Industry veteran Lyle Bunn recently released a white paper, reviewing the year 2008 for the digital signage industry. As always, Lyle’s comments are astute and accurate. His forecast of continued strong growth in 2009, despite the economic backdrop, is well-founded. The improvements in the general visibility of digital signage, availability of information and case studies, increasing numbers of industry consultants (like Mr. Bunn and many others), advancing technology options and falling hardware prices have come together to create serious momentum for our industry. As Lyle suggests, perhaps it is time to capitalize the word Industry.
There are two other waves that are forming in the Industry ocean that are worth noting as well. The first is a movement of major corporations into network ownership, and the second is a replacement cycle for early entrants. Both are significant.
I have long been an advocate of not using WalMart as an example when discussing digital signage, for the simple reason that there is only one WalMart. No other retailer can match the presence, financial resources and leverage with vendors that WalMart has enjoyed for so long. For that and other reasons, what they have done with WalMart TV can not be extrapolated across other environments. That being said, WalMart’s launch of WalMart TV 2.0 this year underscores both new waves. First, it appears that WalMart’s next generation network includes a change in long-time partner PRN’s role from primary mover to mere vendor. Most observers would assume that WalMart has done the math, and would like to enjoy a larger piece of the pie. That PRN is now for sale at a fraction of what Thomson acquired them for might be a good clue that this could be the case. Additionally, WalMart has partnered with DS-IQ to add valuable movement data to the player logs, gaining deeper merchandising and advertising effectiveness data, which will in turn drive ad rates higher.
WalMart’s move to a stronger ownership position in their network may well serve as a model for other large corporations, particularly retailers, as they evaluate business models for digital signage. While the well-known names on the “hot list” I maintain on a white board in my office have usually been 80% or more associated with third party ownership, we have seen a dramatic shift toward corporations making the capital investment and looking to third parties only as outsourced operators. There is still plenty of action for the third party ownership but the ratio is clearly changing. That change means that digital signage is becoming a strategic marketing application.
Early adopters of digital signage have had years to hone their business models, refine their requirements and push the envelope of the capabilities of their chosen solutions. Some of these pioneers have very significant networks deployed. As their requirements evolve beyond their solutions and their options to support those requirements expand, many early adopters are now entering a replacement cycle for software. This is not at all uncommon. In retail, POS software usually has a 4 to 8 year replacement cycle. The cycle for the more sophisticated merchandising tools is generally longer, but it is real. I believe that the cycle for digital signage solutions will be closer to that of POS. In some cases, incumbent vendors will retain their relationships. In others, they will not. The sales process for these situations is accelerated and intense. The buyers know what they want, where their pain points are, and where they need to take their networks. They have been to trade shows, conferences and user group meetings. They read blogs. They talk to their peers. As this wave washes over the Industry in the coming year or so, you will see some changes made, as experienced and savvy buyers place their bets.
Yes, Industry it is.