Beyond Tariffs: Rethinking Value in the AV Industry

The April 2025 US tariffs – although not yet finalized – have introduced new challenges for global AV manufacturers and customers alike. With added duties on a wide range of components and finished goods, cost structures are shifting – even as customers are becoming more cautious with their spending. While these developments may reflect broader global trends - for our industry, they’re prompting important questions about how we operate and how we grow.

In this article, I’ll explain why AV manufacturers need to think differently about how value is created and delivered in an evolving market. 

The Tariff Shockwave: What’s Changing and Why It Matters 

The April 2025 tariffs have introduced a new set of variables for AV manufacturers to navigate. The immediate impact for many in our industry is dramatically increased cost pressure. Manufacturers are seeing higher prices on components and finished goods, prompting reevaluations of pricing models and supply chain strategies. At the same time, many customers are tightening their budgets in an uncertain business climate. This leaves manufacturers and OEMs caught between rising input costs and limited pricing flexibility.

It’s not just happening in the US. The EU has signaled potential countermeasures, and China has announced reciprocal tariffs. These moves are likely to add further uncertainty for global businesses. For now, the full picture is still taking shape - but it’s clear that flexibility and foresight will be critical in the months ahead. All of this leaves AV manufacturers facing tough decisions about how to respond.

The Dilemma: Raise Prices or Risk Profitability?

For AV manufacturers, the current tariff landscape has created a difficult choice. One option is to raise prices to offset rising costs - a move that risks alienating customers and shrinking market share. The other is to hold prices steady, absorb the impact… and watch margins shrink.

Neither path is easy. Customers are becoming more budget-conscious and price-sensitive, even as internal stakeholders remain focused on profitability. Managing expectations in this environment is no small task. We can’t compromise on performance or reliability - yet we have to find a way to introduce flexibility on cost.

We also have to keep our eyes on the horizon. Over time, cost pressures can take a deeper toll. Thinner margins often mean fewer resources for innovation, slower development cycles, and less investment in customer support. Left unaddressed, this erosion can weaken competitiveness and chip away at brand loyalty built over years. 

But there is also a third path - one that doesn’t rely on price hikes or margin cuts. It begins by rethinking how AV value is delivered.

Monetizing Differently: Unlocking Software-Driven Growth

The traditional model of bundling software at no cost with hardware is becoming increasingly unsustainable. Instead of relying solely on hardware margins, manufacturers have an opportunity to pivot toward a more resilient, software-led model.

After all, almost every device is composed of hardware and software to make it run - rebalancing the two can greatly impact the cost structure, especially as hardware carries tariffs that software does not. By enabling software to run through licenses and by adopting new feature-based offerings, through which specific software capabilities are sold as premium add-ons, manufacturers can introduce pricing flexibility without altering baseline hardware costs. This approach not only helps preserve margins but also aligns more closely with how customers consume technology today.

For example, instead of manufacturers selling a $1,000 device in a one-time sale (which under the new tariffs might now cost $1,300), they could sell the device for $500, plus a $500 license that enables a software component. Under the new proposed tariffs, the cost increase would be 50% less. Enabling additional, optional premium features not only has the potential to increase margins, but also provides customers with greater flexibility. 

This model helps absorb the shock of fluctuating component prices and supply chain volatility by shifting focus away from hardware to hardware+software sales. 

Shifting the Model: Leading with Flexibility, Not Just Products

How manufacturers respond to cost pressures says as much about their brand as it does about their pricing. Those who adjust their business model - rather than simply raising prices - signal that they’re thinking long-term and staying aligned with customer needs.

Platforms like Xyte can support this shift, enabling manufacturers to introduce feature-based pricing, offer software upgrades, and bundle services in ways that reflect actual usage. This agility helps manufacturers create added value without increasing the baseline hardware cost - a key distinction in a price-sensitive environment.

Meanwhile, companies that default to price hikes risk appearing reactive or disconnected from the realities their customers face. Those who innovate around flexibility and service delivery, on the other hand, position themselves as forward-looking partners.

In uncertain times, predictable pricing and value-added offerings build confidence - and that confidence turns into lasting customer relationships and stronger market resilience.

The Bottom Line

Every shift in the market is also a chance to evolve. While the latest tariffs have introduced real pressure, they’ve also created space to reconsider how value is built and delivered in the AV industry.

By embracing software and services as core parts of the business - not just add-ons -  manufacturers can create more resilient, recurring revenue streams that align with today’s realities. This transition doesn’t require sweeping change overnight, but it does call for a mindset shift: from selling products to delivering ongoing value.

Companies that act early won’t just stay afloat - they’ll help define what the AV industry looks like in the years ahead. Markets shift. Expectations evolve. And momentum belongs to those willing to lead.