Sign of the Times

by Darek Johnson

“Chances are, if you have visited a retail store, restaurant, theme park, hotel, shopping mall, convention center, airport, or other public or private locations within the last 12 months, you experienced the presence of narrowcasting.” —Brad Gleeson, president, ActiveLight, Inc.

Electronic digital signage (EDS), sometimes referred to as dynamic digital signage, is a prevalent, new advertising technology. It includes LED, OLED, LCD, CRT, plasma, digital, or e-link displays and digital-projection devices (a linked system may include one or more technologies). All are electronic, multimedia display systems.

Generally, and from a central (content management) distribution center, the systems are fed electronic media (content) by either telephone-type lines or a wireless narrowcasting system to display changeable (still, animated, or video) messages from a real-time or prerecorded source.

You’re reading the first sign-industry survey of the electronic digital sign (EDS) industry, conducted by Signs of the Times magazine. Here, you’ll see trends that extrapolate to the industry as a whole, and, if you’re a careful reader, you’ll find an assortment of interesting information and ideas. Some may increase your profits.

SURVEY METHOD

To gather this information, we mailed (and e-mailed) survey forms to approximately 300 EDS-related companies early this year. We wanted to gather information from outside the known sign industry, so we built our mailing list from various sources, including Web searches and press releases. For balance, we included a few ST LED-display manufacturers.

Because our list was homespun, the undeliverable return-mail (e- and snail) tally was high — a count of 50 — which cut our outreach to approximately 250 inservice companies. From this 250, we received 38 valid responses, a respectable 15 percent.

We believed we’d receive more responses from the regular mail forms than e-mail, but the final count was a tie. The beauty of e-mail distribution was that people could, and did, fire back immediate questions. Many were concerned that we’d publish the survey answers along side their name, which we didn’t.

THE TECHNOLOGY

In EDS, the term “display” can describe LED, OLED, LCD, CRT, plasma, projection systems, and electroluminescent or electronically activated ink panels.

Content defines the images the EDS system displays — for example, words, graphics or videos of racecars. This category can include high-definition digital photos and television systems (for best results, EDS displays require HDTV) and the software for creating these images and graphics. There’s also Internet HDTV software for sending high-definition television signals via the Internet.

Content management is the system for directing, timing, and scheduling content. A third apparatus is computer-routing systems, that is, the hardware and software that channel the content to the content-management- systems director, who forwards the coded signals to the display. There’s more — Wi-Fi (wireless) systems and “flexible OLED” for example — but, for now, we’re drawing a line in the sand. The truth is, systems are infinite and the opportunities boundless. Typically, all the players are reaching for the brass ring. Fig. 1 gives you an idea of our survey’s responding companies’ mixed focus.

WHO REPLIED?

Survey participants include display and lamp manufacturers, software and display builders, systems integrators, content creators, systems managers, and others. Because of such a varied mix, we divided our statistics into four classes that seemed to click into place on the returned surveys: companies that work with more than one system and companies that work with LED, LCD and content (see fig. 2).

In all, 34 (89 percent) of the 38 respondents were working in more than one EDS category. It’s interesting to note that 23 (61 percent) of the companies included software (creation, sales, or installation) in their product descriptions, and 16 (42 percent) were also involved in scriptwriting, story, or video production.

We also learned that one prominent LED manufacturer has produced, and is selling, a digital-signage network software; another is now involved with LCD displays and, simultaneously, is tied into programming software, audiovisual systems, and video production.

It doesn’t take a Harvard Business School degree for display-manufacturing executives to grasp that adding content to their product menus equals more profits. It provides ongoing income after the initial equipment sale. See it in the same light as digital-print-machine manufacturers see ink and media — in EDS, content is the consumable. Accordingly, you can expect the larger display firms to either buy or build media-creation companies.

Fig. 3 illustrates the concept. It shows that nine media/content employees could generate more than $700,000 in annual sales.

THE MONEY

Twenty-six respondents reported an impressive $302.1 million in sales for 2002. Combined, these 26 companies employ 527 people.

The highest reported income was $148 million, followed by $21 million; the low was $200,000. Because of the extensive span (and variety of business categories), we didn’t average sales figures. It just wouldn’t make sense. We did drop the top-dollar company sales figure when calculating the Average Sales per Employee chart (fig. 3). This chart reveals that content-providing companies can expect a lower dollar-sales-per-employee ratio than EDS manufacturers or display resellers. Fig. 3 also shows the significant income difference between hardware-specific companies and those working with content.

Our survey respondents listed four primary sources for income: sign and display manufacturers, systems resellers, retailers, and “others.” “Others” includes such diverse enterprises as process-control rooms, schools, flight-information systems, and entertainment or special-event companies. Also, the nondescript “end-user” term appears several times in this field. Fig. 4 indicates the number of companies focusing on each market area. When looking at this, remember that only five indicated his or her company worked in only one field.

Twelve companies revealed they had business-sharing agreements with other firms (some mentioned such names as Mitsubishi, Fujitsu, GE, and Sylvania). A remarkable 69 percent of respondents said they market internationally, 25 percent nationally, and 6 percent regionally.

WHAT THEY’RE DOING

The following count, based on the 38 firms reporting, will give you an idea of the type of technology in which these companies are primarily engaged: 15 LED, 14 LCD, 12 plasma, 7 CRT, 7 graphic/video production, 7 projection, 2 E-ink, and 2 OLED. Of this mix, 37 percent call themselves systems integrators, and 24 percent say they’re display manufacturers, but the replies intermingle when it comes to servicing or installing software or hardware systems.

Interestingly, LED-based companies average 20 employees, with an average-sales- per-employee figure of $200,000; companies offering more than one technology average 28 employees with a divisible dollar rate of $175,836; and those companies that focus only on content average nine employees with a dollar/ employee figure of $79,370.

BUSINESS TRENDS

We believe a company indicates its commitment to a specific technology through the dollar amount it has budgeted for research, development, and marketing. High R&D dollars indicate a company is committed to growth; high marketing dollars indicate the company has hot, new products to sell.

Twenty-seven respondents indicated an increased marketing budget (2002- 2003), and 22 indicated an increase for R&D during that same period. The reported mark-up was from 4-to-1000 percent. The R&D average increase (we dropped the 1000 percent) is 28.6 percent, and the marketing average is 34.3 percent; both strongly indicate interest, growth, and, again, hot new products.

Like any other businesses, EDS companies eye each other’s territories. It’s the grass-is-greener theory. A Northwestern company, for example, wants to move into the specialty and fast-food market. A Southern firm plans to expand into security systems, and another is researching the transportation business. Other fields of interest are groceries, tradeshows, kiosks, education, government, and video production.

TO BE COMMON

The question, “What do you see as important steps to be taken before the EDS field becomes more commonplace than it is today?” received the most interesting and emphatic answers. The high cost of displays was the prime gripe of 15 respondents, while six worry about zoning regulations, and seven believe educating buyers will make EDS ubiquitous. Here are some direct quotes:

“Lower display prices.”
“More reliable forms of content distribution; cost of displays coming down.”
“Cost-effective digital displays in large-format.”
“City code changes are mandatory.”
“Sign-code reform.”

One company spokesperson said commonplace acceptance would arrive via a “paradigm shift from analog static images to digital, changeable images.” Our favorite response expressed a common desire of all people everywhere: “Get rid of companies that don’t know what they are doing.”

Oh, if we could only add politicians to that aspiration.

A New York City-based company summarized: “We need to demonstrate the value proposition — an improved ROI — of this new technology to marketers by showing the way outdoor media and other EDS applications can communicate with consumers.”

Amen to that.

DAREK JOHNSON IS SENIOR TECHNOLOGY EDITOR, SIGNS OF THE TIMES MAGAZINE (WWW.SIGNWEB.COM). HE CAN BE REACHED AT This e-mail address is being protected from spambots, you need JavaScript enabled to view it . SUSAN CONNER, SIGNS OF THE TIMES SENIOR EDITOR, ASSISTED IN THE RESEARCH FOR THE SURVEY.