We often get asked if we license our video analytics technology to other companies, so they can embed it into their products.
We have chosen not to license, which often raises the question: Why not?
There are actually quite a few reasons, but here are some of the most important:
- The licensing approach to selling technology works well in mature markets with a lot of consolidation. This is what you find in the Telco and IT Networking markets, where one or two vendors dominate market segments. But this is just not true in the Security Market. There are boatloads of vendors, and even the largest generally have less than 20% market share. Most are a lot smaller. So, you have to license a lot of vendors before you command any significant share of the market. Some companies, for example, have licensed 30-40 companies or more, which sounds like a lot, but they still represent a tiny fraction of the total products shipped.
- Licensing only works well when the technology is ready for widespread use and when it is ready for rapid market acceptance. This means the technology has to be easy to use and work well. Unfortunately, all of the companies trying to license are finding that they are too early for mainstream markets. It takes too much time to calibrate and tune cameras, and even after all of this effort, they still have too many false alarms or missed detections.
- Every new company you license requires working with a different design to embed the technology into their products. If the technology is easily reduced to a simple chip you can plop in, then licensing makes more sense. But analytics technologies today still require a lot of design support – almost as much as designing new products. On top of this, analytics are still rapidly improving, which means that major improvements could force major redesigns.
- If the technology is a real simple add-on feature that everyone wants to use, then licensing works. But the problem with licensing video analytics is that you end up with camera and DVR companies selling products that they can’t completely support and don’t fully understand. When the technology they are licensing is far more intelligent and complicated than the rest of the product, it makes a real mess of a problem for integrators and end users. You can’t get answers and can’t get problems fixed when you need them. The closer you are to the people developing the core analytics algorithms, the better your support will be.
- The biggest issue of all, however, is that we never believed that “detection” was the only thing that mattered with video analytics. Analytics can make the whole video system smarter, and solve key issues, such as bandwidth and storage. It is not just about detection. This is a radical new idea that we felt needed to be demonstrated first.
In other words, the power of analytics to make your cameras smarter, to control bandwidth and improve storage quality, along with many other benefits, are just as valuable as the ability to detect intruders early to prevent crimes before they happen.
But that’s a whole new product idea, not just an add-in technology.
The other vision we had was to sell intelligent IP cameras for about the same price as dumb IP cameras. Wouldn’t everyone want the smart camera instead? This makes it an easy choice to start using analytics when it doesn’t cost any more, and solves your bandwidth and storage problems. Isn’t this what the market wants? But camera manufacturers paying license fees to add in analytics will always have to charge more to cover their added costs. So, the licensing approach makes it harder to reach to ultimate goal.
That’s some of the reasons we haven’t licensed our technology.
April 16, 2009 at 4:16 am
Hi Doug,
All of your points are interesting and I tend to agree with many of them. Here are some counter-arguments to your position:
You say, “Every new company you license requires working with a different design to embed the technology into their products” ObjectVideo has standardized around TI chips and now Intel. While there is some work involved, I think you are over-stating the level of difficulty.
You say, “the power of analytics to make your cameras smarter, to control bandwidth and improve storage quality … just as valuable as the ability to detect intruders early to prevent crimes before they happen” I think you can get most of the bandwidth and storage benefits through licensing or developing one’s own.
You say, “But camera manufacturers paying license fees to add in analytics will always have to charge more to cover their added costs.” This is a fixed cost vs variable cost issue. I may pay a few hundred to license an analytic per camera but I save the ten million from developing it myself.
Finally, let me offer 2 negatives for building an all-in-one appliance with video analytics (like VideoIQ’s).
(1) One has to be an expert at developing cameras and video analytics (hardware, software, mechanical issues, optics, etc.). It’s a lot harder to do both. The all-in-one company can be left with a product that is mediocre at both.
(2) Even if the all-in-one product is good, now the customer is forced to buy through you, rather than his existing suppliers. This may block him from selecting this product. It may also force the all-in-one manufacturer to spend far more in marketing and building a channel.
I think it’s a great question and worthy of discussion.
Personally, I think there are risks on both sides.
Best,
John
April 16, 2009 at 11:05 am
“We often get asked if we license our video analytics technology to other companies, so they can embed it into their products.”
Hey! I asked Scott Schnell that question on Monday!
You’re stealing a little of my thunder here Doug…
April 16, 2009 at 8:17 pm
John,
I love the discussion. Let’s get to it.
I’m going to respond to each of your points – and they are all good ones:
Yes, OV has built their embedded solution into industry standard chips. Most of the companies trying to license are using TI, as well. Ours runs on a TI DSP as well. But that only makes the hardware portion easier. The time it takes to integrate the software inter-connectivity and functionality is not as simple as I think you are suggesting. Making sure you have a product that works when you are done and the testing is not trivial either. Since everyone is developing a different product (especially high end products), that means added time to support different needs.
We’ve talked to many who wanted to license our analytics, and I can tell you there is a wide range of different things wanted and different hardware platforms to integrate into. If it was easy to do, we’d look closer at more of those opportunities.
My point is that you can’t just develop one reference design. You end up designing lots and continue to add to the design to meet all the needs requested.
In your point about getting the same benefits from designing your own, I think you missed my point. What I was talking about was our early discussions with companies who wanted to license our technology. We tried to get them to see the opportunity with storage and bandwidth, but we couldn’t get any who were interested. They only saw analytics as a means for detection. That’s why we felt we needed to demonstrate it by doing it ourselves.
You mentioned the trade-off between the cost of developing the analytics yourself and licensing. That’s absolutely true for camera and DVR manufacturers who don’t have the analytics technology. I agree 100% that it’s an easy decision for them. What I was talking about was our decision. We had the analytics technology. We didn’t have to spend
$10M to develop it. Our question was whether to hope that the camera and DVR manufacturers would know what to do with our technology if they licensed it, or did we need to develop it ourselves to be sure it demonstrated all the potential it had.
Everyone kept looking at analytics as a detection technology, but we thought that market was too small, and the real potential was much bigger.
Now onto the negatives:
I agree completely that you need to be an expert in both camera technology and analytics. We happened to have that expertise. We’ve got a long background in both, so we knew we were uniquely qualified. This is an excellent point you make, and will indeed be a difficulty for anyone else. Steve Lefkowitz has been developing and selling innovative cameras for over 30 years. We acquired a large camera manufacturer in Taiwan, when we both worked at GE Security, and learned all the ins and outs of camera design and manufacturing. For example, we introduced the first Pixim based camera into the marketplace, and it was an immediate success. Our analytics technology is second to none.
That’s exactly one of the things that makes VideoIQ so unique.
I agree with you on the last point. This is a limitation to our approach. If someone loves buying from Sony, for example, then they really don’t want to buy from another vendor. If our technology was about the same as everyone else’s, then this would be a problem. Or even if everyone else’s analytics were good enough, then a slight technical advantage wouldn’t be enough to make an impact as a new company.
However, the main problems that have kept video analytics from becoming widely adopted show that the technology is not good enough. It needs to be as easy to install as a standard camera. It can’t require hours of tuning and calibration. It needs to be accurate. You can’t be dealing with 5-20 false alarms per day per camera. It needs to be cost effective. It can’t double the cost of your video system.
So, if the integrator who loves Sony wants and needs a product with real video analtyics that works, is easy to use and costs about the same as a standard IP camera, he can’t get it from Sony. So, he either lets his competitors get a leg up on him, or he will take a look at our iCVRs. Fortunately, most are eager to try a product like ours.
Without a substantial advantage, our approach would be much riskier. But seeing the slow down in the analytics market, while our business is booming, we couldn’t be happier with our choice to build the whole product rather than just licensing and hoping others would get it right and sell it properly.
As always, I enjoy all of your comments, and hopefully this discussion benefits others as well.
Doug.
April 16, 2009 at 8:19 pm
Sam,
Dang it. I didn’t mean to steal your thunder.
Did Scott say the same thing I did?
I guess we will have to wait and read Sam’s thunderous interview to find out.
Thanks.
Doug.
April 17, 2009 at 11:00 am
Yeah, Scott mostly said what you did, although he hedged a little and said if the opportunity was right, you’d embed your analytics in someone else’s hardware sometime in the future. Didn’t rule it out, basically.
Should have the analytics review up on the site early next week.
April 24, 2009 at 4:58 am
security dvr software…
Intriguing idea, but I don’t know if I believe you one hundred percent….
May 3, 2009 at 10:19 pm
Hi, good post. I have been wondering about this issue,so thanks for sharing. I’ll definitely be subscribing to your site.