Projector Projections

Once the exclusive domain of audio-video resellers, digital projectors have become increasingly attractive to IT VARs. New entry-level models are sporting dramatically low prices, opening this product category to ever-larger markets that had long written them off as too expensive.

Overall, digital projectors have been one of the fastest-growing product categories in the market. According to Menlo Park, Calif.-based Pacific Media Associates, worldwide sales of projectors grew by 42 percent in 2004. In the Americas alone, the growth was only slightly less, at 39 percent, resulting in total sales of 1.35 million units.

That growth is expected to continue, although not quite at such high rates. El Segundo, Calif.-based iSuppli estimates annual growth for 2005 and 2006 at 36 percent worldwide and 32 percent in North America. The lion's share of this increase will be through retail channels, though iSuppli expects a healthy 30 percent increase in North American sales for 2005 through PC/IT resellers. By contrast, growth in the traditional professional AV channel is expected to be flat.

No doubt, most of this growth is built on continuing price erosion. For example, at the recent InfoComm show, which is the premier annual showcase of new projectors, NEC debuted its VT37 model with an estimated selling price of $795. That is an order of magnitude less than what similar products cost just 10 years ago. But price erosion is just one of a number of continuing trends. An increasing number of projectors now offer wired or wireless networking options, both of which tend to bring IT staffers into the projector-buying decision. And where IT staffs go, IT resellers are sure to follow.

Price Drops Offer Opportunities

While the incredible shrinking price tags on projectors have had deleterious effects on profit margins, several projector manufacturers see some significant upsides for the channel. The most obvious of these is that the low prices open these products up to customers that could not afford them before. The current performance/price ratio, according to Sander Phipps, Sony's product manager for USA LCD projectors, "is opening a lot of markets, especially the K-12 education market, which is where a lot of [solution providers have] been trying to reach out to."

Even customers that could have afforded projectors previously are revising their needs.

"Some customers who a year ago would have been satisfied with just a projector have money to spend for solutions that use the projector more efficiently," says John Glad, product manager at Hitachi America.

In addition, the great popularity of sub-$1,000 projectors may cause the industry to change strategies.

Maureen Schmidt, senior director of sales at NEC Solutions America's Visual Systems Division, observes that "as our category matures, we're starting to see 'PC-style' business models develop." She cites three developing opportunities.

The first opportunity involves replacing projectors, which have an average life span of three to four years.

"The projector market hit its first big years--greater than 500,000 units--in 2001 and 2002, so NEC expects many of those customers to refresh their product line in 2005," she says. "This replacement cycle is expected to drive the market to approximately 2 million units this year."

Savvy channel partners should mine their existing customer base with attractive upgrade opportunities, she adds.

The second opportunity, Schmidt points out, involves up-selling.

"We all did a great job, as evidenced by the rapid growth of the sub-$999 category, but the industry did not develop up-sell opportunities to complement the entry-level price points," Schmidt says.

In the previous two years, she says, there was a very large price gap between the entry-level $999 category and the "step-up" models of $1,500-plus. What was missing were products priced between those two extremes.

"NEC [for example, now] offers a full line of step-up models under $1,295, so it's easier for channel partners to up-sell their customers to a model that provides higher margin opportunities," Schmidt says.

The third strategy involves solution sales. "Many first-time buyers in our industry tried to assemble solutions on their own," she says. "For example, they purchased all the different components of a digital conference room separately and installed them on their own." Now, as they look to upgrade their systems, these customers will probably prefer complete solutions. "They don't want to go through the hassle of doing it themselves," Schmidt says. "This presents a great bundling opportunity for the channel."

Campuswide Networking

Another factor that may spur solution sales is networkability, an increasingly popular feature on projectors--particularly the larger models. Kevin Handerson, Sony's marketing manager for LCD projectors, reports that he has been seeing big sales of networkable projectors on college campuses, so that central facilities can proactively monitor their performance and maintenance schedules. Handerson admits that benefit might sound mundane, "but it reflects an operational savings for them in terms of money and efficiency, and also cuts down the number of unexpected trouble calls--the sort of small emergencies they have to deal with."

The allure of the networkable projector, in fact, could pervade the entire education market.

"Once that was only universities, but now it's moving down even to high-school settings," Handerson says. "More and more K-12 opportunities are starting to include that sort of functionality in their requests. We are not sure they are all using them as of yet, but they are definitely planning ahead and making that a part of their choice."

The full benefit of networking, however, may have to wait. NEC's Schmidt says that her company is seeing good adoption of its networking solutions, "but it's not really going to take off until the industry develops a standard for asset management."

"Imagine a customer that deploys projectors in every conference room," she adds. "They will more than likely use projectors from multiple vendors, so it's crucial for the networking software to support every model on the market."

Cutting Cables

In the past two years, a number of projector manufacturers have attempted to bypass the traditional and bulky VGA computer cable with wireless connection options. While initially exciting, these connections have been hobbled by the relatively slow speed of 802.11b wireless LANs and intricate setup procedures that are beyond the technical expertise of many presenters. Still, the technology does have strong appeal to at least one market segment.

"What I'm understanding so far is that the wireless approach seems to work best when you have, for example, multi-presenter meetings where there seems to be some handing off or sharing of information," Sony's Handerson says. "Oftentimes in a meeting, there's a lot of wire handling to accommodate it, and the wireless seems to really cut down on that sort of thing."

Several manufacturers have presented approaches to ease the pain of setting up a wireless connection. Sony's solution to setup headaches is to include everything needed in one package.

"We include not only the wireless card that fits in the projector, but also the wireless device that would attach to the presenter's computer," Handerson says.

Sony also sells the devices separately as accessories so that VARs can have them handy if the need arises.

But the best panacea to wireless-setup headaches may be a universal one. NEC's Schmidt takes pride in the fact that market research firm DTC has crowned her company the leading provider of wireless projectors, with a market share of greater than 30 percent. Yet she looks forward to a time when Microsoft gets involved.

"Our wireless models are key products for the value-added resellers," she says. "However, the category won't really take off until the industry creates a standard. Hopefully, Microsoft will work a wireless display standard into Longhorn when it ships late next year." *

Rich Malloy ([email protected]) is a freelance writer and college instructor based in Greenwich, Conn.