Article

Pioneer shutters signage network

A look at the demise of a forerunning digital media network.

August 1, 2007 by Bill Collins

Advance TV, one of the largest and longest-running retail media networks in the United States, has been shut down.

Advance Auto Parts Inc., the automotive aftermarket parts retailer that operates the network, has not yet announced the shutdown publicly. However, an Aug. 1 visit to two stores in the Cincinnati area confirmed that the Advance TV screens were dark. One store employee said that the network had been shut down Tuesday, July 31. He said company officials were telling employees that the retailer would save $3 million, money that he indicated would be used for other retail purposes.

The TV-style digital signage network — which began operation eight years ago and had been expanded to three channels at nearly all of the 3,150 locations of the auto-parts retailer — was apparently shut down as part of a cost-cutting and restructuring campaign by new management at Advance Auto Parts. On May 7, the company's previous chairman and chief executive, Michael N. Coppola, resigned "to pursue other business opportunities," according to a company press release.

Since the resignation of the former CEO, the company has launched a nationwide search for a new CEO and named a former executive from the Food Lion supermarket chain, Elwyn Murray, III, to be the company's executive vice president of merchandising, supply chain and technology. While the nationwide search for the new CEO proceeds, the company is being led by John C. Brouillard, a retired CEO and CFO from the H.E. Butt Grocery Company supermarket chain.

Brouillard joined the Advance Auto Parts corporate board in 2004, and Murray joined the senior staff at Advance Auto Parts in 2005, several years after Advance TV was established in 1999. Neither H.E. Butt or Food Lion has made any significant investment in digital signage for their stores.

Although it is not completely clear why the new management singled out Advance TV for the ax, it seems likely to me that the following factors played a role:

• Customers at Advance Auto Parts stores were still viewing the network on old-style CRT screens which clearly needed to be upgraded to flat panel screens — obviously at a considerable cost — in order to sustain the network in the coming years.
• Because the network had been operating since 1999, the backbone technology running the network was most likely a proprietary system that needed to be upgraded — again at a considerable cost — in order to take advantage of recent improvements in digital-media technology.
• None of Advance Auto's competitors — Pep Boys, AutoZone, etc. — had invested heavily in retail media for their stores. As mentioned earlier, the current Advance Auto Parts executives have not come from supermarket chains where in-store digital media was a significant investment.

Looking from the outside in, many people in the U.S. digital signage industry had viewed Advance TV as a leader among the digital signage networks at retail that were not financed by third-party advertising. During the network's eight-year run, the company had invested directly in the production and operation of the network, ostensibly because of the networks' value to the company in terms of employee training, branding, enhancing the customer experience and its ability to present longer-format "how-to" videos which educated car-parts shoppers on how to repair and customize their personal automobiles.

During the last couple of years, some of the network's sophisticated how-to content had been available for download from the Advance TV Web site onto iPods and other hand-held devices. This innovation may have been the first time that a U.S. retailer had made how-to content from a digital signage network available for consumers to download to hand-held electronic devices.

What lessons can we learn from this?

For the digital-signage industry, what lessons can we take away from the shutdown of this innovative network in retail? Below are some thoughts, which hopefully will generate more discussion in our industry:

• The "how to" content screened on Advance TV seemed to be successful in reaching the retailer's core market. It seems likely that this type of innovative content can be effectively deployed in other venues such as paint stores, tile stores, home improvement stores, craft stores, office-supply stores, sporting-goods stores, as well as any number of B2B retailers that serve tradespeople.
• For the older TV-style networks at retail such as Advance TV and Wal-Mart TV, at some point a "day of reckoning" comes when management needs to decide whether or not the value of the network to the business justifies the investment of large amounts of additional money to modernize and upgrade the network. Here the challenge for digital-signage software companies is to develop new applications and features for retail media networks that are so compelling that retailers come to see these capabilities as critical to their future success.
• Like anything else in retail, in-store media networks cost money to operate, maintain and upgrade. So, if a given retailer is in financial trouble and/or brings in new management, there is a good chance that the new bosses will shut down a digital-signage network just as quickly as they shut down underperforming stores or store departments. Business is business.

Perhaps the most important lesson to learn from the closing of Advance TV is that the advertising model for digital signage networks in retail stores continues to be a hard nut to crack, especially in specialty retail stores such as the auto-aftermarket parts retail sector. When Advance TV began in 1999, the management of Advance Auto Parts Inc. had hoped to make the network self-financing via advertising sales, but it was very difficult in those early days for any retail media network to develop compelling audience metrics and also find effective ways to sell advertising time. This difficulty with the advertising model was particularly pronounced for networks located in specialty retail stores.

Even today, in 2007, it is not clear if retail media networks in specialty retail such as Advance TV can pay for their operating and production costs based on our current understanding of what an advertising-based screen-media network could and should look like at retail.

Yes, it is possible that the new management at Advance Auto Parts might have saved Advance TV if the network had been generating significant advertising revenues. We'll probably never know the answer to that question.