European av markets: On road to recovery?

Flat is the new growth. That is the message coming from av manufacturers and resellers across Europe as one of the av sector's worst-ever years draws to a close.

During 2009 most of the large, established av markets in Europe were hit hard, with the UK being the greatest affected and taking the longest time to recover. There were also significant downturns in Germany, France, Spain and Portugal. The Benelux and Nordic countries fared better, but there was mayhem in eastern European markets as credit disappeared.

There is, however, good news. The videoconferencing market across Europe was stable. Interactive whiteboard sales boomed as EU countries made investments in educational technology. And even projector and flat panel sales showed signs of recovery in Q3 and Q4.

PROJECTORS

The scale of the downturn in the projector market is shown by the latest figures from market analyst Futuresource Consulting. In March 2008, Futuresource was predicting total EMEA projector sales of 2.2m units. By December, it had downgraded its 2008 forecast to 1.8m units - almost 400,000 less than had been sold the year before.

Finances are also in a poor state. Futuresource originally predicted an EMEA projector market value of €2.02bn, compared with €2.2bn in 2008. In reality, the value figure is likely to come in at something like €1.7bn. If pricing has been as aggressive as some reports indicate, it could be a lot worse than predicted.

Futuresource analyst Mike Fisher says: 'Volumes are about 17 per cent down on 2008, reflecting the fact that corporate and high-end project work slowed.'

The view from manufacturers reflects Fisher's comments. 'We got hit a little later than some of the mainstream vendors,' says projectiondesign international sales and marketing director Chris Axford. 'But the general av business (across Europe) took a pounding. Benelux and the Nordics have been very strong, but the UK came to a halt in the middle part of the year and Germany fell back. Spain and Portugal were hit quite badly.'

Projectiondesign spent much of last year targeting specialist markets such as simulation and post-production, focusing its marketing and technology introductions on areas where it could get 'new' business. But it hasn't deserted the av presentation and installation business and Axford says 'there are strong signs that the tide is turning. A lot of projects were put on hold, but now a lot of people are saying 'we need it now' and we have had a relatively strong end of year.'

Nevertheless, nobody is that optimistic about the prospects for 2010. Futuresource expects EMEA projector unit sales to get back to 2008 levels (it is predicting sales of 2.13m units), but prices are lower and there is severe competition in the key 5,000-6,000 lumen installation projector market, with lower-end vendors trying to move upwards into that business. Substitution of expensive projectors with cheaper ones was a feature of the market in 2009 as integrators struggled to keep projects live.

'Values are poor in all markets,' says Fisher. 'Everyone has been targeting the high-end av projector business, but they can't break in to it, because there is not much business around and integrators don't want to carry five projector brands.'

FLAT PANELS

In comparison with projectors, the EMEA flat-panel market has done well in volume terms. Commercial sales are up year on year, from 520,000 units in 2008 to 627,000 units in 2009, and they are forecast to leap to more than 900,000 units in 2010. But values have declined, mainly because so many less expensive consumer panels (known as c2b products) have been sold into business applications. In 2008, less than half the flat panels sold into corporate applications were c2b products (in other words, TVs). In 2009 Futuresource estimates that 60 per cent of the flat panels sold were c2b units, and it expects c2b units to take a 63 per cent market share in 2010.

According to Fisher: 'A lot of people have been trading down and a lot of the volume has been at entry level. The commercial-grade flat panel market has been flat, but we do now see signs of it picking up.'

Non-advertising based digital signage for use in wayfinding, information provision and brand promotion has been the big driver in the flat panel market, he says, and buying criteria have changed - 'it used to always be about which technology to buy, who had the biggest screens and the best resolution. Now the discussions are all about ultra-thin screens, PC-enabled screens and slot-ins.'

INTERACTIVE WHITEBOARDS

Now for the good news. Futuresource says that the interactive whiteboard market, dominated so long by UK schools, leapt ahead by 15 per cent last year, hitting just under 250,000 units in EMEA, against 210,000 units in 2008. Prices are stable and the analyst expects further rises in 2010, to an EMEA total of nearly 350,000 units.

'The UK market is a bit slow,' says Fisher, 'but in other countries - especially in the Eastern European bloc - the seed money put into education is beginning to have an effect. Russia had a poor year in most displays markets, but has come up in the IWB market, as have Slovenia and Slovakia. France and Germany have also put in increased volumes of whiteboards.'

SYSTEMS AND DISTRIBUTION

There are no Europe-wide figures for the systems business, but all the reports suggest that market has been as flat as the projection sector, with manufacturers challenged to maintain 2008 revenue figures.

'A lot of projects were committed to at the end of 2008, so they went ahead,' says Crestron International sales director Robin van Meeuwen.

'The big, stable markets such as Germany, Scandinavia, France and the UK have held up very well, but the climate in the southern European countries - Spain, Portugal, Italy and Greece - is really tough.

'The lack of major projects has made the market very competitive, which has eaten into profits at a time when we are making investments in the company and its products, but the bread and butter business has been steady. There's been a decline in big system installations and an increase in systems going into training rooms and small meeting rooms, which has meant more volume, but less money, so we have had to sell more to maintain the same turnover.'

With technology and links to IT systems an increasingly important a-v systems product driver, van Meeuwen admits 'that was going to happen anyway, even in a buoyant market, it's a global trend that has accelerated because everyone is putting economics above egos.'

For Crestron, like others, the ability to maintain its turnover has been provided by product innovation and its ability to tap new markets or incremental business.

The highlight for van Meeuwen and his colleagues has been lighting - which has doubled to 12 per cent of Crestron's business - and sales of its DigitalMedia 1080p switching and distribution system, which sold more in Q1 than the previous system had sold in the whole of 2008.

THE PROSPECTS FOR 2010

'For a lot of our clients, the motto has been to hold on to your existing customers and cherish them, because there aren't any new ones out there,' says van Meeuwen, and things are not likely to change that much over the next six months. The outlook for France and Germany, he says, is 'tremendously positive', but the length of the project cycle means that development has to start now if it is to bear fruit by the summer.

The displays market is also taking what Fisher calls 'a conservative, but positive view of 2010' and he points to the fact that 'it all depends on when latent demand returns ... it's hard to see a load of back orders coming forward, but resellers are more optimistic than the manufacturers.'

He adds: 'The main drivers of the displays business in 2010 will be education and digital signage', and Futuresource is backing its judgement on that with a major research project looking into the shapes of future meeting rooms and classrooms to capture that.

In the meantime though, business relationships will continue to be key. 'If it wasn't for the partnerships we have with our dealers and our introduction of new technology we wouldn't be where we are today,' says van Meeuwen.

'Our slogan for ISE is "growth through innovation and partnerships".'

It is a sentiment that's already shared by many.