DSE: Digital Signage Expo

Technology/Content Provider

Technology and content providers comprise the largest stakeholder segment of the DSE Quarterly Business Barometer. Of those responding to the fourth quarter poll, 31 percent identified themselves as systems integrators and installers or AV installers (Figure 32) followed by almost equal percentages of content providers (17 percent), component manufacturers and distributors (16 percent), and software developers and distributors (15 percent).

This group displayed a significant shift in attitude toward the future of the industry in Q4, with a decrease of 7 points, from 62 to 55 percent, among those who indicated they felt “very positive” about the industry and an increase of 9 points, from 33 to 42 percent among those who indicated they felt “somewhat positive” (Figure 33). Despite this shift, the combined positive total (“very positive” plus “somewhat positive”) edged up 2 percentage points from Q3.

Surprisingly, the respondents were less upbeat about the future for their businesses, with only 48 percent indicating they felt “very positive,” down from 55 percent in Q3 2009 (Figure 34). By comparison, the percentage of those feeling “somewhat positive” about their businesses rose 5 percent over Q3, reflecting a similar shift in attitude toward their businesses as toward the future of the industry as a whole.

As comments about the future of the industry were by and large upbeat, we saw few clues that would explain these shifts in sentiment. It is obvious, however, that the state of the economy still weighs on the minds — and businesses — of most digital signage executives.

“When the economy slowed, DS became an optional spend that most companies put on hold. As the economy improves, budgets will be opened back up,” says Mark Zwicker, VP business development, St. Joseph Content/Alchemy, Toronto.

“The economy has really hurt the DS industry,” adds Thomas Doherty, president, Teknowledgies LLC, Sunnyvale, Calif. “For most companies, DS is, unlike expenditures like rent and payroll, a bit of a ‘nice to have.’ As such, it is one of the first areas to get cut in most budgets. I think that, if the economy rebounds, we will see an uptick in DS installations and projects.”

Though the state of the economy has exacted its toll on the businesses of digital signage technology and content providers, the Q4 respondents from this group were generally positive in their sentiments toward general business conditions looking out six months into 2010, with 65 percent indicating they thought economic conditions would be “better” and 33 percent predicting conditions would remain “about the same” (Figure 35).

Those indicating their dollar sales volume was “higher” in Q4 2009 than in Q3 remained nearly the same at 40 percent compared to 42 percent for the previous quarter (Figure 36).

A rise of 3 percentage points among those indicating their dollar sales volume remained “about the same” put the combined total of 74 percent (“higher” plus “about the same”) not only slightly ahead of Q3, but also at the highest level for the year.

The Q1 2010 forecast is even rosier, with the percentage of those predicting a “higher” dollar sales volume than the previous quarter up 8 points to 56 percent and those predicting that sales will remain “about the same” only off 2 points to 29 percent (Figure 37).

As for the sectors the technology and content providers forecast to experience the most growth during the next 12 months, Retail (also see Appendix C) and Healthcare remained neck-and-neck, as they did throughout 2009 (Figures 38-39). Among the other top five venues were Restaurant (also see Appendix C), Transportation, Education and Arts/Entertainment/Recreation.

When asked which types of Arts/Entertainment/Recreation venues out of a list of 12 would experience the most growth, the respondents were decisive in indicating Spectator Sports Facilities and Casinos (Figure 40). (also see Appendix A: “Profile of Arts/Entertainment/Recreation Industry Sectors.”)

While the overall prognosis for digital signage growth is good, most industry insiders recognize that in such a diverse industry, different drivers may affect different sectors. For example, during the past year, digital signage in the public sector seems to have flourished, while deployments in retail have slowed.

As one unnamed respondent puts it, “Outside of the public sector, almost everyone is postponing projects; it's too early to tell how fast 2010 may open up.”

The following respondent comments provide a glimpse into the various factors driving some of these sectors:

• Retail: “Retail will take an upswing only based on market recovery in Q4 sales of 2009.” — David Carbert, senior product & business development manager, TELUS, Toronto

• Healthcare: “The health care field will be a big target for the next couple of years.” — Jay Back, owner, j-Consulting, Hesperia, Calif.

• Restaurants: “In my particular field, there has been a big switch from printed menu boards to the digital menus, and we receive requests daily for new accounts interested in upgrading their facilities.” — Anonymous

• Education & Corporate: “Most of the North American corporate and campus communications applications are tied to the broader macro economy. Improvements in the general economy appear to impact the number and scope of these deployments. There is a general sense (driven by the stock market) that the economy is improving. As a result, we are seeing a higher volume of activity.” — Sean Matthews, president, Visix Inc., Norcross, Ga.

• Stadiums & Arenas: “As technology grows and the financial climate gets better, we are finding that the investment to upgrade the experience of digital signage outdoors has grown incrementally. The stadiums have proven their need to upgrade to flat panel technology with better content and will invest to keep the venue more attractive and fun to attend. We have seen this transition to resorts and amusement parks as well.” — Lynn Stearn, VP sales and marketing, SunBriteTV LLC, Moorpark, Calif.

• Government: “In our sector (federal government), there is a very strong push to implement at large military bases.” — Anonymous

Answers to our question regarding the chief developments needed to spur future DS/DOOH network growth remained relatively unchanged from the previous quarters (Figure 41), with “more proof of return on message & investment” once again leading the way, followed closely by “lower costs for network deployment & operation.”

As Bill Gerba, CEO of Fort Lauderdale, Fla.-based WireSpring Technologies points out in his recent 2009 Digital Signage Pricing Study, the cost is indeed going down, from $8,400 per sign in 2004 to $4,355 per sign in 2009, based on the cost of implementing a 100-screen network.

Furthermore, respondents are increasingly noting that deployment costs are becoming less of an obstacle.

“Digital signage is coming of age. The costs are falling into line, and the lift generated is being well documented,” says Michael McDonald, director business development, National Product Services, Irving, Texas.

In fact, one respondent expressed the concern over a counter-trend that may have other technology providers worried. “As a hardware supplier, we feel that a cost-down approach will negatively affect our sales numbers while volume will take time to catch up,” says Justin Gibson, business development, Interlink Americas Inc., Long Beach, Calif.

Lowering costs should drive up volume as well as open the door to new markets, which in turn will drive more volume, according to some respondents. “Cost has to come down in both hardware and software in order for the volume to be there as well as being able to provide signage to the smaller chains and businesses,” says Christopher Kim, chief technology officer, Digital Concepts LLC, River Vale, N.J.

Viewed from another perspective, the corollary of decreased deployment costs is increased return on investment (ROI). As William Stanton, director of business and technology, Cilutions, Germantown, Md., points out, “The challenges for the industry primarily lie in two areas: increasing ROI (by decreasing implementation costs and increasing ad revenue) and adopting industry wide standards that are universal and measurable.”

“Businesses have a pent-up demand for DSN (Digital Signage Networks). With cost of deployment going down and the ability to measure ROI, the benefits now can be maximized over a broader spectrum of business analysis,” adds Brent Brown, president, International Business Systems Inc., Mercer Island, Wash. “ROI and ROM (Return on Message) are the key to the future. If the content can be calculated and measured, the cost can be justified.”

Appendix A

Appendix C