Recurring Service Revenue To Become Larger Portion of Smart Home Market, Says ABI

Smart home device sales will nearly double over the next 12 months, as the groundwork and service offerings developed over the past few years lead to wider adoption, said an ABI Research report Wednesday. Hardware sales will continue to dominate smart home revenue over the next five years, but ABI said a transition to recurring service revenue “is well underway.” Recurring service revenue is projected to be close to a quarter of total smart home revenue by 2020, driven by providers including ADT, AT&T, Comcast, Deutsche Telekom, Lowes, Staples and Vivint, ABI said. In addition, a new generation of do-it-yourself smart home devices and systems from startups and from tech giants Google and Samsung is driving recurring revenue through data collection and storage, it said. Following the home security market model, managed smart home system pricing is set up to win new consumers with reduced device and equipment sales in return for long-term recurring revenue, analyst Jonathan Collins said. Security providers lead in the deployment of smart home systems now, but by 2020, cable companies, telcos and retailers will share similar subscriber bases, he said. How smoothly those providers can steer customers away from DIY installations to managed system subscription services will determine much of the growth in recurring revenue. “Smart home service providers are increasingly bringing the most popular DIY devices, such as the Nest thermostat, into their managed service offerings,” Collins said. But he said that consumers will increasingly expect that integration to be available “in an ad-hoc nature.”