The digital signage industry faces several challenges as the global economy sours. Will companies cut back on capital intensive projects, or will they see the benefit of using these solutions to reach more customers?
Tim Tang, marketing director for HughesNet Digital Signage services, believes the current economic climate is a double-edged sword for digital signage companies. "In a difficult economy, we have seen some digital signage projects delayed. Digital signage projects are capital intensive programs, even in a good economy," he says. "In today’s economy, retailers are forced to do more with less. However, retailers still need to engage with their customers and still need to promote their products. Digital signage may provide an effective method to engage with their consumers. Nonetheless, there will be speed bumps for new initiatives in these types of economic circumstances."
The global recession also will create a shakeout of vendors in the space, says Chris Riegel, CEO, Stratacache, which provides multi-platform software and appliance-based technology. "We are seeing a massive wave of consolidation in the digital signage area. I believe you will lose 60 percent to 70 percent of the vendors in this space. The recession is having an impact and clearing out a lot of the companies that are not executing. That is clear."
Stuart Armstrong, president, Enqii North America, an end-to-end networked digital out-of-home solution provider, adds, "I would say that the digital out-of-home environment is an emerging market and is now moving to its adolescent stage. It remains highly fragmented, however with any emerging market, as it matures, there is going to be a culling out of companies within the space. The economic situation as it is, is going to be a catalyst, and we are likely to see many supplier companies in this space pull back or even worse, go out of business if they do not have the capital resources or market momentum to sustain themselves during this period," he says.
Riegel believes digital signage offers strong solutions for companies examining what they spend more closely. "Customers are being much more cautious to make sure they have a [return on investment], but we are also seeing an acceleration of projects where end customers are very focused on enhancing their performance. They find digital signage is a much more cost-effective method than broadcast television. As traditional media and TV numbers shrink, signage is taking greater percentage of that market."
Janice Litvinoff, director, digital media systems, Cisco, agrees. "We are actually seeing digital signage becoming more important than ever in the current economy. Utilizing digital media for communication with both employees and customers, as well as deploying for revenue driving models, is key. Retailers are increasingly needing to reach customers with targeted messaging and offers to drive sales, create awareness and increase customer intimacy. The public sector is continuing to invest, and there are a lot of opportunities in education with major deployments in schools and universities," she says.
Lyle Bunn, principal and strategy architect, Bunn Co., and a digital signage expert, believes the market has entered a new phase. "The proof-of-concept phase of digital signage is complete and application optimization stage and build-out stages are in progress. The business models for ad-based networks have been well developed, while staff- and patron-focused networks paid through internal communications budgets are growing rapidly. The current market split of 50-50 of both types of deployment is expected to generally continue, although sponsored content or lifestyle ads may increasing be applied to offset the operating costs in the non-ad based business model."
"Customers are being much more cautious to make sure they have a [return on investment], but we are also seeing an acceleration of projects where end customers are very focused on enhancing their performance."
— Riegel, Stratacache
This market shift will make digital signage an attractive option for a whole host of companies, and one of the key questions is how can satellite companies leverage their advantages. "Satellite offers operational economies to large scale digital signage networks, while multicasting and single vendor connectivity sourcing provide further economies for multi-region networks. In deployments that include dynamic, customer-facing display with staff training and live promotional events, satellite is especially well-suited. As digital signage networks grow and aggregate, satellite will increasingly be examined as a next-stage option," says Bunn.
"I think in the short term, it is only going to get (the digital signage industry) bigger while there is a wait for broadband spectrum that they have auctioned off," says Greg Weaver, manager, digital signage networks, Microspace Communications Corp. "While cellular is an option for content delivery, it does have limitations from a bandwidth standpoint. Satellite is ideal for networks that require frequent updates of larger files and its inherent multicast capabilities are quite advantageous. The capacity for cellular is limited and connectivity in the United States, when you get away from a major metropolitan center, is an issue. In all the terrestrial scenarios, there is a per site, per month charge to get connectivity."
The move to high-definition content also is having an impact on the digital signage market, says Weaver. "It is not just 50 megabyte files anymore. You are looking at 1 gigabyte files and larger and updating those every few days, because as the screens get bigger, you want to have high quality images on there. As previously mentioned, with satellite multicast, you can send it one time to multiple locations. Networks are paying one time to get the content to all these locations, as opposed to terrestrial connections having to pay $80 per site per month. If you have 1,000 sites at $80 a month, that’s $80,000 a month. The costs can quickly escalate," he says.
Tang also believes there is a "huge opportunity" for satellite. "Digital media solutions require a great deal of bandwidth. We have worked with several large enterprises who have attempted to distribute high-quality multimedia content through a terrestrial network. This is a difficult and challenging task. The idea of point-to-point distribution with large amounts of content simply does not scale, particularly with large networks. Multicast distribution via satellite is the ideal solution to distribute multimedia content to a large number of locations," he says.