Digital Signs Point To The Channel

There is an old adage that says follow the money. The new adage for solution providers may be to follow the marketing dollars—which increasingly means following the digital signage market.

Like the Internet before it, digital signage is an information medium that is giving businesses better ways to communicate with customers and employees and is spreading into new niches. InfoTrends estimates that digital signage sales generated about $1.5 billion in revenue in 2006, growing exponentially since 2002, when revenue totaled $388 million.

Retail has been the main driver, but sectors such as financial services, transportation and hospitality have also been quick to replace traditional signs with digital ones, according to Norman McLeod, a digital signage specialist for the market-research and consulting firm.

Even though the digital signage market is growing, it remains a specialty niche. Nearly half of the solution providers in the CRN monthly poll placed digital signage in the early adopter phase, which translates into long sales cycles, and only 6 percent of the solution providers said they were currently selling digital signage.

But that is beginning to change. Declining display costs and off-the-shelf software packages are lowering costs and barriers to entry. Solution providers say customers are now coming to them to ask about solutions, reducing sales cycles. And, according to the CRN poll, the number of solution providers offering digital signage solutions could quadruple over the next few years.

Moreover, the market offers opportunities to mine consulting services revenue and ongoing revenue streams from hosting, content management and content creation. Indeed, in the CRN poll, nearly two-thirds of respondents reported receiving a relatively hefty $1.50 to $2 in revenue for every dollar of deployment revenue within the first 12 months of a deployment. Solution providers also attributed 70 percent of their digital signage revenue to services.

Next: Getting Into The Market

Getting Into The Market
International Business Systems, Mercer Island, Wash., made its foray into digital signage four years ago when a customer of its IT consulting business asked for a digital signage solution. Since then, it has become a core business, said Brent Brown, the company's vice president and CIO.

"Most of our digital signage customers came from the existing client base," Brown said. "We have credibility with the clients through our original IT consulting business, and we were able to build on that."

Many of International Business Systems' clients were in the hospitality market, such as casinos and hotels. The company recently installed 66 screens in a network across 16 floors at the new Las Vegas World Mart, a trade show complex for home furnishings, as a follow-up to an earlier deployment.

Brown said many of the company's clients already have networks and often have other suppliers for displays. But that's fine with him. While there are big dollars in selling displays, there's not much margin. "Screens are a big part of the costs, but we don't make a lot of money on the screen itself, so it doesn't bother us if we don't sell them," Brown said.

Solution providers generally make about 20 percent margins on initial deployment, said Jill Miller, executive vice president of Digital Signage Group, a digital signage speciality distributor that started out 12 years ago as Audio/Visual Integrator.

Digital-AV, a solution provider and Scala reseller in Indianapolis, reported that it can make 25 percent margin on a software sale.

The real money is in the full solution. An end-to-end digital signage solution includes consulting, installation, content creation, content management and support. "A lot of what we do is helping the customer understand how to use digital signage," Brown said.

International Business Systems found content creation can be particularly lucrative. After deciding to handle content creation in-house, International Business Systems assembled a graphics team as part of the startup activities. The designers had experience with Web design, but they had to learn to work with different file types such as movie files and animation. Since the content is shown on bigger screen real estate, the designers had to adjust resolutions, aspect ratios and pixilation.

Content development can be packaged as an ongoing service and not just as part of a deployment. One of the selling points for digital signage is the ease in updating content, and the ability to keep content fresh.

Bryan Meszaros, founder and COO of OpenEye, a digital signage agency with offices in South Amboy, N.J.; Auckland, New Zealand; London; and Melbourne, Australia, estimates OpenEye gets 10 percent to 20 percent margins on displays but 40 percent margins on content creation services.

Lowering The Barriers To Entry
For IT solution providers, the barrier to entry is generally low since they already have many of the necessary technical skills, Digital Signage Group's Miller said. The larger hurdle for solution providers, she said, is learning how to sell digital signage and dealing with a sales cycle that can last a year or longer.

It is not a technology sale, but a human-resources and marketing solution sale. "Ultimately, digital signage is not about technology. It's about communication," said Jeffrey Dowell, sales manager at 3M Digital Signage, Bainbridge Island, Wash. Many IT providers and A/V installers claiming to know digital signage are not successful because they have a "sell technology" mentality instead of a "sell concept" mentality, he said.

While the market is still young, prices are dropping, products are getting packaged for easier deployment and sales cycles are shortening. The drop in screen prices has a lot to do with the market's growth, industry experts say, but it's also gaining recognition as people get used to seeing digital signage in hotels, gas stations and grocery stores.

Next: The Solution Set

The Solution Set
A digital signage network is generally made up of four components: digital media players, content, distribution systems and software. The media player feeds content to the displays and can be as simple as a basic PC connected to the network, or as specialized as Cisco Systems appliances mounted on the back of the displays. If the screen loses network connectivity, the player can show local content until the connection is restored.

Content refers to the actual digital media files such as movies that appear on the displays. However, content is not limited to images. Many digital signs draw content from databases, such as the ones found in airports and manufacturing plants. Add-on modules also provide content such as local weather reports, stock tickers and headlines. Distribution systems include all the hardware and networking ingredients, such as cables, routers, hubs, servers, Internet connectivity and displays. The final component, digital signage software suites, draw all the other elements together into a unified system, distributing, managing and monitoring content.

When it comes to picking vendors to work with, solution providers must choose from among a wide range of software vendors in a highly fragmented market. Fortunately, a number of full-featured turnkey software suites have emerged to take a lot of the custom development work out of the equation.

Five popular applications being packaged for the channel include 3M Digital Signage Network Edition, Scala InfoChannel, Omnivex, Cisco Digital Media System and BroadSign Suite. For the most part, all of the packages offer much of the same functionality. Each suite offers basic modules for managing, monitoring and playing content on a network.

Solution providers will find some differences. Cisco and Scala include tools for creating content. BroadSign and 3M offer hosted services. Omnivex tends to be popular in the financial services industry because that's where the vendor started out. Scala InfoChannel is favored by some solution providers because of its script engine, which enables customization.

Still, all of the packages handle the three major tasks with relative ease, can pull content from outside sources and can be used to provide hosted or managed services.

BroadSign has three components in its BroadSign Suite called Administrator, Server and Player. BroadSign Administrator schedules and monitors content playback. That includes generating the important "proof of play" reports, which ensure advertisers they are getting what they pay for. The administrator can also turn screens on and off based on business hours, holidays and other factors. The BroadSign Server distributes media files to the playback machines based on schedules, and the BroadSign Player receives content from the server and displays it according to the schedule.

BroadSign also offers a hosted service, which solution providers can participate in. The monthly fee covers a custom-configured hosted server, player and administrator software, maintenance, support and upgrades.

Cisco's Digital Media System can create content as well as schedule playbacks and monitor the network. The Digital Media Manager manages and publishes content. It also remotely manages the Digital Media Encoder, which supports on-demand encoding of most popular formats. The formats are all supported by the Video Portal, which lets users browse through a library of digital media.

Omnivex's three main management tools are called Display, Control and DataPipe. Display is the content management application. Control manages everything from a centralized location and schedules tasks to run automatically. And DataPipe, as the central hub of the signage network, acquires and distributes data across the network.

Worth noting is that DataPipe can receive data from external sources that support the Windows Dynamic Data Exchange (DDE) protocol. Any changes to the data are automatically pushed to every connected client and player device. It is a data-centric product that excels in managing data in multiple formats.

Scala's InfoChannel also consists of three components. Content Manager can be used to develop playlists and plan playtime over the next week, month or year. The Web-based application can also be used to manage and monitor multiple sites with different content coming from various sources. Screens can have multiple zones, each with separate playlists, and there can be multiple playlists. In addition, content can be multicast. Scala's Designer application combines text, graphics and audio into a cohesive message. The centralized designer is ideal for a staff of people designing content. The software can connect to a database, such as Oracle, and run queries. It also supports scripting, which can be written within the system or externally, such as a Visual Basic script.

3M Digital Signage unveiled version 3.5 of its Network Edition on March 23. Like the other suites, Network Edition lets users distribute, schedule and play back media files, as well remotely monitor the network. The application includes automated e-mail alerts, hardware and software inventory management and scripting support for virus and path management.

With such software packages, solution providers say pulling together digital signage solutions is not difficult, and digital signage offers opportunities to develop ongoing revenue steams from content creation, management and hosting services. But it isn't a market for everyone. Much like Web development, mining digital signage solutions can mean making an investment in creative services and learning how to sell to marketing departments.