Is the digital signage industry finally starting to consolidate?

March 20, 2014 | by Christopher Hall

After a recent mini spate of mergers, acquisitions and joint venturing — some of which came hot on the heels of a potentially seismic announcement from Google at this year's Digital Signage Expo — Digital Signage Today reached out to a few industry insiders to gauge their reactions to the news.

With Barco's acquisition of X2O Media, the merger of Broadcast International and Wireless Ronin Technologies and the joint venture agreement between MRI and LG Electronics, we asked industry insiders if this spate of mergers and acquisition activity was an early sign of the big wave of consolidation the industry's been waiting for. And we asked them if the latest M-and-A news might be a reaction to the news of Google coming into the space (although the LG-MRI JV was announced prior to that news breaking), or just business as usual as companies partner up to increase market share.

"Absolutely, these are all part of an overall process," Real Digital Media CEO Ken Goldberg wrote in an email. "Many have been predicting it for a long time, but now the variables seem aligned for action.

"Niches have been defined for software and hardware vendors; prices have dropped, and with them margins; expansion capital is harder to raise; and getting to some sort of critical mass profitably has become challenging for some."

Goldberg said he viewed the Barco-X2O deal as strategic, much like the Cineplex acquisition of EK3. "They paid a premium price at face value, but apparently see a fit and speed to market as trumping a low price," he said. "My views on WRT and BI are already public, and I view it as far more a move of mutual desperation than of a hugely strategic opportunity. But it is still consolidation of a sort. It will almost certainly not stop there. Barco represents a new type of potential buyer, and we haven't even seen much in the way of M&A that pairs mobile with digital signage —yet."

Digital Screenmedia Association Executive Director Paul Flanigan said the news likely is more a sign of the times as the money in the industry moved from hardware to services. "From my prior days of working for an integrator, the margins on hardware sales have all but vanished. For Barco (largely a hardware manufacturer) to acquire X20 (a CMS platform) to combine makes sense," he wrote in an email. "They can create complete solutions together, and X20 can bring in some already established clients and services that Barco may have looked at creating themselves."

As for the LG-MRI JV, Flanigan said the move seems to have increased LG's product line while decreasing its barriers to entry in new markets where the company sees opportunity. "This is not necessarily the model I describe above, but then again, they have not shared their P&L sheets with me," he said. "Big companies are big for a reason — they enter markets, buy or beat up the competition, and continue to grow."

But Rich Ventura, vice president of product marketing and solutions operations at NEC Display Solutions, took a slightly different view, saying he didn't see these announcements as a new wave of consolidation but simply "direct responses to business opportunities and challenges."

"It will be interesting to see how each action impacts their business and the industry as a whole," he said. "The responses and ramifications of each will probably not be entirely known or felt for a few months. This supports the idea that companies must continuously evolve in order to truly deliver complex solutions that meet the needs and challenges of the market."

Keith Kelsen, author and a longtime digital signage analyst/consultant/executive, indicated that these tremors were early signs that the industry is about to shift dramatically.

"One word: mobile," he wrote. "The only companies that will survive will be solution-based companies with reach, cash and innovation around mobile and social. And that doesn't mean a like me button ... It's integrated platforms that drive real-time decisions in the marketplace directly to the consumer."

Industry consolidation will probably continue, as companies with unique propositions combine to form full-service solutions, Flanigan said, but it will be more the result of natural selection within the industry than because of another megacompany entering the space.

"Everyone has their eye on Google, but I'm not entirely sure Google's entry into the space has much to do with this," he wrote. "If that were the case, we would have seen a lot of companies consolidate when Cisco and Intel (among others of that size) entered."

Ventura also seemed to think the news from Google and the recent activity probably weren't related — but Google's testing the digital signage waters "brings an exciting new opportunity for the industry."

"It shows us that this is truly a huge growth market and that we are finally starting to reach the tipping point," he said. "Those of us who have been involved in the digital signage space since the beginning should see this as a new breath of fresh air with opportunities to grow our business."

The Google news and that breath of fresh air could result in the industry delivering "new exciting platforms and applications to digital signage consumers."

"There will be some that will consider this a heavy threat to their business; we saw this in recent years with Android players and embedded media players," he said. "But what it did instead was help us all look to new strategies to deliver the right solutions and the right products for the signage market. Not only will there be more changes because of Google's entry to the space, but there will also be new breakthroughs in content delivery systems."

And Goldberg echoed those sentiments, that Google wasn't the catalyst for the latest news, but could be for other changes for some time to come.

"I do not think that Google announcing a Chromebox at DSE did or will motivate anyone to buy or sell," he wrote. "While some people thought it could be life-changing, it is still just a box. There is much more to it than that. If Google wants into digital signage, they have the resources to jump in as wide and as deep as they please, and it won't revolve around a media player, trust me. There will be people lined up to sell their wares and indeed their companies to Google, just like it used to be for Cisco. But my best guess is that Google is smart enough to leave the low-margin stuff to others, and to figure out how to get into the ad-selling and content-distribution business at high margins."

Topics: Hardware , Mobile Interactivity , Outdoor Signage , Software , Trends / Statistics

Companies: Digital Screenmedia Association , LG Electronics USA, Inc. , Cisco Systems , NEC Display Solutions , X2O Media , LG-MRI , Intel Corporation

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