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Lessons Learned from the Matter Smart Home Standard Rollout at CES 2024
Each year, thousands of people travel to CES® to find - or showcase - the next big thing in consumer electronics. But initiatives that highlight the technology industry’s evolution can also be found at the high-profile event in Las Vegas.
At the 2024 trade show, there was an important update on Matter, a protocol for smart home devices that had been released by the Connectivity Standards Alliance (CSA) just over a year earlier. Matter was established with an ambitious goal – to alleviate the frustration people feel when they’re trying to connect products such as smart light bulbs, locks, cameras, and air conditioners to their home network and to similar devices. It sets out to change the way the products interact at a technical level, so that devices, regardless of brand, can communicate with each other and the cloud.
The complexity of set-up and a lack of integration are some of the biggest barriers to the widespread adoption of smart home technologies. Omdia research shows they’re also some of the most significant challenges for the developers of products.
Despite these challenges and Matter missteps, companies remain optimistic and are supporting the Matter roll-out with viable solutions, i.e. creating smarter and more stable connectivity between smart home devices and networks to enable a more efficient smart home ecosystem. More than 280 companies, including vendors are supporting the new Matter standard, and some are even innovating built-in Matter support and Wi-Fi sensing functionality to help operators continue progress with Matter. In the hope of unifying the Matter smart home connectivity protocol, many market key players are evolving strategies to increase adoption of Matter across multiple devices and applications. Our recent report, 'Matter at One Year', examines the common standards for smart home device authorization, and application connectivity usage.
Matter gains, momentum
The CSA has united many of the smart home industry’s largest companies behind its initiative, though progress towards interoperability remains slower than anticipated in some areas, especially the rollout of Matter-ready cameras and doorbells. There were some setbacks following the release of the first version of the specification, which were discussed in an earlier blog, and some of the more complex device types, such as cameras and doorbells, that according to Matter’s original timeline were due to be supported by the standard.
And yet, Omdia remains cautiously optimistic about the potential impact of Matter on the consumer smart home market. Yes, the CSA’s proposed timeline for rollout was aggressive, though the standard was designed to evolve, rather than be a quick fix for all the problems consumers have with the smart home. Even the most recent update, version 1.2, highlights how many Matter software releases will be incremental, not evolutionary.
The slower pace has, to the CSA’s benefit, given the CSA 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 extending the protocol to more complex devices and solutions that use more processing horsepower and therefore require additional bandwidth, and a more secure and stable connection to consumers’ in-home networks.
A new year for Matter
What more can we expect as Matter continues to be refined? We believe the working groups established by the CSA will become increasingly important. Their industry-specific knowledge and expertise will help to ensure consumers benefit from individual technologies and can see the value Matter adds to a smart home. These groups are establishing new standardized protocols, crucial to the progression of Matter and supporting its future. For example, Aliro (see Further Reading), the new communication protocol designed to manage interoperability between devices and access control aims to improve adoption for a unified digital access experience.
However, the issues that the standard is addressing will persist for some time yet. The CSA is trying to influence an entire industry and transformation takes time. Even technologies that we consider to be an overnight success, like the iPhone, gained widespread acceptance over a longer period.
Growth in the smart home market is slowing
That said, the industry’s ability to improve efficiency of smart device platform connectivity and generate automated network ecosystems will help to determine the future of the smart home market. The demand for products is growing, although more slowly than in the past, with five-year CAGRs for most smart home devices shrinking to 50%, an overall decrease of 60% from what they were only two years ago. That’s primarily because the US market is maturing quickly. There, brands rely on existing customers, who they hope will add more devices to their established smart home set up. It takes longer for them to move through the sales cycle, but the good news is they’re still investing. Omdia research shows they have up to nine or ten connected devices in their homes now, up from six products two years ago.
It's a different story in Europe and the Asia Pacific region, where companies are targeting first-time customers. In Europe, people are more likely to spend money on products that promise financial or environmental benefits, such as energy savings. In Asia Pacific, and China in particular, buyers have a lot of choice, and some smart devices can be seen as disposable because of their low cost, which presents challenges for brands.
Future now? Smart home as a service
In all cases, it’s becoming more difficult for manufacturers and brands to make a profit from the sale of smart home devices. As a result, in the past 12 months, more market-leading companies have introduced subscription services in the hope of retaining customers and generating recurring revenue.
For example, a connected camera may be offered for a minimal price and home monitoring will be added as part of a relatively low-cost, month-to-month contract. The homeowner benefits from the sense of security and the provider is assured vastly increased profit compared to the sale of the camera hardware.
The main point of friction to the as-a-service model, which is to say virtually any subscription-based smart home service, is that consumers may not be ready to pay for their smart home solution on a recurring basis, whether monthly or annually. Subscription overload is extremely likely among most consumers, and subscription-based smart home services are the latest in a series of subscription-based media and entertainment services being offered. Everything from movies, to television, to coffee is now available for a monthly fee.
And it’s not just consumers that will hesitate at the as-a-service smart home. Some smart home device companies in the market may also be reluctant, or even unable, to make the shift. They may not have financial or human resources to move from a hardware to software-based approach, forcing them out of the smart home market.
As smart home-as-a-service emerges, consumers, especially early adopters, are beginning to ask for more from their investment in the smart home. They want to know how well their devices enhance their day-to-day lives and address what they feel is important, rather than what features and specifications the devices have. They’re asking how a smart security camera will help them keep their loved ones safe, not what video resolution it records at, or how wide the viewing angle is. It will be interesting to see how brands answer these questions in 2024.
To read more insights and analysis covering market trends and industry forecasts prepared by Omdia’s Consumer Electronics practice, click here.
Further Reading:
Each year, thousands of people travel to CES® to find - or showcase - the next big thing in consumer electronics. But initiatives that highlight the technology industry’s evolution can also be found at the high-profile event in Las Vegas.
At the 2024 trade show, there was an important update on Matter, a protocol for smart home devices that had been released by the Connectivity Standards Alliance (CSA) just over a year earlier. Matter was established with an ambitious goal – to alleviate the frustration people feel when they’re trying to connect products such as smart light bulbs, locks, cameras, and air conditioners to their home network and to similar devices. It sets out to change the way the products interact at a technical level, so that devices, regardless of brand, can communicate with each other and the cloud.
The complexity of set-up and a lack of integration are some of the biggest barriers to the widespread adoption of smart home technologies. Omdia research shows they’re also some of the most significant challenges for the developers of products.
Despite these challenges and Matter missteps, companies remain optimistic and are supporting the Matter roll-out with viable solutions, i.e. creating smarter and more stable connectivity between smart home devices and networks to enable a more efficient smart home ecosystem. More than 280 companies, including vendors are supporting the new Matter standard, and some are even innovating built-in Matter support and Wi-Fi sensing functionality to help operators continue progress with Matter. In the hope of unifying the Matter smart home connectivity protocol, many market key players are evolving strategies to increase adoption of Matter across multiple devices and applications. Our recent report, 'Matter at One Year', examines the common standards for smart home device authorization, and application connectivity usage.
Matter gains, momentum
The CSA has united many of the smart home industry’s largest companies behind its initiative, though progress towards interoperability remains slower than anticipated in some areas, especially the rollout of Matter-ready cameras and doorbells. There were some setbacks following the release of the first version of the specification, which were discussed in an earlier blog, and some of the more complex device types, such as cameras and doorbells, that according to Matter’s original timeline were due to be supported by the standard.
And yet, Omdia remains cautiously optimistic about the potential impact of Matter on the consumer smart home market. Yes, the CSA’s proposed timeline for rollout was aggressive, though the standard was designed to evolve, rather than be a quick fix for all the problems consumers have with the smart home. Even the most recent update, version 1.2, highlights how many Matter software releases will be incremental, not evolutionary.
The slower pace has, to the CSA’s benefit, given the CSA 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 extending the protocol to more complex devices and solutions that use more processing horsepower and therefore require additional bandwidth, and a more secure and stable connection to consumers’ in-home networks.
A new year for Matter
What more can we expect as Matter continues to be refined? We believe the working groups established by the CSA will become increasingly important. Their industry-specific knowledge and expertise will help to ensure consumers benefit from individual technologies and can see the value Matter adds to a smart home. These groups are establishing new standardized protocols, crucial to the progression of Matter and supporting its future. For example, Aliro (see Further Reading), the new communication protocol designed to manage interoperability between devices and access control aims to improve adoption for a unified digital access experience.
However, the issues that the standard is addressing will persist for some time yet. The CSA is trying to influence an entire industry and transformation takes time. Even technologies that we consider to be an overnight success, like the iPhone, gained widespread acceptance over a longer period.
Growth in the smart home market is slowing
That said, the industry’s ability to improve efficiency of smart device platform connectivity and generate automated network ecosystems will help to determine the future of the smart home market. The demand for products is growing, although more slowly than in the past, with five-year CAGRs for most smart home devices shrinking to 50%, an overall decrease of 60% from what they were only two years ago. That’s primarily because the US market is maturing quickly. There, brands rely on existing customers, who they hope will add more devices to their established smart home set up. It takes longer for them to move through the sales cycle, but the good news is they’re still investing. Omdia research shows they have up to nine or ten connected devices in their homes now, up from six products two years ago.
It's a different story in Europe and the Asia Pacific region, where companies are targeting first-time customers. In Europe, people are more likely to spend money on products that promise financial or environmental benefits, such as energy savings. In Asia Pacific, and China in particular, buyers have a lot of choice, and some smart devices can be seen as disposable because of their low cost, which presents challenges for brands.
Future now? Smart home as a service
In all cases, it’s becoming more difficult for manufacturers and brands to make a profit from the sale of smart home devices. As a result, in the past 12 months, more market-leading companies have introduced subscription services in the hope of retaining customers and generating recurring revenue.
For example, a connected camera may be offered for a minimal price and home monitoring will be added as part of a relatively low-cost, month-to-month contract. The homeowner benefits from the sense of security and the provider is assured vastly increased profit compared to the sale of the camera hardware.
The main point of friction to the as-a-service model, which is to say virtually any subscription-based smart home service, is that consumers may not be ready to pay for their smart home solution on a recurring basis, whether monthly or annually. Subscription overload is extremely likely among most consumers, and subscription-based smart home services are the latest in a series of subscription-based media and entertainment services being offered. Everything from movies, to television, to coffee is now available for a monthly fee.
And it’s not just consumers that will hesitate at the as-a-service smart home. Some smart home device companies in the market may also be reluctant, or even unable, to make the shift. They may not have financial or human resources to move from a hardware to software-based approach, forcing them out of the smart home market.
As smart home-as-a-service emerges, consumers, especially early adopters, are beginning to ask for more from their investment in the smart home. They want to know how well their devices enhance their day-to-day lives and address what they feel is important, rather than what features and specifications the devices have. They’re asking how a smart security camera will help them keep their loved ones safe, not what video resolution it records at, or how wide the viewing angle is. It will be interesting to see how brands answer these questions in 2024.
To read more insights and analysis covering market trends and industry forecasts prepared by Omdia’s Consumer Electronics practice, click here.
Further Reading:
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