At the InfoComm10 show this week, LG announced that it was introducing a software/media player/content bundle that they will target at the SMB market through their dealers and distributors. This brings yet another display manufacturer into the software business, competing with the many software companies already in the space. Given that my company sells digital signage software solutions and that I am prone to manifest my short fuse with sarcasm, you might expect a stinging post…. or at least a gauntlet thrown down. But there will be none of that. Instead, we’ll attempt a logical examination of what all this means to the display folks, to the software folks, and to the industry. Thanks to Mike Baron, the yang to my yin here at RDM, for his insight and zen-like calm.
The display manufacturers have been jockeying for position in the huge and emerging digital signage marketplace for many years. And with respect to our friends in the business, it is really hard to differentiate the products, especially in the sweet spot of the market. A really crisp 42″ hi def LCD with all the right ports and interfaces looks terrific to most people, regardless of the brand on the frame. Most digital signage purchase decisions are made without ever viewing an actual screen, and tend to be based upon price, warranty and sometimes relationships. This puts the manufacturers in a pretty tight spot. Regardless of how much they innovate, the biggest part of the market could apparently care less, and focus right on price. To complicate that more, The Korean companies have a built-in price advantage in the US, based upon their scale and the currency factor, with the Korean won tied closely to the dollar. This puts added pressure on the Japanese competitors in particular. Sony has been dabbling in software for many years, Mitsubishi has their own networking software, and recently NEC decided to offer “free” software. Samsung has soft-pedaled their MagicNet software from the outset, but has recently begun offering branded media players as well. LG introduced a media player earlier this year, and now with SignNet, they hope to close the loop.
What has driven these huge manufacturing companies to enter the software business? Interestingly, one factor may be the mutual neutrality between the software vendors and the display manufacturers. For the most part, software vendors have little reason to care whose displays are used (assuming it is a quality producer) unless a deal is jointly sourced or bid. It is tough enough to compete against other software companies. Linking one’s fortunes to a specific display vendor adds the risk that you may lose because your partner was not the low bidder on a high-cost item. On the flip side, the display manufacturers have to be agnostic with regard to the software vendors, because no single vendor has the market share to drive enough volume to meet display vendor unit volume growth requirements. With both sides trying to be Switzerland in order to meet their own legitimate goals, neither side has significantly leveraged the other.
At the same time, the dealer/distributor channel has hungered for a way to gain more leverage in the digital signage business. The challenge has been that the software side of the deal is complicated by the education and training required to properly position and sell it (especially on larger deals), and the delayed financial reward implied by SaaS solutions. The display manufacturers, to their credit, have recognized a void in the SMB market and an opportunity to create products for their channel partners. Providing a unified offering under a single brand, as Samsung and now LG have done, gives the resellers an easy-to-understand, easy-to-sell solution. Both companies have taken pains publicly and privately to emphasize that the intended market is lower volume SMB deals. NEC inferred the same approach in their explanation on DailyDOOH of their free Vukunet offering (although the comments are not charitable, including my own). The vendors are very much aware that the larger deals, where container loads of glass can be sold with the swipe of a pen, are likely to remain the domain of the more sophisticated software offerings. As such they walk a precarious line, trying to satisfy the dealer channel as well as the software vendor partners.
Does any of this matter? I think it most certainly does. The ability of software vendors to compete for deals that are within the reach of the reseller channel and the vertical offering of the display manufacturers is going to be impacted. Nicely featured, well-priced solutions may very well either disappear altogether, or be forced into very tight niche applications. It will be very difficult for them to sell against a bundled price from one giant company, or against a pseudo-free price from another. If the customer is satisfied that the bundled offer will meet their needs, it becomes hard to force a feature/function comparison. So those vendors who live in that space now are in a tough place. The SMB market has many more individual opportunities and customers than the large company and corporate markets, but each deal is smaller, and the cost of sales is just as high. The resellers, primarily AV companies, are well-entrenched at many customers and have considerable influence. The forecast is for rough seas.
For those companies competing for larger scale, more sophisticated deals, as RDM does, the actions of the display companies will be less impactful. That world includes sophisticated IT shops, procurement functions, consultants and extended bake-offs. The resellers don’t compete well there, and the display vendors know it. So while they lead the cheers for their new software offerings, they are working the back channel with the software vendors, promising that they will play nice on big deals in order to get leads and referred business.
A new customer called me today to ask who I would suggest they contact about displays for their new project. I didn’t hesitate to include my contacts at both LG and Samsung. Their software offerings did not impact that decision. Both companies have always been great to deal with, and can be trusted to respect our customer relationship. Rather than anointing themselves as industry leaders, both companies have taken steps to address the entirety of the digital signage market, differentiating their approach based on the nature of the deal. They have done so in context, and with purpose.
Make no mistake: there are very large forces in play that are changing the digital signage industry, forcing strategies to evolve. Software under glass is one example of evolving strategy. LG’s announcement was probably the right thing for them to do in order to engage their reseller channel and compete for a large swath of business. Selfishly, I never like to see new software entries muddy the already-murky waters, but this may actually serve to stratify the software market in a way that will be beneficial, almost in a yin-yang kind of way. I’m OK with that.