Is Axis IP camera dominance coming to an end?

IP video is becoming mainstream but Axis' IP cameras may lose their dominance in the process. Six critical issues may undermine Axis position and in the process provide consumers with more options and lower prices.

The six issues are:

• Lower cost, good enough, IP cameras from competitors are maturing.
• Multi-megapixel cameras from competitors are maturing.
• Axis' new features overshoot the needs of mainstream buyers.
• Now, traditional CCTV vendors are committed to moving into IP.
• Industry interoperability specifications are coming
• The recession will force buyers to prioritze low cost.

Low Cost, Good Enough Cameras Maturing

Numerous manufacturers are now providing products that offer good enough alternatives to Axis main products.  Since I have made this point before, I suggest you read my Axis vs ACTi comparison report for details.  I will only add that I have received numerous unsolicited reports (even from rival camera manufacturers) about how well ACTi is doing.  As more mainstream security buyers go to IP and expect similar pricing to analog, the lure of low cost IP cameras will become even stronger.  I do believe the costs of IP cameras is a significant issue and in an informal conversations with IP surveillance integrators from around the world, all of them cited the higher costs of IP as a key sales barrier.  If you believe that the TCO of IP overcomes this issue, see my IP cameras problem report for a rebuttal of this vendor sponsored claim.

Multi-Megapixel Cameras Maturing

Multi-megapixel cameras are the hottest segment of the IP video industry right now yet Axis has a very limited lineup for this.  Expect strong competition from specialist vendors like Arecont Vision (H.264 cameras up to 5 MP) and IQinvision (with a broad range of housing and body options). As customers continue to specify more megapixel cameras, Axis will have challenges.  While I expect Axis to respond in this area (it's premium applications like this where Axis has historically focused), Arecont Vision and IQinvision with 5 to 10 years experience focusing on megapixel will be strong competitors.

Axis Overshoots the Mainstream

Axis new product development is focused on H.264 and video analytics.  H.264 will not be very appealing for standard definition cameras as the savings relative to MPEG-4 are not terribly significant (maybe $50 or $100 reduction in storage costs). The situation is different for megapixel cameras, however, Axis' offering is currently only for standard definition.  While Axis support for video analytics is generating good interest for vendors such as Agent Vi, all the market statistics make it clear that video analytics is a small niche.  Video analytics support will be a weak factor in overcoming the significant price premium for Axis cameras.

Traditional CCTV Vendors Moving In

For the last 5 years, Axis' growth has been enhanced by traditional CCTV vendors offering limited or no IP cameras. 2008 has demonstrated that all of the big vendors are now seriously motivated to fight for IP camera market share.  Ironically, because Axis kept prices so high (while generating huge profits), other vendors now have the opportunity to undercut Axis on price, grow revenue and still make a profit. The IP camera market is also big enough now that the revenues generated justifies the opportunity.

Industry Interoperability Specs are Coming

While we may not have standards for a long time, vendors are coming together to promote interoperability.  It is clear to me that members of the PSIA are extremely motivated to implement support for a common IP camera specification.  They correctly, in my mind, realize that this is important for them to clear a barrier to entry and to attack Axis.  I would not be surprised to see many camera and video management vendors implementing the PSIA specification next year. Such support will bolster competition and reduce Axis advantage.

Recession Prioritizes Low Cost

It's clear we are in for a significant, if not severe, recession. Such conditions forces most buyers to more carefully examine and compare pricing. In recessions, buyers are more keen to make sacrifices and it's reasonable to believe many will forgo Axis advance features for lower pricing of competitor's products.

Fundamentally, it looks like Axis could wind up 'stuck in the middle' - too expensive for the mass market that wants cheap, good enough product and not strong enough in the high end market where customers want specialized products.  All the while, they will be under attack from huge companies that have finally committed to ensure that their position in the overall security camera markets is not undermined.  While I think Axis makes quality products, their strategic moves to keep prices high and focus on areas of innovation with lower customer value, could result in a significant shift in customer choices as the IP camera market matures into the mainstream.