Lessons learned from the rollout of the Matter smart home standard at CES 2024
Thousands of people visit CES® every year to discover and see the next big thing in consumer electronics, but the high-profile Las Vegas event also strives to highlight the evolution of the tech industry.
The 2024 trade fair saw the announcement of important updates to Matter, a protocol for smart home devices that was released just over a year ago by the Connectivity Standards Alliance (CSA). Matter was founded with the ambitious goal of reducing the frustration people experience when trying to connect products such as smart lightbulbs, smart locks, smart cameras, and smart air conditioners to their home networks and similar devices. Matter aims to change the way products interact at a technical level, allowing devices to communicate with each other and with the cloud, regardless of brand.
Complex setup and lack of integration are among the biggest barriers to widespread adoption of smart home technology, and according to Omdia research, they are also among the most significant challenges for product developers.
Source: Omdia
Despite these challenges and Matter's failures, businesses remain optimistic and are supporting Matter deployment with viable solutions that enable smarter and more stable connections between smart home devices and networks, enabling a more efficient smart home ecosystem. More than 280 companies, including vendors, support the new Matter standard, with some working to innovate built-in Matter support and Wi-Fi sensing capabilities to help operators continue to progress with Matter. In an effort to unify the Matter smart home connectivity protocol, many market leaders are rolling out strategies to increase Matter adoption across multiple devices and applications. In our recent report, “A Year in Matter,” we explore common standards for smart home device authentication and application connectivity usage.
Matter increases and gains momentum
While the CSA has rallied many of the biggest names in the smart home industry behind the effort, progress toward interoperability has been slower than expected in some areas, particularly the rollout of Matter-enabled cameras and doorbells. As we discussed in our previous blog, several roadblocks arose after the release of the first version of the specification, and more complex device types like cameras and doorbells were expected to be supported out of the box under Matter's original timeline.
Still, Omdia remains cautiously optimistic about Matter's potential impact on the consumer smart home market. While the CSA's proposed rollout schedule was certainly aggressive, the standard was designed to evolve, not quickly solve all the problems consumers have with their smart homes. Even the most recent update, version 1.2, emphasizes that many of the Matter software releases will be incremental, not evolutionary.
The slower pace has given the CSA the advantage of having time to ensure updates are focused on improving the out-of-the-box experience, especially for consumers who have invested in the most common types of smart home devices. The next challenge will be to extend the protocol to more complex devices and solutions that use more processing power, requiring additional bandwidth and more secure, stable connections to consumers' home networks.
A new year for Matter
As Matter continues to improve, what more can we expect to see? We believe the working groups established by CSA will become increasingly important. Their industry-specific knowledge and expertise will help ensure consumers benefit from individual technologies and understand the value Matter brings to their smart homes. These groups are essential to Matter's advancement and are establishing new standardized protocols that will underpin its future. For example, Aliro (read more), a new communications protocol designed to manage interoperability between devices and access controls, is intended to improve adoption of integrated digital access experiences.
But the problems this standard addresses will be around for a while yet: CSA is trying to impact an entire industry, and change takes time — even seemingly overnight successes like the iPhone have taken a long time to gain widespread acceptance.
Smart home market growth is slowing
That said, the industry's ability to improve the connectivity efficiency of smart device platforms and create an automated network ecosystem will help determine the future of the smart home market. Demand for products is growing, but more slowly than in the past, with the five-year CAGR for most smart home devices shrinking to 50% and an overall decline of 60% compared to just two years ago. This is mainly due to the rapid maturation of the US market. In the US, brands rely on existing customers, hoping they will add devices to their existing smart home setups. It takes longer to move through the sales cycle, but the good news is that they are still investing. According to Omdia research, there are now up to nine or ten connected devices in the home, up from six two years ago.
The situation is different in Europe and Asia Pacific, where companies are targeting first-time customers. In Europe, people are more likely to spend their money on products that promise economic or environmental benefits, such as energy savings. In Asia Pacific, and especially China, buyers have more choice and some smart devices can be seen as disposable due to their low price, posing a challenge for brands.
The future is now? Smart home as a service
Either way, it's becoming increasingly difficult for manufacturers and brands to make a profit on the sale of smart home devices. As a result, over the past 12 months, more and more market-leading companies have introduced subscription services in the hope of retaining customers and generating recurring revenue.
For example, say you offer connected cameras at the lowest price possible and add home monitoring as part of a relatively low-cost monthly subscription – homeowners get peace of mind and you get to significantly increase your profits relative to selling the camera hardware.
The main problem with the as-a-service model, and therefore with almost all subscription-based smart home services, is that consumers may not be ready to pay a recurring monthly or annual fee for a smart home solution. Most consumers are very likely to fall victim to subscription overuse, and subscription-based smart home services are just the latest in a long line of subscription-based media and entertainment services on offer. Everything from movies to TV to coffee is now available for a monthly fee.
It's not just consumers who are hesitant about smart home as a service: some smart home device companies in the market are unwilling or unable to make the transition. Some may be forced to exit the smart home market because they lack the financial or manpower resources to move from a hardware to a software-based approach.
As smart home services emerge, consumers, especially early adopters, are beginning to want more from their smart home investments. They want to know not about the features or specs of a device, but how well it enhances their daily lives and addresses the things they find important. They're asking how their smart security camera will help keep their loved ones safe, not how high the resolution of the video it records or how wide its viewing angle is. It will be interesting to see how brands answer these questions in 2024.
To read more insights and analysis on market trends and industry forecasts produced by Omdia's Consumer Electronics division, click here.
References:
Connectivity Standards Alliance Announces Aliro, a New Initiative That Puts Mobile Devices and Wearables at the Center of the Future of Digital Access
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