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By now, you’ve most certainly heard or read the news that Samsung – the Korean consumer electronics giant – has agreed to purchase Harman International Industries, a holding company with a diversity of CE brands (Harman/Kardon, JBL) and pro AV marques (AKG, AMX, BSS, Crown, dbx, DigiTech, JBL Professional, Lexicon, Martin, Soundcraft, and Studer).

Much has been made of the fact at Samsung is zeroing in to the automotive market with this acquisition. The company has no real presence in car audio, having made its reputation on televisions, computers, smart phones, and appliances. And there’s no question that the potential business for connected, smart cars is enormous – it’s already attracted the attention of Intel, Microsoft, Google, and Apple.

So why did this deal happen? There are a number of reasons, but the most obvious is a scramble for profits. While Samsung remains the worldwide leader in TV shipments and sales, Chinese companies like TCL and Hisense are closing the gap and breathing hard on Samsung’s shoulders. Concurrently, prices of finished televisions are plummeting, even with the transition to Ultra HD: I saw a Philips 55-inch 4K set offered for less than $600 on Black Friday.

Business prospects don’t look much better with mobile phones. The market for smartphones is basically saturated in the U.S. and carriers are moving away from fixed contracts to month-by month deals with lesser-known models. It didn’t help that the much-ballyhooed Galaxy Note 7 developed serious battery issues, costing the company billions of dollars in recalls.

There has already been a shift in the company’s marketing efforts to major appliances (white goods), as evidenced by the last two booth setups at CES. Refrigerators, freezers, washers, dryers, ovens, and small appliances are still profitable for the company. But the largest market in the world for displays – transportation – has eluded Samsung’s grasp, at least in North America.

Let’s not forget that Samsung has a rather large display device manufacturing business, particularly for mobile devices. They’ve made substantial investments in both LCD and OLED technology, with the latter widely used in the company’s Galaxy smartphones and tablets. Flexible OLEDs are a natural for automotive applications where there is considerable vibration and flexing – not to mention G-forces.

Most of the news reports I’ve read have focused on the car audio and connectivity angles of this deal. In contrast, the questions coming from our community are all about Samsung’s ulterior motives in the commercial AV space. They’re already a major player in digital signage. Now, they’ll also own a control systems company (AMX) that also happens to make signal management and distribution products, along with video encoders and decoders (SVSI).

The real question is this: Does Samsung – a very IT-centric company – care all that much about switching and distributing HDMI and HDBaseT signals? I’ll go out on a limb here and say, “No.” Practically speaking, Samsung – which is already pushing AV over IT for its digital signage products – can have signal management products manufactured inexpensively in China by OEMs (as many companies already do now) and sell them at rock-bottom prices.

In the larger picture, the income from those operations will be dwarfed by revenue from car audio, navigation, and Internet of Things products. And Samsung will definitely have an interest in controlling AV devices, but their focus will be IT-based control using apps and icons, not proprietary control systems with custom programming.

What’s particularly intriguing about this acquisition is that Samsung (as pointed out in a New York Times article) “…keeps tight control of its supply chain — often owning its suppliers outright — and has mostly eschewed big deals to fill in holes in its portfolio.”

The Samsung/Harman acquisition is just another example of consolidation in our industry. You see it every day in other sectors, ranging from health insurance companies (Aetna & Humana) to airlines (American and US Air) and semiconductors (Qualcomm and NXP). It’s all about the search for profitability as costs keep going up and margins keep going down. The long-term trend is for manufacturers to move more of their products to distribution and away from direct dealer sales. Unless a dealer can hit an ever-higher monthly sales quota, the manufacturer is better off simply working through a distributor; minimizing paperwork and warehousing costs while boosting profits. That’s the Wal-Mart/Target/BJ’s/Costco model!

You only need look at the costs of AV gear to understand why; specifically, portable business projectors. In the overall scheme of things, these projectors are becoming more of a low-cost niche product these days. Accordingly, they’re sold mostly through distribution from online dealers or from brick-and-mortar office supply distributors like Staples (which acquired Office Depot in 2015).

The real wild card is the migration to IT infrastructures for signal distribution – and that very much includes 802.11x and proprietary wireless systems. As product costs come down and IT interfaces are added, our professional products start looking more like consumer products. (This has only been going on for 15+ years now, just in case you weren’t paying attention.)

At some point, this combination of CE features and lower prices will lead many of us to install a consumer product, like large televisions instead of professional monitors. That’s also been going on for some time, as has the use of Apple TV to ‘mirror’ iOS tablets and Mac laptops in meeting rooms and classrooms.

So where does this all take us? For one thing, you will see more consolidation of brands in the AV industry by the end of the decade. Example: There are simply too many small companies selling signal management and control products to share in the wealth – some will go under; others will merge to stay alive, or be bought out.

Ditto companies that sell display products: They’ll either become part of a larger “umbrella” holding company like Harman, or simply close their doors. A good example of the latter is Milestone, which has aggregated Chief, Da-Lite, Sanus, and Projecta.

The writing is on the wall. I attend the Consumer Electronics Show every year and compare what I see there to what’s happening at NAB and InfoComm. The products are becoming smarter; can self-configure in many cases, rely more than ever on IT connectivity and wireless, and have shrinking price tags.

That, in turn, is shifting the focus to how we use these products with less emphasis on how they work, and how to install them – just like in the world of consumer electronics. This shift to more consumer-centric AV products started 20+ years ago with the first LCD projectors and flat screen displays, and has done nothing but pick up speed since.

It’s a new game with new rules…

The post On Samsung , Pro AV, Car Audio, and Control appeared first on HDTVexpert.

Posted by Pete Putman, December 6, 2016 12:53 PM

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About Pete Putman

Peter Putman is the president of ROAM Consulting L.L.C. His company provides training, marketing communications, and product testing/development services to manufacturers, dealers, and end-users of displays, display interfaces, and related products.

Pete edits and publishes HDTVexpert.com, a Web blog focused on digital TV, HDTV, and display technologies. He is also a columnist for Pro AV magazine, the leading trade publication for commercial AV systems integrators.