) Focus to Shift from the BRICs to the CIVETS?
• 3) HD over Coax-What Will Happen in 2012?
• 4) Increased Processor Power to Push Analytics to the Edge
• 5) M&A in 2012: Video Companies Under Surveillance
• 6) Looking Up-Where is Next for Cloud Base Video Surveillance?
• 7) The Turning Point for Spinning Disk?
• 8) It's VMS, but not as we know it
• 9) Beyond H.264
• 10) Video Surveillance to Augment the Internet of Things in China

1) Refocusing on Image Quality in 2012

HD and megapixel resolution security cameras have been "flavour of the month" in the video surveillance industry over the last few years. In fact, IMS Research forecasts that by 2015, more than 70% of all network camera shipments will be megapixel resolution. Furthermore, there is a general consensus amongst the industry that HD resolution is "enough" resolution for most security applications.

In spite of this, over the last twelve months, manufacturers have continued to push for greater numbers of megapixels. Arecont Vision and Avigilon both have 20 megapixel cameras in their product portfolios, Dallmeier released a 200 megapixel camera and ipConfigure upped the ante with the launch of the world's first security focused gigapixel (technically a 2 gigapixel) wide area surveillance camera.

This trend plays to the common misconception that more megapixels/more resolution equates to better image quality. However, video quality is dependent on factors other than the number of megapixels on the sensor, such as the lens and image processing.

So, will manufacturers continue the trend to push higher numbers of megapixel/gigapixels in 2012?

Whilst some manufacturers are unlikely to desist from releasing higher megapixel cameras, for example Dallmeier have plans to up their 200 megapixel camera to 600 megapixels, IMS Research believes that for the vast majority of manufacturers, there will be a renewed focus on image quality in 2012.

This all stems back to the issue of requirement. For most general purpose video surveillance applications, there is a limit to the amount of image detail required; typically the ability to distinguish facial features and clearly identify a license plate is sufficient. With the exception of wide area surveillance (e.g. borders, stadia, etc.) the utility of higher than HD resolution is often negligible. To date, the market opportunity for "high" megapixel cameras remains relatively niche.

With an ever increasing number of HD resolution security cameras being releasing on the market, manufacturers will need to further develop their points of differentiation/USPs. Likely advancements will be in well-established areas of need, such as low light capability and wide dynamic range. However, we will also see increasing adoption of P-Iris lens technology and advances in live video enhancement.

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2) Focus to Shift from the BRICs to the CIVETS?

Given that the Eurozone crisis, which has yet to find a resolution, looks to potentially dampen global economic growth in 2012, where will video surveillance suppliers find opportunities for growth in the coming year?

Over the last few years, the BRICs (Brazil, Russia, India and China) have been the countries of choice for video surveillance vendors seeking new growth opportunities. Unlike the more developed video surveillance equipment markets in EMEA and North America, the BRICs were far less impacted by the recent economic downturn. IMS Research estimates that the total video surveillance equipment market in the BRICs was worth over $2.5 billion in 2010. With a growth rate exceeding 20% for the next two years, the BRICs will continue to offer video surveillance vendors solid growth opportunities as the more established and mature video surveillance markets feel the impact from a second potential downturn.

Whilst the BRICs have and continue to offer opportunities for growth, many of the leading market players have already established footprints in these countries, diminishing any potential for first mover advantage.

So beyond the BRICs, where should companies seek out new growth opportunities? The CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) are being touted as the next set of tiger economies due to their rapidly industrializing economies. The indicators appear promising as the current long term GDP rate for the CIVETS is in line with that for the BRICs.

In terms of the current spend on video surveillance equipment the CIVETS are a minnow when compared with the BRICs. However, in the medium to long term, as infrastructure development and social mobility increases, the CIVETS will provide a strong opportunity for video surveillance vendors to grow. From a broad economic perspective, political instability and terrorism are current issues that will deter FDI (Foreign Direct Investment) in to some of the CIVETS. However, whilst this may serve as deterrent for growth in many industries, the security industry has historically benefited from instability and the threat of terrorism.

In terms of video surveillance market size, the CIVETS will not overtake the BRICs for many years, if at all; however, IMS Research believes that manufacturers will begin to explore the long term growth potential of the CIVETS in 2012.

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3) HD over Coax - What Will Happen in 2012?

In last year's "Trends for 2011" paper, we wrote a short article ("HDcctv to join the fray in 2011") which referred specifically to the introduction of HDcctv Alliance conformant products into the video surveillance market. The article concluded that HDcctv Alliance conformant products would not impact the adoption of network video surveillance equipment in the short term; however, we did note that there was long term potential for this new transmission technology.

A year has passed since this article and reviewing the landscape shows that this assertion was generally accurate. Whilst HDcctv Alliance conformant products have continued to gain presence and share of mind, the first full year of sales has been muted.

What has happened is that this category of products has expanded. In addition to HDcctv Alliance conformant products, HD-SDI and Security Link over Coax (SLOC) products (marketed by Sony as IP over Coax) are also available to the market for the transmission of high definition images over existing (or new) analogue infrastructure. Readers should note that there is a key difference between HDcctv Alliance/HD-SDI products and SLOC products in terms of transmission. IMS Research refers to all of these different types of products as HD over Coax equipment.

A large number of manufacturers have been displaying HD-SDI (as opposed to HDcctv Alliance conformant) concept and production cameras at trade shows throughout 2011. At CPSE 2011 a high proportion of video surveillance manufacturers exhibited some form of HD-SDI camera.

Looking to the future, the concept and market potential for HD over Coax is fundamentally sound. There is a large amount of analogue video surveillance equipment (and infrastructure) currently in existence and there it a strong demand for high definition video. That being said, there has been relatively little market demand for HD over Coax equipment in 2011, with issues related to storage, price, transmission range, education and compatibility, all factors that have limited adoption.

So, what are the three key things that need to happen next year to give HD over Coax (focusing on HD-SDI only) equipment a platform for growth?

• 1. Standardisation

For H over Coax to penetrate the existing analogue market, multi-vendor/brand compatibility is a must. Currently, with the exception of HDcctv Alliance conformant equipment, there is little standardization amongst HD-SDI video surveillance equipment.

• 2. Storage cost

HD-SDI cameras transmit uncompressed HD video which can lead to high storage requirements and cost. For HD-SDI to breach the mainstream analogue purchasing market, the price of storage needs to fall. The cost of HDDs (Hard Disk Drives), especially given the current situation in Thailand, impacts storage costs, as does the cost for hardware compression. The supply of HD over Coax compression ICs is effectively an oligopoly, as the market is perceived as niche and does not yet warrant other manufacturers entering the fray.

• 3. Market education

Manufacturers need to engage the correct market segments and promote HD over Coax products as a potential alternative to analogue or network video surveillance solutions.

So what are our expectations for 2012?

IMS Research predicts that manufacturers will continue to push HD over Coax equipment to the end-user, increasing availability and choice. With the backing from large vendors, such as Sony and Samsung Techwin, it is increasingly likely that a number of other large video surveillance brands will begin to introduce some form of HD over Coax products into their portfolios in 2012.

As with last year's predictions, we don't believe that 2012 will herald an explosion in demand for HD over Coax equipment. However, IMS Research forecasts that the HD over Coax category will still see strong growth, with the market size nearly doubling, as increasing numbers of manufactures begin to push this technology forward.

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4) Increased Processor Power Will Push Analytics to the Edge

Video content analysis (VCA) software can be run on standard off-the-shelf computers or embedded in video surveillance devices such as network cameras and encoders. In server-based solutions, the analysis is usually done centrally with the full video stream sent across the network. In embedded solutions, the VCA software is loaded on a digital signal processor (DSP) or embedded processor which is physically installed in the video surveillance device at the time of manufacture. In some cases, the software is up-loaded directly into the video surveillance device as a plug-in, whilst the device is in the field. Embedded solutions are often referred to as "analytics at the edge" as they have the ability to analyze the video before sending it across the network.

Server-based solutions offer more processing power than can be provided at the edge. For this reason, processor intensive applications, like face recognition, are normally server-based, whilst edge-based solutions are restricted to simpler applications, such as people counting and tripwire. Typically, the vast majority of the processing capability of the main processor is needed for system control and image processing tasks, leaving limited resource for VCA. Whilst it is possible to add a dedicated analytics processor, this increases the bill of materials and can make the price of the device uncompetitive. However, IMS Research predicts that in the coming years the types of applications that can be performed at the edge on the device's main processor will increase. This will mainly be driven by the availability of more powerful processors and partly by the refinement of VCA applications to make them less processor intensive.

As powerful processors at affordable price points become available to video surveillance manufacturers, they will increasingly add VCA to their devices. Basic analytics will become standard features and more advanced "paid for" analytics will be performed at the edge. Over time, an increasing variety of analytics will be added as standard features, at no extra cost to the customer. Moreover, more powerful processors will enable multiple VCA algorithms to be performed at the same time, for example loitering and object tracking to improve the detection capabilities. Another possibility is cross camera tracking, where one camera hands-over to another to follow a person as they move through a building.

If Moore's Law continues to hold then the power of processors will continue to increase quickly. Moreover, VCA is increasingly being used outside of the security industry, such as driver assistance cameras in cars and interactive gaming console peripherals (e.g. Microsoft's Kinect). Some of these new markets for VCA offer high volume potential, which is attracting the attention of the chip makers. In the coming years it is likely that these companies will introduce powerful processors that are optimized for VCA applications. For the security industry, this will inevitably mean more analytics at the edge.

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5) M&A in 2012: Video Companies Under Surveillance

Despite the economic turmoil, merger and acquisition activity in the security industry has continued over the last couple of years. However, video surveillance acquisitions have not been at the forefront of these deals.

The remote monitoring market has seen sizable deals, such as the acquisition of Broadview Security by Tyco International in 2010. The deal was worth around $1.9 billion. In the same year, Protection One was acquired by private equity firm GTCR and Monitronics was acquired by Ascent Media Corp in a deal valued at $1.2 billion. The acquired companies were three of the five largest monitoring companies in the North American market in 2010.

Similarly, in the systems integration market; large, high profile M&A activity has occurred. The recent acquisition of Niscayah by Stanley Black & Decker has combined two of the top ten providers to the US market (in revenue terms). According to a press release from Stanley, the deal was worth $1.2 billion and was completed in September 2011. Another notable non-video surveillance acquisition is SAFRAN's acquisition of L-1 Identity Solutions ($1.09 billion value).

However, the video surveillance market has not really seen deals of a similar magnitude. Generally, M&A activity has been on a much smaller scale. Most recently, March Networks announced that it had been acquired by Infinova in a deal worth around $90 million. Other notable activity includes DVTel's acquisition of video analytics manufacturer ioimage in 2010 and mergers at Panasonic and Samsung to create unified video surveillance businesses.

The only recent exception is UTC Fire & Security's acquisition of GE Security in 2010. GE Security was a top ten supplier to the video surveillance market in 2009; however, it is doubtful whether the video surveillance business was the main driver in this acquisition with the fire business a key strength of the company's product portfolio. Consequently, you need to look back to 2007 for the last acquisition of a top ten video surveillance supplier primarily for its video surveillance equipment portfolio, Schneider Electric's purchase of Pelco.

A cursory glance at the numbers would suggest that the video surveillance industry is a prime candidate for M&A activity.

IMS Research's annual report on the global CCTV and video surveillance equipment market estimates that the market was worth over $9 billion in 2010. However, the top 15 video surveillance equipment suppliers only accounted for around 40% of all sales. In addition, the video surveillance industry has continued to enjoy robust growth despite the unfavourable economic climate. IMS Research forecasts that network video surveillance equipment sales will exceed 25% in 2012, despite uncertainty in the Eurozone.

Whilst IMS Research does not believe that the video surveillance industry will see a spate of billion dollar super deals in 2012, it is likely that a greater volume of medium-sized deals will complete in the next 12 months.

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6) Looking Up - Where Next For Cloud Based Video Surveillance?

At the end of 2010, IMS Research forecast the increased traction of cloud-based video surveillance, also known as Video Surveillance as a Service (VSaaS). The market certainly picked up in 2011, with notable sales growth at some of the vendors in this space. Overall, the market grew by around 20-30%. However, the market is still emerging, developing and evolving. IMS Research believes that there are a number of potential avenues for suppliers of VSaaS to explore in the coming year.

One application that could augment the functionality of VSaaS is the addition of cloud-based video content analysis. By running analytics in the cloud, users can take advantage of the large virtualized processing power available to them. This use of the cloud, named Infrastructure as a Service (IaaS), is common in other industries. Examples include the Apple's voice control software, Siri, which utilises IaaS to process complex voice commands and Amazon's Silk Internet browser that harnesses IaaS to accelerate page loading times. This application opens up the potential for a different type of business model for analytics vendors. Rather than charging on a per channel basis, vendors can charge for services aligned to analytics, such as report generation. For example, a retailer could pay a given amount each year to receive monthly reports on store metrics, such as the daily customer count, average queue lengths, etc.

A majority of the security cameras used in small and medium sized enterprises are solely used for security reasons. However, some of the more technology savvy users are beginning to leverage and monetize video from their existing systems. Rather than simply leaving video dormant on a hard disk drive, business owners could post or stream video to the Internet, allowing customers to see real-time footage of the place they intend to visit. Video could be integrated with Groupon, TripAdvisor, Yelp or even Google Street View. Prior investment in security equipment could be transformed from an expense to a revenue generating tool; for example, by analyzing the effects of a Groupon or Yelp promotion. IMS Research estimates nearly 65% of the DVRs sold in 2011 were Ethernet enabled, demonstrating the potential market for video to be distributed to the cloud and used for non-security related solutions.

Another potential application for VSaaS is video analysis by people. Video from security cameras can be distributed to the cloud for monitoring purposes. This monitoring process could be privately conducted, where operators (either trained or publicly crowd-sourced) view video to identify shoplifters or ensure the correct practices are taking place in factories, for example. This type of monitoring can be conducted anywhere in the world making the solution potentially more accurate and cost-effective than some software-based analytics systems. With regards to crowd-sourced monitoring, this involves the general public viewing video from public spaces. Individuals are tasked with identifying unusual or illegal behaviour. Whilst there are privacy issues with this application in some countries, a small number of vendors have started to offer solutions. One example is Internet Eyes, a UK company, which offers an online monitoring solution that allows registered members to view live camera feeds from businesses, and notify them when a crime is observed.

Whichever of these applications for VSaaS takes-off, one thing is for certain; for VSaaS to continue to gain traction, solution providers need to look at new applications for video surveillance. VSaaS is not an inexpensive option, so providing solutions that offer "real" benefits (e.g. monetizing otherwise unused video) will fuel growth for this emerging market.

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7) The Turning Point for Spinning Disks?

The average price of hard disk drives (HDDs) has been falling for over two decades. Now faced with the consequences of the recent flooding in Thailand, the video surveillance storage industry could well see the effects of a change to this trend.

Many of the world's largest manufacturers of HDDs, and suppliers of components to the HDD industry, have production facilities in Thailand. For example, nearly 60% of Western Digital's production takes place in Thailand, while Toshiba, the fourth biggest hard drive producer, makes about half of its HDDs in the country. The reported extent of the disruption to HDD production differs from vendor to vendor. Official statements of predicted price increases vary from 0 to 180%. While the credibility of the outliers in this range is questionable, it is clear that some effect of HDD production shortage will be felt within the video surveillance market. A deciding factor of the scale of this effect will be the size and type of the storage vendors in the market.

Smaller storage companies are likely to be hardest hit. This group will get last pick of HDD stock meaning that prices will be at their highest and supply at its shortest. Vendors who have relied exclusively on HDDs from Thailand will struggle to find supply from a different source while vendors using a different source of HDD will struggle to keep it secured. These smaller storage vendors may find it difficult to maintain production and are likely to pass on the increased cost of sourcing HDDs to their customers through higher storage system prices.

The effects on medium sized vendors will be mixed. Vendors who have been quick to secure HDD supply lines may only feel an impact should their HDD supplier choose to increase price. Such an increase of price could, in the short term, be absorbed by the storage vendor; although this would be dependent on the scale of price increase. A likely outcome if HDD prices do significantly increase is that the historical trend of falling prices for storage systems will level out, resulting in a plateauing of price per Terabyte (TB) in the industry.

The behemoths of the storage market will most likely not be significantly affected; in fact, such vendors may stand to gain from the disruption to HDD supply. This is because HDD supply for the larger vendors will be assured. The buying power of such vendors is unparalleled which, when coupled with a global supply chain, results in a more secure supply of HDDs. Because such vendors have the greatest shelter from any price increase for HDDs, the price trend per TB of their storage systems will most likely remain relatively stable. This could see larger vendors taking market share from smaller and mid-size vendors, who are forced to increase their prices.

The net result for 2012 is likely to be a softening to the trend of falling storage prices. If disruption to HDD manufacturing facilities continues for longer than anticipated the stated affects will become more pronounced, to the point that there may be a slight increase in average storage prices for a short period. Once HDD production recovers in Thailand, or production in alternative manufacturing sites is increased, the trend towards lower HDD prices and the resulting lower price per TB of storage systems will continue. However, for the moment it appears that the trend of lower prices for spinning disks has been temporarily paused.

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8) It's VMS, But Not as We Know It

IMS Research predicts that 2012 will see a raft of innovation in the VMS industry, as vendors attempt to stave off the threat of commoditisation.

Examining the current market structure shows that whilst the upper tier of the market is occupied by a combination of the large, well established VMS brands and VMS offered by security solution providers; the middle and lower tiers are a "free-for-all".

For the more established VMS vendors to continue to enjoy the historic high growth rates they need to accomplish two key things: (1) maintain and increase presence in the upper market tier and (2) grow in the middle and lower tiers of the market. The enabler to satisfying both targets is innovation.

The key selling feature of many VMS systems has been "openness", and whilst the ability to integrate to a broad range of video surveillance brands is still desirable, this has become more of a basic expectation. IMS Research believes that VMS vendors will work on the following innovations in the next twelve months:

User Interface - Whilst different VMS solutions do contain unique features, in general the user interfaces are fairly similar. Manufacturers will seek to develop simpler and more intuitive user interfaces in the coming year.

Mobile Applications - Applications for mobile platforms, such as iOS and Android, will be the front of many VMS manufacturers' arsenal in the coming year. The market for mobile video surveillance applications is still relatively immature, this is true for both the technology and the market demand. The functionality of the current generation of applications is generally confined within the boundaries of remote video viewing. Vendors will spend 2012 improving the utility of these applications. Simple concepts, such as leveraging location services to either show video from the camera closest to the mobile device or to arrange video streams from multiple cameras by proximity to the mobile device (e.g. a guard on patrol), would provide enhanced user experience.

Situational Awareness - The integration between access control and video surveillance systems has been a well trodden path in the last few years and this trend will persist through 2012. However, VMS vendors will look to further develop their offerings from pure-play VMS platforms to security management platforms. Looking at the PSIM (Physical Security Information Management) software market, there is a definite and tangible demand for situational awareness (a correlation of multiple sensor inputs to generate an actionable report and response) platforms in specific industry segments. However, whilst the advantages of PSIM solutions are desirable, the cost of implementing these solutions is high, priced far outside the reach of many end-users. VMS vendors have already sought to bridge the gap between supply and demand for situational awareness by implementing "PSIM-like" features in their platforms (e.g. Enhanced visualisation functionality with Google or Esri maps). IMS Research believes that 2012 will see an acceleration of this trend.

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9) Beyond H.264

H.264 has become the de-facto compression technology for video surveillance systems. However, a combination of factors in 2012 could lead to advancements in video surveillance compression. The three factors are:

• 1. The flooding in Thailand

As stated in the "2012 - The Turning Points for Spinning Disk", the flooding in Thailand has significantly impacted the price and supply of hard disk drives (HDD). Whilst steps are underway to restore production, the current situation will likely persist well into 2012.

• 2. The economic climate

With no immediate resolution to the Eurozone crisis on the horizon, it remains highly likely that the global economic climate will remain turbulent through 2012. Whilst the video surveillance market is forecast to continue to grow during 2012, IMS Research expects that customers will increasingly look for greater cost efficiencies. Video surveillance storage is one area that may be examined. However, due to legislation or other governing factors, it may not be viable for users to simply reduce the volume and/or quality of video that they record.

• 3. The growth of HD and megapixel network cameras

The market for HD and megapixel network cameras is forecast to continue to grow strongly, despite adverse economic conditions. In 2012, shipments are forecasts to increase by more than 70%, compared with the previous year. Whilst the accelerated proliferation of high resolution security cameras provides end-users with benefits, such as greater clarity when viewing live video, the storage costs can be significant due to the larger file sizes.

The increasing amount of high definition video, coupled with decreasing (albeit short term) availability of storage and a greater demand for cost efficiencies, could prove to be a driving force for the industry to transition to more efficient video compression codecs.

Some of the potential compression formats include:

H.264 SVC - Whilst there are many different variants of H.264 available in the market, the Scalable Video Coding (SVC) variety, despite being well established in other industries, is still not commonplace in the video surveillance industry. The key benefits of the SVC variant include a reduction in bandwidth (leading to a reduction in storage requirement) and dynamically resizable video.

WebM - An open and royalty free video compression format based upon VP8. It is debatable whether WebM is more efficient or performs better than H.264. However, WebM is optimized for HTML5 video, which could be a key consideration in VSaaS applications. The current stumbling block for its use in video surveillance is that WebM currently does not have an associated real-time streaming protocol.

High Efficiency Video Coding (HEVC) - HVEC is still under development and is seen to be the evolution of H.264, providing increased compression efficiency. Ratification of this new standard is not scheduled until late 2012/early 2013.

So what will happen in 2012? It would be fair to say the video surveillance industry is not on the cutting edge of technology advancements in video compression. MPEG4, Wavelet and JPEG2000 are all still widely used and H.264 is sometimes still referred to as "new". As H.264 SVC is essentially an extension of H.264, it is the most viable alternative in the short-term and we expect more video surveillance products with support for H.264 SVC to be launched in 2012. Longer term, HEVC is perhaps the most likely successor to H.264, but that will depend on just how much better it performs and its suitability for video surveillance applications,

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10) Video Surveillance to Augment the Internet of Things in China

One trend which is unlikely to have a big impact on the video surveillance market in 2012 but will receive more publicity and have a longer term impact is the Internet of Things (IOT).

IOT is a concept in which individual objects are electronically identified and categorized virtually in an Internet-like structure. To be identified, such objects need to contain a tag such as an RFID tag. Once categorized, supply could more easily meet demand, waste would be reduced and it would be possible to find objects when they become lost.

IOT is receiving a lot of attention in China. The Chinese central government is strategically focusing on the development of seven emerging industries. These industries are expected to enjoy preferential policy treatment in a number of respects. New Generation of Information Technology (NGIT) is one of these industries. And IOT is one of the most important parts of NGIT.

China has installed millions of video surveillance cameras over the past 10 years and these cameras could provide a source of information to verify the categorization of objects for IOT. IOT includes three layers: the perception layer, the network layer, and the application layer. Video surveillance cameras would provide a source of information for the perception layer.

It is questionable whether IOT will drive new investment into security cameras. However, the expected benefits of IOT will help justify public expenditure on video surveillance equipment. IOT will be an interesting subject for those in video surveillance to monitor in future years.

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