The Resurgence of the Residential AV Market

As the globe wrestles with the idea of work-from-home and many builders and homeowners look for ways to differentiate across a saturated housing market, the residential AV market has seen a resurgence. “The market is ripe and there’s been quite a lot of driving factors that have forced everybody to start to see how important home automation and smart home is,” says Crestron’s Michael Short. Watch below as he joins Pro AV Today with host Ben Thomas to discuss the opportunities and challenges that this residential resurgence has provided.

*transcript is auto generated*

BT: Hey everybody, welcome back to pro AV Today. I am your host, Ben Thomas, and today we’re talking about the residential market. It’s something really that gets a lot of people on edge when we start to talk about the residential market. But the reality is the market now is as ripe as it’s ever been for innovation, expansion and sales, especially as you look in a post-covid world where people not only are looking for home automation, but they’re looking for integrated experiences for home offices and home theaters and energy automation, things like that. And it’s such a unique world that’s expanding rapidly that I wanted to get a voice onto the show to really talk about that. And there are a couple of people that jumped out, but the number one person that I wanted to get on, we were able to bring on, and that’s Michael short from crestron. Michael, Thank you so much for hopping on for me today.

MS: No, Thanks for having me. The number one person. I love it. The number one person.

BT: And here’s why. Here’s why I say that, Michael. People have whatever opinion they want of crestron. But the reality is, is that you guys are key, are probably the number one key innovator in the residential market right now, especially as you guys start to look at things like integrating home automation and energy automation and really the whole home experience. We’ll start there. Right talk to me a little bit about how especially on the B2B and enterprise side, the residential market really is rich. It’s full of opportunity. Talk a little bit about that from a crestron perspective.

MS: So it’s interesting and it’s a really good point right now. It is the market is ripe and there’s been quite a lot of driving factors that have forced everybody to start to see how important home automation and smart home is. Interestingly, for crestron, we’ve been doing home automation for 50 years from the very start of crestron days, home and smart home was the initial building blocks really of the company. When you look at some of the shading aspects and the founder trying to control shades in his garage as he was innovating 50 years ago, which is George feldstein, we’ve always sort of had a home automation portion. And as the company has grown, the commercial side has grown and resi has sort of always flirted between being number one or number two, and now we’re seeing them coming closer and closer together. So we’ve always seen residential as an essential market for us. But the change that we’ve really seen recently is historically crestron has been all about custom and it was the luxury market and it was all about hitting that super, super looks. It looks sort of audience. But because, as you mentioned, smart home is becoming very, very essential in the current times. There’s a few things that have sort of really driven that factor. And I think the emergence of diy, you know, it basically made everyone understand what smart home was. Now whether certain things can be classed as smart home or not, you know, depending on the product doesn’t really matter at that point. But it’s that awareness that it’s driven and the affordability that’s that sort of DIY products has meant that the market and the consumer market has grown, and that’s led to people expecting that homes need to be smart now. And at what level? That depends whether you go down the DIY or you come to someone like crestron and you build that professional market because work from home, you need a smart home office, you want to differentiate your property. So if you’re an architect or a builder or a developer, what’s going to make you stand out is different properties. So there are so many things going on right now that really mean that for our market, for manufacturers, for integrators, for the professionals, residential is key. It’s growing and growing and growing. And it’s going to continue to grow because there’s no turning back. Now, that expectation in the market, is there.

BT: You know, Michael, you talked a little bit about, I think, one of the most interesting kind of decision makers or opportunities in the space, and that is new home builds or developer builds or really used to be a differentiator for maybe somebody down here in Dallas that’s looking to buy a new home. Hey, this house is energy efficient. It’s got smart home integrations. It’s got all this built in that now is a luxury, right? That is something that home builders and organizations are putting in as features. Right especially as you start to look at some of the things like lumber prices going up and components being obviously much harder to get. You know, those are things now that are being used as attraction pieces.  These these are projects now that the end users are looking for, right. Whether it’s in the DIY world or the new home build or even the retrofit. Right talk about a little bit how some of those, whether it’s the developer or the end user demands, have changed a little bit. What are some of the things that you’re seeing specifically from those buyers and end user markets?

MS: That’s kind of informing the way that you guys are integrating into the new resi space? Sure I think if I just go back one second to something you said there about the developers and, you know, the properties are now demanding these sort of experience. I think as you look at the current economic climate and you look that recession might be looming and we know that interest and mortgages and everything globally is becoming harder to navigate and to get the developer market. What we’ve historically seen through our sales process is that this is actually a time when the professional, smart home market grows exponentially because the new build. You can’t when demand is high, you can build a block of apartments, a block of units, and you can sell them. You don’t need to differentiate yourself because there is so much demand out there that get it up and sell it as demand drops and as recession can actually hit. Everyone has to differentiate their properties and what can you do to make things different? You can have smart home and automation, energy savings, health and wellness aspects to the home. All these things really become a driver for that market. But when you go back to what you were asking there around, what are we seeing the demands now? Interestingly, this has been a progression over two, three, four years now. And the main thing really is the simplicity of user experience. When you look back all the way back to the iPhone and the developing of that operating system, everybody now expects an experience in their hands or in their homes. That is simple to use and learn for everybody in the home, whether it’s kids, whether it’s grandparents. It has to be easy for everybody to use and learn. So one of the things that we’ve hugely focused on over the last three years, when you look at from home operating system is the driver for that was it has to be a really simple and easy to use operating system for everybody in the home. And that user experience is so important and that’s what comes first. Now when we’re developing all of our products and solutions so that big driver, that user experience aspect and that’s been driven from everybody in the evolution of technology really through smartphones and at your fingertips that ease of experience. The other thing is really around design. When you look at the level that we play, all our products have to have a high end design to fit into these homes, but b, be quality and have extreme reliability. And you know, we’ll touch on it maybe later with regards to supply chain, but that is a big thing for us. That quality is really, really important. And the expectation of our clients, especially at the level that crestron work at, is that design and quality is key. So you’ve got user experience and you’ve got quality and design that really makes our products super, super reliable. And then an interesting one for us that is really, really important for smart home and for home automation is, is security. Now, the more devices that come online in your home, the more access points you have, the more opportunity to have your data potentially stripped away from you. So for us, security is really, really key. And we work in commercial projects that are with the American government. We have projects from the commercial side that are in the most secure places in the world, and we replicate that into our home. So security is really, really important. And I read something recently and I would love to hear your opinion potentially on this that smart TVs. OK, everyone, if you buy a TV now, it’s a smart TV which makes accessibility to things like Netflix, Disney Plus in every room easy because everyone now has access. We have a platform called DLM and it’s video distribution. It was revolutionary when we brought it out, and that essentially distributes video content from the rack to everywhere in the home. But now we’ve got smart TVs. So, you know, you have access to Netflix in every TV. You don’t need an Apple TV in the rack and to distribute. And it’s interesting to think about security, because when you look at smart TVS, they all scraping every inch of your viewing habits into their system and selling that data so that in the future, every single advert is being driven to you. The only way to stop giving that data away. To put it in the rack and distribute video. So there’s advances in technology and security, all these things that are driving these topics. But that type of thing is a perfect example whereby we’re all running ahead with certain aspects and actually we need to think about what the customer really might want in the future. And it could be protecting data and security. And they’re the types of things that for us are really forcing our decision making process from a product standpoint.

BT: I love that you brought that up because that’s a conversation that not a lot of people want to talk about. Right and specifically when I say that, referencing more of the smart the smart TV world, the Amazon, Alexa, the Google Home worlds, where really what drives those price points and what makes them affordable to most end users is the fact that they are selling you. Right? they’re selling your data. They’re picking up your habits. You look at Amazon, for example, they know how often you’re going in and out of your house, just if you’ve got your Amazon security system set up. And without getting too of the weeds here, what really the market has said is that if you can make it cheaper for us, we really don’t give a crap what you do with our information. And that sounds bad. But what you’re seeing, Michael, and I think you’re right, we’re the pendulum is swinging back a little bit more towards the security and privacy world, especially as people are just a little bit more freaked out about maybe their data leaking or the fact that I can use this and I could say that, you know, I want a new t-shirt and I’ll get ads for it 5 minutes later. But, you know, in my anecdotal opinion, it sounds like and it feels like the pendulum is swinging the opposite way. Right and and obviously, price point is the number one thing that really is driving kind of that what I call the open user experience versus the closed user experience. But that’s when we start talking about stuff like crestron, right? We start talking about whole home racks, we talk about whole home automation and really looping the user experience into it too. Is that the burden now of whether it’s the AV designer or even the diyer is that they have to build a system that’s designed for interoperability, privacy, security, whatever else they want to add to it. Right? whether it’s outdoor living, it’s all connected at this point. But one of the things that I always recommend and of market you’re going to fight this a little bit more than you do in most traditional markets. Is that so? Here in Dallas, we have a pretty big installer integrator partner called Star power. It’s much easier for me to go to Amazon and buy the five things that I need than it is to go pay a premium to use a company like star power. But the value is, Michael, and this is I’m going to kick this back to you. The value is the expertise, the integration, the design, the support, the electrical stability, things like that, the reliability. Talk a little bit about that, that balance that you see where people want to be able to do things on their own. But in a lot of cases, especially in larger homes, they really should be using an integrator. Talk about that divide a little bit.

MS: I think it’s a really, really great point. And I think we all should be supporting you. Look at our professional integrators and the entire professional AV market, we need to help consumers understand the value of professional. And we’re getting there and it will take some time. And that’s why I’m a big supporter of the DIY market opening up this small home world to everybody because it used to be just for those who either could afford it or had a builder or a friend or someone else. You had, you know, a smart home done, let’s say, for crestron. And it was passed on and said, hey, you should do this. Now, everybody’s understanding it. But talking about that pendulum, I do believe that pendulum is going to swing back soon enough where people are going to say that a smart home is something that is professionally installed. You have a boiler, you have a professional come in to fix your boiler, to service your boiler, to install your boiler. And this is exactly the same. It’s a very, very skilled technical thing. And it’s our job, it’s our installers job, it’s our partners jobs. We have to really continue to educate the market that a professionally installed smart home is a smart home DIY stuff that doesn’t work together. It’s great. And if you just want a doorbell, totally cool and it works fantastic and the products are amazing. But ultimately, to get the best out of your living experience, having that single ecosystem installed and service by professionals is key. But I do think that it’s, it’s everybody’s job to educate the market there because it was the rich and the famous who could afford it. And they could afford the kit they could afford. Service contracts. And then the other side, you’ve got the DIY. Now everything is slowly coming together and it’s, it’s, we’re going to find that perfect rhythm soon where people start to realize that a small home is a real small home is one that’s professionally installed. And on our side we feel that a real small home is that singular platform that looks after the whole home. And of course though, you do need interoperability with many products. And that’s a really, really important topic and something that we have to balance between working with certain products and certain solutions and not others. But we have to and we have to work with those products. But they should be worked with in a professional way, in my opinion, rather than just a single DIY product that can plug-in and it isn’t supported under the ecosystem.

BT: You know, Michael, I feel like we could do an entire spin off episode on that argument altogether. I feel like, you know, that conversation we just had that last 20 seconds, you’re going to build me $1,000 for that consultation. That’s that’s the end user skepticism of integrators right there. And I can’t pretend that it doesn’t exist even for my, my, my experience. Who a guy who can install all of that pretty much mostly himself but but still choose to go through an electrician most of the time because I don’t want to burn my own house down. But I say all the time on this show that this isn’t a paid show. It’s not a pay to play show. And to prove that, I’ve got to ask you about supply chain. If I don’t, I would be a bad show host. I won’t go crazy deep into it, but it’s a question that everybody is asking. Right and more specifically on the residential side, I don’t know that this is something that people talk about quite as much, but talk to me a little bit about some of the supply challenges, supply chain challenges that you guys are seeing. Kind of specifically on the residential side, is it as impactful as it is on the enterprise installation side or maybe even less just kind of tow that line for me?

MS: I think from our standpoint, it is as impactful. I think that the difficulty with the residential side is our dealer base and our professionals or a wide array of companies. Some are on the smaller side living project or projects. Some are huge dealers that would call themselves large companies. And for us, you know, the difficulty and the struggles that we’ve been seeing with our dealers is the fact that, you know, if you are a smaller dealer and it is very, very difficult to go projects or projects, and we are working as tirelessly as we can with all of our dealers to support them as and when we can. But we are seeing the supply chain problems. It’s been ongoing for a year, two years now, same as everybody else. And we were hit very, very hard with it, but we brought in a ton of different processes. We updated the way that we looked at ordering, the way that we delivered projects, the way that we work with our dealers to get them working ahead of the game. So order early to really try and get products to them in time. And we’re working with dealers day in, day out to understand what’s going on. How can we help? Where can we shuffle and work with you? And we’ve not been prioritizing dealers. You know, we have this question a lot with supply chain about, oh, if you’re a big dealer, you get product first. You know, we haven’t done that. It’s been very much every dealer is on the exact same weight. Now, interestingly, we are starting to see, you know, positive news on our side with supply chain. We’re starting to see those lead times coming down a little bit and we expect it to get better and better over time. But I suppose one thing that I will touch on and we’re not going to talk too deeply about supply chain because I think we’ve been all over the news this week with regards to the town halls we’re doing is I want to go back to that point I made around quality and crestron for all of our years has always focused on quality and unwavering quality in our products. And for us that has meant that we did not want to change the way that our products were built and lower that quality over this period of time, because our clients, they can’t if a remote breaks or they have 10 touch screens in their house and 8 fail. They cannot forgive question. You know, the client can’t. And then that ruins the reputation of the dealer, because not only is it our product, but the dealer recommended that product in their house. And as much as you know, we would love to have had quick fixes, taken different products, different parts, and just lowered our quality. We weren’t going to do that. And that for us has been something that we put the stake in the ground early doors and said we have to stick to the quality of our product. Our reputation is built on that and has been built on that. And to get your reputation back is very, very difficult. But look, that also doesn’t help dealers who right now need product to finish or start a job. So it’s been difficult and we have been very open and honest with our dealers. We’ve given them all the information that we’ve had to hand at the time through our suppliers. We’ve updated them whenever we have updates, but it has been a difficult period, one that we’re now seeing and coming out the other end of starting to come out, the other end of and hopefully as the months go by, we start to see those lead times come in a bit. But yeah, it’s been tough, it’s been tough. It’s been tough for every industry across the world.

BT: And the reality too is I think that I might get some heat for saying this, but I think it’s a little overblown. It’s there are always some types of challenges that we have as an industry, whether it’s whether it’s user base, whether it’s buyer base, whether it’s supply chain. There’s always something that we’re dealing with. And, you know, supply chain, frankly, is kind of the flavor of the month. I recognize that there’s impact and I recognize that it’s important. But, you know, I appreciate the transparency there because, look, it’s a question people are asking. But the reality is, is and you guys have seen this as a company of significant age. You know, the market continues to go up and to the right is what I like to say. Right if you look at it, there’s kind of some UPS and Downs, but we’re going up and to the right. So I appreciate the transparency there. And, you know, kind of on that optimistic and kind of future note, one of the things that I want to wrap with and kind of give you the floor here is crestron really doesn’t stop at the physical hardware side and software side anymore. You guys have actually made the jump into the we’ll call it the I guess the metaphysical world. I don’t know. Is that the right word for it? But talk to me a little bit about really kind of what’s next for crestron and including some of those metaverse and metaphysical type projects.

MS: Yeah so I’ll finish on the metaverse stuff because that’s actually it’s a really interesting project and something that would be finished to finish on, I think that. You know, for us, moving forwards software is becoming more and more important. We launched the crestron home operating system three years ago to basically take control of the user experience and our ability to push updates and constantly improve a platform versus maybe a custom system that has to have the professional dealer come back in to look at updates or what we did have a few years ago, which was ping, which was the basis of this OS. So all our future growth is going to be around being able to push software updates that add value week in, week out to the customer and to the Pro. So you look at the operating system bringing new features, new products, pushing these updates. So the user experience change is a bit like when you go from iOS to IOS, you get a new look and new feel, new things coming in the way you control your lighting. All these things can change and adapt and get better over time. That’s key. You have to be able to in today’s world, push updates, improve the platform without shipping physical, new products. And the same goes for PCs and Macs. They were physical products, but actually they’re platforms. And we push software updates to those platforms either by firmware or the cloud that add value and add value and add value. This for us is the key. The products that we launch need to be based on platforms that we can continue to update and improve over time that help both the consumer and the dealer. So that’s going to be key for us and you’ll see us pushing plenty of updates out there constantly to improve the way dealers can install and configure homes through to that consumer experience. So that’s our future. Yeah we’re going to continue to make amazing products, new keypads, new remotes will get better touch screens will innovate and we’ll grow. That’s like a lifeblood of what we do is innovation, but it is going to be based around platforms that can continually update and sort of share and grow with the consumer the way the market goes. But you mentioned the metaverse stuff. This is just a really fun project for us. We were approached a while back from a developer in Miami and he’s been on TV now. He’s been in the news, he’s been on NBC, and he’s building a beautiful, beautiful luxury home in Miami, a real life home, and it’s full of crestron. It’s a full, full crestron crestron home solution. Lights, shades, touch me. It’s not full, full home solution. But he’s replicating the exact house in the metaverse. And you purchase the metaverse house and you get the real world one for free. And the idea being that you’re able to work and play within both homes, you could throw a party in the metaverse and have the same party happening in your real world. Crestron home and be able to control the music in one and the other and have people join in the real world and in the metaverse. You could have Snoop Dogg DJing in the metaverse and it’s shown in the screen and the real world. But you’re all in the same house want in the real world and one in the metaverse. And it’s all based around the sandbox, which is this world within the metaverse. And it’s going to be really cool to see crestron working in both environments to see how we can connect the two. How far you want to push that and just really start to see how we can play with these, these new technologies and these new areas that the world is going in. It’s a fun project, really, really fun. And there’s plenty more to come on it. But yeah, that’s a little bit of a side project, let’s say to some of the more normal innovation that we do know. That’s the future of the company.

BT: You heard it first here from crestron is all in on the metaverse on marketscale. We’ll do an interview for the metaverse next time we’ll join. You don’t want to see you don’t want to see. My my metaverse avatar. I’m there’s a reason I hide behind this camera. But we’ll go. It’s always fun, right? Look, at the end of the day, if I can get Snoop Dogg to DJ anything. Oh, Thank you, Siri. I appreciate that, Siri. That’s why I’m not in the metaverse right now. But no, I mean, Michael, it’s a lot of fun to have these conversations, right? And I love to be able to relate to chat with you guys about some of these things, like, like integrating into the metaverse because, you know, at the end of the day, it’s fun, man. It’s you know, it’s probably not a massive enterprise market quite yet, admittedly, but hey, it’s a good time. I love I love the energy that you guys bring, not only with the innovation, but really your dedication to the end user, the buyer, the consumer. And Thanks so much for coming on today, Michael. I appreciate you appreciate your insight and your a little bit of humor with us.

MS: My pleasure. I appreciate it. Thanks a lot.

BT: And Thank you guys for watching. Stay tuned and join us again next time.