The vast majority of builders--well in excess of 50 percent according to the NAHB--now offer home theaters as an upgrade. But that doesn't mean all builders are making money on home theaters. Talk to a home technology integrator and he'll say too many jobs still wind up as retrofits, because builders don't get integrators involved early enough in the home buying process. That results in upset home buyers who learn after they've moved in that their new homes aren't prewired for audio/video (A/V). Retrofits take more time, cost more, and generate less profit, because once the drywall goes up, it's tough enough to get the wire installed correctly, let alone a large video screen for a home theater.
"One of my biggest challenges is to find ways to meet with builders and partner with them earlier in the process," says Tim Corder, sales manager at Hod's Home Theater in Waterford, Mich.
"Builders are leaving a lot of money on the table, especially when I get to the customers after they've moved into the house," Corder says. "It hurts me, and it hurts the builders, because I haven't had the time to explain the technology options early enough in the process. Once the entertainment room is designed and under construction, technology options can become limited, because it can be more expensive to add the screen or set of speakers the customer wants.''
Builder talked to integrators, builders, and vendors to find out the steps builders should take to ensure that their home theater jobs produce satisfied customer and adequate profits. Here's what they told us:
1. Take the time to explain the technology to customers. During an initial meeting, builders should take the time to educate customers on what's available in home A/V. This meeting should be very early in the process, well before the customer begins to select options. Any builder serious about home technology now offers structured wiring as standard. But customers also need to understand that while structured wiring is the fundamental building block for telephone, home computers, and most other home technologies, it does not fully lay down the infrastructure for A/V. New homes also need to be prewired for A/V. Use the initial meeting to get a sense of what the customer wants in a home theater and how much they can spend.
2. Develop a close relationship with a home electronics integrator. Very few builders have established their own home technology departments. Village Homes in Littleton, Colo., set up its TechTouch division several years ago and has had great success, but most builders don't want to be in the home technology business and prefer to turn over home theaters to an integrator. Look for an installer who's affiliated with an established trade group such as CEDIA, the Custom Electronic Design & Installation Association.
Some of the more successful builders have the integrators predesign and lay out a basic home theater and audio system in the builder's model homes. The music pulls customers into the model home and keeps them in the showroom longer. Once the buyer commits and signs a deposit for a new home, the salesperson refers the buyer to the integrator, who typically likes the buyer to visit the integrator's showroom. There, buyers can bring their own music or videos, listen to and view a wide range of models, and learn about the latest gear. Integrators are best equipped to install a full complement of structured wiring for home networking, plus wiring for A/V. An integrator will also make sure that all the cabling that goes into the house is properly sized and meets local building and fire codes.
3. Keep abreast of technology trends. Here's where you can really lean on your integrator to steer your customer in the right direction. For example, according to the integrators we interviewed, plasma screens are hot right now. Panasonic, Sony, Pioneer, Hitachi, LG, and Samsung all have popular plasma screen models. For larger screens up to 61 inches, digital light processing (DLP) screens can deliver higher quality at lower cost, and are starting to gain market share. Samsung is one of the first vendors to heavily promote DLP technology. Another trend to watch for is the convergence of A/V with the Internet and desktop computers. Companies such as Integra and Yamaha build receivers that let homeowners configure a home computer so they can download surround sound upgrades, or distribute MP3 files throughout the house. Another hot technology is Integra's Net-Tune server, which lets users download and store audio off the Internet and distribute digital audio files across an Ethernet home network.
4. Work with home technology manufacturers that understand new-home construction. Speaker Craft is one of the best examples of a company that understands builders. The company's in-ceiling speakers use just two sets of brackets for the entire line of speakers, a 6-inch model and an 8-inch model. This makes it much easier for builders, since all they need to know is the size of the speaker the customer wants, not the specific model. The actual speakers can be selected and installed after the home closes, or more easily changed if a customer wants to put in an updated model a few years later. SpeakerCraft has products ranging from $125 a pair to well in excess of $1,500 a pair in both sizes. The company also has very aggressive pricing and supports builder model programs. Niles Audio Corp. also has a broad range of models and sizes and offers some of the same aggressive pricing and model home programs. Other speaker companies that vie for the attention of builders are Bose, Russound, and Sonance.
5. Be realistic about what customers will spend and how they will buy. Custom builders have buyers who spend well in excess of $100,000 on a home theater and home technology. That's not going to happen for most builders. Expect that most home buyers are willing to spend $5,000 to $10,000 on a home theater. Also, while there's a lot of hype around the industry about homeowners rolling the full cost of a home theater into a mortgage, it's still very rare. Custom home buyers may fold the cost of a home theater into the mortgage, which saves them money in the long run, since they are paying lower home mortgage rates vs. a store credit card. But first-time home buyers stretching their budget will more typically roll just $500 into the mortgage for prewiring and call the installer later to add the electronics equipment.
6. Don't overcharge. Builders must understand that consumer home electronics is a high-volume, low-profit business and won't generate the margins they're used to on security or central vacuum systems. On the other hand, because of the high volume, builders can expect a 5 percent to 10 percent profit on a home theater. Builders who mark up home theaters by 20 percent or 30 percent will scare customers away. Consumers know what these products cost and don't want to feel that the builder took an unfair markup on a home theater.