Trying To Solve The L.E.D. Quandary
Selling “light,” not light bulbs, is one way that companies producing long-lasting L.E.D. bulbs hope to stay in business, even after “socket saturation” sets in.
Is there a workable business model for products that are built to last, rather than to fall apart? This is an idea that I explored here in July, in a story about the L.E.D. quandary. That quandary, in short: companies are making a good thing—light-emitting-diode bulbs that conserve energy and last for years—but they can’t make money in the long run from products that rarely need replacing. As global light sockets fill with L.E.D.s, century-old corporate titans are getting out of the bulb business even before “socket saturation” tips sales into a decline. The question remains whether any company has an incentive to make a product that is not designed to fall apart or become obsolete.
After that story ran, several newer, smaller firms reached out to me claiming to have solutions to the conundrum. Two seemed worth a deeper look: Cree, an L.E.D. specialist in the U.S.; and UrbanVolt, based in Dublin, Ireland. Both say that they no longer sell light bulbs but “light.” They exemplify two very different approaches to doing so.
Cree’s business model turns light into a gadget. With its new line of L.E.D. bulbs, which came out in September, the company promises not just more energy-efficient light, but better light. “Better light makes the colors in the object that is illuminated more accurate, more vivid, more true,” Al Safarikas, the vice-president of consumer-product marketing, explained.
Better does not mean best. On the index that measures how accurately a light renders color, the warm, natural tone of the familiar incandescent bulb—those short-lived energy vampires that L.E.D.s are intended to replace—is the gold standard, scoring at or near a hundred out of a hundred. In Cree’s new bulb line, the L.E.D. analogue of a sixty-watt incandescent has a rating in the high eighties. That’s good, but Cree itself has made higher-priced products that offer equivalent projected life spans (twenty-two years under normal usage) but superior light quality, at least by this metric. Three years ago, Cree started selling bulbs that scored ninety-three on the index. They cost twenty dollars each. For the same price, you can get a four-pack of Cree’s most recent bulbs.
Cree’s latest generation of lights is not a leap forward so much as a strategic compromise at a price point that moves bulbs out of the hardware store. With sixty-seven bulbs in the average American home, products like Cree’s make it more affordable to shine high-quality, energy-efficient light everywhere from the bedside lamp to the storage closet, and your children could grow up and leave home before the next time you need to change a light bulb.
The company doesn’t intend to let that happen, however. Cree is approaching L.E.D. lights as products, like smartphones, that people will regularly upgrade in order to benefit from new features or improvements. These might range from further fine-tuning of efficiency and color quality, to app-driven “connected bulbs” that respond ever more perfectly to your needs or tastes. (Cree currently offers styles that can be remotely scheduled to dim, brighten, or turn off and on.)
“We’re not inventing this consumer behavior. It’s what technology companies do,” Betty Noonan, who oversees both Cree’s marketing and its general consumer business, told me. “I have replaced more damned flat-panel TVs in my home, just because they got thinner and brighter, than I care to even tell you.”
Cree’s solution to socket saturation is gadgetization, which is itself a form of obsolescence, effectively shortening a product’s life span. On the other hand, it does buck the alternative trend: ever-cheaper L.E.D. bulbs that cast the kind of light that gives a zombie pallor to human skin and may burn out in a matter of months, turning a durable technology into a disposable one. Disposability was one of the ills L.E.D. technology was supposed to end.
Across the Atlantic, UrbanVolt is selling light not as a product but as a service. Hire UrbanVolt, and certified electricians in hard hats and safety vests will come and replace your light bulbs with proprietary fixtures—designed by UrbanVolt, made in China—without you paying a dime up front. “We started with a really simplistic thing on the back of a napkin: If we were giving these away for free, would everyone do it?” Kevin Maughan, the co-founder and C.E.O. of the company, said.
Across the Atlantic, UrbanVolt is selling light not as a product but as a service. Hire UrbanVolt, and certified electricians in hard hats and safety vests will come and replace your light bulbs with proprietary fixtures.
So far, UrbanVolt is working only with businesses, ranging, to date, from a coffee shop to a million-square-foot shopping mall. (The company is considering a package for residential customers.) Changing to high-quality L.E.D. lighting normally cuts these companies’ energy use by eighty per cent, but the expense of making the swap in the first place can be prohibitive. UrbanVolt solves the problem by replacing its customers’ lights at no initial cost; each client then pays UrbanVolt a monthly share of the savings on its electrical bill.
During the contract term, which lasts five years, UrbanVolt must pay for any maintenance of the light fixtures. This is an incentive for UrbanVolt to eschew obsolescence in favor of durable lights, and, indeed, its most popular product lasts nearly twenty years under typical usage. (The company deployed twenty-five thousand fixtures this year, and had to replace six of them—a failure rate far below one percent.) Once the contract expires, the client keeps the fixtures and can then pocket all future savings, or extend the service agreement with UrbanVolt at a substantial discount, given that the original fixtures by then will have paid for themselves.
“There’s a huge addressable market today, but every day our market is shrinking, because every building that changes to L.E.D. lights is one less customer for us,” Maughan told me. “We think it’s a big boom business for the next five years, and then it will taper off.”
What happens when Ireland begins to feel the socket-saturation effect? “It is kind of our goal to put ourselves out of business,” Maughan said. That claim is a cliché in do-good business circles (and if anyone has heard of a firm that actually followed through, please let me know). Maughan doesn’t really plan to put UrbanVolt out of business, but he might get out of the bulb business. He estimates that the market for switching over to L.E.D.s is worth about two billion dollars in Ireland over the next ten years. But UrbanVolt is already researching other product-as-service energy technologies that could be sold to customers in a way that brings to mind video games: level 1 is L.E.D. lights; level 2 might be on-site batteries that reduce bills by storing power at off-peak times, when energy is cheaper; level 10 might take you entirely off the electrical grid. The company hopes to offer one such new service sometime next year.
Looking longer term, Maughan speculates that UrbanVolt could eventually cease providing products entirely, drawing its income instead from the maintenance of a large network of clients whose energy systems UrbanVolt has helped to build. “You no longer have the cost of having to purchase assets and invest in them and install them into places. You’re now purely a service business with long-term recurring revenues,” Maughan said. “That’s not a bad place to be.”
This description parallels what Tim Cooper, a design professor at Nottingham Trent University who has studied product durability for more than twenty years, promotes as a more sustainable consumer economy. That economy, he argues, would be built on quality products, with longer replacement cycles, sold for higher prices, with a much larger repair-and-servicing sector to keep them in use. If Cooper’s vision sounds like a throwback to the days when toaster repair was a credible way to make a living, it is. According to researchers at the Global Footprint Network, an ecological economics think tank, American consumerism probably crossed the line into unsustainability—meaning that U.S. per-capita consumption exceeded the natural resources theoretically available yearly to each world citizen—sometime between 1940 and 1960.
While the L.E.D. industry offers glimpses of a possible future, the idea of an entire, modern economy founded on long-lived products and their maintenance remains, as Maughan put it, “pie in the sky.” What’s becoming clear, though, is that durable goods haven’t only faded because the consumer economy is jacked up on greed and shopaholism (though there is that, too). It’s also because the businesses that sell stuff that lasts may not last long themselves.
By J. B. MacKinnon