Satellite-Based Digital Signage Market
By Christopher Baugh
Satellite-based video distribution is, and perhaps always will be, paramount to satellite industry success. Video represents the vast majority of revenue for virtually every satellite operator worldwide. Through services such as permanent channels, occasional use, direct-to-home (DTH) platforms and business television (BTV) networks, video remains the cornerstone of the satellite market.
In the enterprise space, video has also been an important revenue source for satellite players. Enterprises have come to realize that video is one of the most powerful tools for communication with employees, suppliers and customers. This realization has led many enterprises to distribute large amounts of internal video content over closed BTV networks. Satellite BTV networks for internal training, in-store video promotions, corporate communications and video collaboration have been used by large corporations in order to foster effective company-wide communications.
Many Fortune 1000 companies use satellite BTV networks as an augmentation to an existing local area/wide area network due to the efficiencies of using satellites for one-to- many distribution. Such verticals as the retail market, manufacturing, automotive and financial sectors use satellite BTV networks as an everyday component of their communications infrastructure. The introduction of IP now promises to revolutionize the BTV market in terms of new services, reduced bandwidth requirements and enhanced distribution capabilities.
Intelligent Digital Signage
The emergence of IP in the BTV space has made a significant impact on the nascent digital signage market. Digital signage uses technology to combine high-quality video with other media-rich content to create dynamically changing advertising.
Digital signage has long been the focus of niche players eager to deploy solutions in the retail market. Before the dot-com fallout, many companies expected this segment of the market to be particularly lucrative. While plans were put on hold after the fallout, concrete plans are now beginning to take shape in this industry. In fact, many service and solutions providers project the retail digital signage/kiosk market will be the largest near-term BTV opportunity.
Digital signage is traditionally designed as a means for retailers to generate new revenue streams and increase in-store sales. Digital signage involves distribution of video (and accompanying data) and digital images to retail locations where the content is intelligently played out via a plasma screen, TV, kiosks, computer monitors or other digital media. Content can be delivered either live or on-demand (store-and-forward), but on-demand delivery represents virtually all digital signage deployments. Content is typically a combination of feature entertainment, national brand advertising, news and promotions customized to audience demographics, seasonal content, local geography and other variables. Additional content could include how-to features and informational programming.
Content is distributed and stored locally on a server in the site location. A play list can also be sent to each site, which directs the receiver and storage unit to play a pre-selected set of content on a TV in the enterprise location.
While most early applications included primarily point of sale (PoS) videos, many new endeavors are incorporating point of purchase (PoP) video monitors in order to drive instantaneous purchases of selected items. According to SkyStream, more than 75 percent of purchase decisions are made at points of purchase, which signifies a compelling opportunity for PoP viewing.
A wide range of uses for digital signage exist. Pharmacies can use TV screens to carry advertiser-sponsored messages related to health. Grocery stores are able to display ads for discounted products. Banks can deliver up-to-the-minute news about investments, stock quotes and retirement planning. Digital signage can also be used as an information point in public places such as airports, railway stations, hotels or hospitals.
According to a November 2001 Nielsen survey, in-store broadcast television builds brand equity, customer satisfaction and brand loyalty. Additional benefits of digital signage and retail kiosks include:
- Perceived as low cost – claims are often made that a digital signage solution costs less than television advertising for stores and their partners;
- Enhanced shopping experience;
- Direct, unfiltered information that communicates value, price and savings to customers and employees;
- Same infrastructure used for employee and customer communications;
- Employees are able to provide more informed customer service;
- Sales are driven at PoP; and
- Digital signage is ideal when in-store promotions change frequently and where price is a primary means of competition.
Benefits of IP
Similar to other enterprise video markets, IP is a vital factor driving growth in the digital signage and kiosk market. In legacy MPEG digital signage networks, the enterprise is limited to looping the same video over and over, with no control over either the timing or targeting of in-store promotions. Next generation IP video networks have dramatically changed the look and feel of kiosk applications. Content can be distributed to individual kiosks within a store, enterprises can create video play lists to be played out at various times of the day, and enterprises can develop interactive displays.
IP also enables content customization to a specific department, location, region, time of day, day of the week, season, or by any other means. And perhaps most importantly, IP allows advertisements to be sold based on a unique location (geography, season, etc.).
Industry analysts have projected the combined terrestrial and satellite digital signage market will reach $2 billion by 2008. While Northern Sky Research (NSR) believes this number to be greatly overestimated, an emerging opportunity is certainly taking shape for satellite players. Based on NSR projections, the IP satellite-based digital signage and kiosk market (in North America and Europe) will grow from $19.66 million in 2003 to $104.76 million in 2006. This projection excludes customer premise equipment sales, integration and installation revenues. This conservative projection is based on estimations of actual deployment deals in the near term, in addition to NSR projections of retail take-up in the latter forecast years.
As noted above, many satellite companies see this market as a prime opportunity. Industry leader Kingston inmedia claims this market will be the largest segment of the IP enterprise video space in the UK. Microspace also sees a great deal of activity in this market. Specific deals noted by NSR include:
- Globecomm – won large contract for 1,300+ site Home Depot network of MPEG BTV and IP kiosk video distribution.
- BT Broadcast Services – won a small deal for delivery of IP-based advertising video to a chain of gas stations (video to the pump) in the UK.
- Kingston inmedia – claims it is far along in discussion with a large customer in the UK, which would install digital signage sites in all store locations.
- Spacenet – claims it is working on a significant convenience store deal, but it was unable to provide specifics due to confidentiality reasons.
- SkyStream — deployed an IP-based digital signage network at all 1,800 Safeway locations. The service involves broadcasting of video and play lists to 42-inch plasma screens and strategically placed 8-inch digital price “flags.”
Additional companies trialing digital signage technology in the UK include Debenhams, Sainsburys, Asda, Boots, WH Smith, M&S and Selfridges.
Despite signs pointing to positive growth, this market is not without hurdles. Two large hurdles may curtail the growth rate of this market over the next two to three years:
1. Cost of Technology – Large plasma screens cost upwards of $10,000 per unit, and this cost is multiplied by many thousand of dollars based on the scale of many retail chain deployments. Such a cost may be workable for the largest of retailers, but will severely limit the market in mid- to lower-tier retail establishments.
2. Weak Advertising Market – Advertising is extremely important to this model since it can offset installation costs and increase return on investment to the retail establishment. Retailers can sell airtime to manufacturers in order to promote their brands at the point of purchase. In effect, the state of the advertising market will ultimately determine the deployment schedule of digital signage solutions. Unfortunately, the worldwide advertising market is suffering through a prolonged slump and will likely not improve soon. Once again, the largest retail chains may not be affected by this trend, but it is a direct factor relating to overall market growth.
Christopher Baugh is president of Northern Sky Research. He can be reached at firstname.lastname@example.org. This article is based on a new Northern Sky Research report entitled Next Generation Satellite Business Television.