Tech-Savvy Residents Expect Tech-Savvy Homes

2008 NAA Education Conference Tech-Savvy Residents Expect Tech-Savvy Homes

Public: @mdutech Anonymous: d mdutech www.twitter.com/mdutech

Dave Hanchette, Russound

Henry Pye, JPI

Steve Sadler, Post Properties

Mike Whaling, InfiniSys Electronic Architects

Panelists

Dave Hanchette Russound

CE Industry Growth 10.1% 13.1% 6.5% Source: CEA Sales and Forecasts, Jan 2007 50% over 5 years

Mega Trends Impacting CE Trends That Cut Both Ways Food for thought: How do these trends affect your business? Trend The Good The Bad Price Deflation Easier to Sell Lower Margins Collapsing Products (Convergence) Convenient, More Likely to Use Fewer Products to Sell Sales Channel Proliferation CE Everywhere Channel Conflict, Battle for the Shelf Rise of Software and Services Content, Connectivity Not spending on CE Interoperability Issues Winner Take All Forces Choice

Home Technology Offerings Structured Wiring Monitored Security Multi-Room Audio Home Theater Lighting Controls Home Automation Energy Mgmt. 2006 2007 Source: CEA 6 th Annual State of the Builder Technology Market Study Central Vacuum Intercom Systems N/A N/A

Who Installs Home Techs? 2006 2007 Source: CEA 6 th Annual State of the Builder Technology Market Study

Food for Thought:

Are electrical contractors eating into business opportunities?

Geek Squad experiment?

Technology and Marketing Is Offering Technology Important in Marketing Homes? 11% 25% 64% Source: CEA 6 th Annual State of the Builder Technology Market Study

Technology and Marketing Is Offering Technology Important in Marketing Homes Compared with Two Years Ago? 37% 53% 10% Source: CEA 6 th Annual State of the Builder Technology Market Study

Research Objectives

Who? Profile the types of consumers who are listening to audio sourced from a computer.

What? Identify CE products associated with computer-sourced audio consumption in the home.

How? Understand how consumers are connecting CE products for computer-sourced audio consumption at home.

Why? : Learn users’ motivations for consuming audio through a computer at home.

2007 PC Audio Study What market opportunities does this activity represent?

A Collapsing Universe MP3 Voice Games Video PC TV DVR/STB PC Games AVR Navigation Telematics Voice Playback Diagnostics Portable or Installed Systems? Game Console or PC? Cell Phone or Portable Media? Anywhere Technology In-The-Home Technology In-the-Car Technology

Market Size 73% of online adults use computer-sourced audio content at home. 122 million PC Audio Users

Why Listen to PC Audio? “ I can listen while I work …” “ I always seem to be on the computer” “ It stores all my songs, lets me rip my CDs into mp3s, lets me download new music, allows me to play with an equalizer, etc, all through [one] piece of equipment …” Convenience / Efficiency “ There are sources of audio content that can only be accessed on the Internet” “ Most of my music is stored on my computer.” “… to sample new music.” Access to Content

Why Listen to PC Audio? “ Better sound than a stereo system …” “ Great sound and flexibility …” “ I think the sound quality is better than my TV and portable headphones …” Better Sound Quality “ You have more control playing audio through a computer …” “ I just like to …” “I like listening to music.” “ It’s easy to set-up and listen to what you want.” Technical Reason / Enjoyment

Where Do They Listen?

% Listening Mean Hours Spent Per Week PC Audio Activity Engagement Special Interest Content Enthusiast Content Popular Content General Interest Content

Overall Satisfaction PC Audio Listening Experience Overall 86% of PC audio users are satisfied with their experience. Is there any room for improvement?

What Would They Improve? Top Five

Trading Quality for Quantity

Spending on Audio Content Previous Six Months – Home PC Audio Users Mean Spending = $101 Spending Window: Oct 2006-Mar 2007 Mean Spending = $87 Overall Home Audio Listeners Market Value = $12.3 Billion

How Much Will They Spend? Market Value = $23.5 Billion Annual Content Spending: Oct 2006-Sept 2007 Home PC Audio Users Previous Spending Window: Oct 2006-Mar 2007 Market Value = $12.3 Billion Mean Spending = $101 Future Spending Window: Apr 2007-Sept 2007 Market Value = $11.2 Billion Mean Spending = $92

Conclusions

Home PC audio use is widespread.

Music is content of choice – physical media still rules.

Users satisfied, but still see room for improvement.

Sound quality can always be better (CD standard).

Connections may be part of the answer.

High-resolution MP3s could be another.

Users seek balance between quality and quantity.

Content spending is significant - estimated $23.5 B

It’s About Marketing

Capitalizing On The Trends

IP addressable speakers

AVRs with wireless PC connections

Less compressed digital music files

Services

CODECs

Sound bridge devices / media extenders

Higher-end powered speakers/headphones

DACs specifically for compressed audio

What Opportunities Exist for the Industry?

Dave Hanchette [email_address] Henry Pye [email_address] Steve Sadler [email_address] Mike Whaling [email_address] The Multifamily Technology Group is on LinkedIn and Facebook. Our blog is at MultifamilyTechnology.com.