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Digital signage industry prognostications for fall 2009

The Real Digital Media CEO forecasts some big moves into the digital signage space from large technology companies.  

September 28, 2009 by Ken Goldberg — CEO, Real Digital Media

As the football season gets into full swing, it feels like as good a time as any to break out the crystal ball and do some prognosticating. No sense in waiting until January… that is too conventional! With that in mind, I offer you a touchdown (and an extra point) worth of predictions.

1. Big hardware players make big moves: Look for HP, Cisco and potentially Dell to make moves to expand their presence in digital signage. Intel may also be ready to leverage its position in embedded systems beyond chips and boards. Cisco has not gotten what it hoped for out of its Tivella acquisition, and no one should be surprised if they don't take a second shot, perhaps with more of a hardware (media player) slant this time. Some of this was signaled at the recent DisplaySearch Conference in San Jose. I don't expect the big players in displays to make acquisitions outside of their sandbox. Most of them are simply not culturally able to manage the less forecastable software businesses, and the Planar/CoolSign experiment was a fine example of vertical deals not always making sense.

3. Capital for network deals will get smarter: Venture capital, private equity and even angel money will flow to larger scale, well-conceived network deals, and it will get tougher for under-capitalized, independent networks to scale and survive. With all the lessons learned in the past several years, investors have a keener sense of what they are looking for: mature management, realistic ramp rates, and strong evidence of advertiser interest for ad-supported deals. It is clear that there is money on the sidelines, but the hurdles for prying it loose are higher than ever.

4. Smaller, ad-supported networks dwindle in number: Many of the smaller networks will become attractive to larger entities and be receptive to takeover deals due to weak cash positions. Those less fortunate will simply disappear. Others will band together in smaller-scale mergers in an effort to achieve scale and efficient operations. Declining costs are not enough to float the boat on small networks, as it is and always has been about generating revenue. Scale and reach matter a lot to advertisers. As such, combinations that provide penetration in attractive DMAs may make more sense than ever, and we will see them happen.

5. The recession and the natural software cycle produce two interesting effects: First, as we have noted before, savvy retailers have a penchant for investing during downturns, so that implementation occurs ahead of recovery. We are already seeing the signs, and expect to see more retail activity than has been the case over the past 18 months. Second, while the retail activity picks up, so will software replacement as a source of new deals for solution providers. Many early players have fully depreciated the capital expenditures from their first foray into digital signage, and are now ready for second generation solutions. Wal-Mart TV 2.0 was perhaps the first and most well known example of this. Look for early adopters to set up very competitive processes as they re-invest.

6. New consulting practices will cater to big players: With bigger entities and the attendant bigger money entering the space, the need to build a business case and clear strategy will become greater, whether it is in support of a start-up network, an acquisition, or a new product. Big retailers, huge high tech companies and venture capitalists are not shy about using third party experts to provide perspective, validation and process. To-date, consulting in digital signage has tended to be niche-oriented (content, technology), and we expect to see more generalized, business-oriented practices emerge and win some large deals, while perhaps engaging some niche experts as subcontractors. (NOTE: AFTER THIS PIECE WAS WRITTEN, THE PRESET GROUP ANNOUNCED THEIR FORMATION, BRINGING TOGETHER DIVERSE DIGITAL SIGNAGE AND RETAIL QUALIFICATIONS UNDER ONE ROOF.)