Chris Connery, vice president of DisplaySearch, kicked off the DisplaySearch Digital Signage Conference last week with an analytical look at how digital signage fits into an $80 billion global display market. He revealed that there are two perspectives about digital signage in the market’s eyes: While numbers indicate that shipments of 26+ inch displays are continuing to grow, the sector still represents a small portion of the display market overall.
Market size
Connery said that flat panel display makers feel like the commercial flat panel display (FPD) market is “taking forever to emerge.” Much of this is due to the fact that the numbers of FPDs is often benchmarked against that of consumer TVs. According to DisplaySearch, from 2005-2008 there were “no fewer than 3.9 million 26+ inch commercial FPD units deployed worldwide, while the TV market is forecasted to be 155 million units in 2009.
However, Connery said those in the industry must also consider that commercial FPDs are often part of intricate digital signage systems, and not easily-installed stand-alone units like TVs. Thus, they represent a smaller percentage of the market because they “require unique skill and yield higher margins for industry participants.”
Within itself, the commercial FPD market outlook is shaping up to be good, as DisplaySearch predicts it to grow at a 24 percent CAGR through 2015.
“When FPD revenues are added into the equation, the market is forecasted to grow from $1.7 billion in 2007 to over $6 billion by 2015 for display hardware alone,” Connery said.
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Connery addresses the DisplaySearch Conference delegates in San Jose. |
Global economy
The slowing of the global economy has had its effect on digital signage, just as it has most other industries. Construction has stalled, meaning there are fewer new building for networks to be installed in. There has also been a subsequent drop in advertising spend, which has effected the out-of-home side of digital signage.
Unfortunately, there isn’t much of a flip side here. Although Connery said in his presentation that “there is more to digital signage than just digital advertising,” and that “dynamic messaging is needed in many applications, including those now backed by government stimulus money such as education and transportation,” ensuing presentations did not align with the statement.
Eddie Franklin of Synnex Digital Signage later revealed in a presentation that although stimulus money is being spent, very little of it is being allocated to IT, and therefore even less is reaching digital signage projects.
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FPD investment
The economic slowdown is also brewing fear that “consumers are trading consumption for savings and will now buy fewer TVs, thus giving less incentive for LCD and PDP manufacturers to build new FPD plants to make bigger displays,” said Connery. “Weak consumer economies will slow down FPD production investment, thus making the affordability of larger size FPDs (due to economies of scale) less of a near- term reality.”
This fear is countered by several trends occurring in the digital signage industry.
For one, 2008 was a record year for LCD production equipment capacity expansion ($13.8 billion) with a notable drop-off as panel makers became worried about how long lasting the global recession would be.
Also, Connery said he sees China “as a huge and underpenetrated market for TVs and PC products, so production investment will continue with digital signage benefiting from the economies of scale associated with Chinese LCD and PC markets.”
LG seems to have caught on to both of those trends, announcing last month plans to build a new eighth-generation LCD manufacturing plant in Guangzhou, China.
Digital out-of-home advertising
As said earlier, the recession has caused marketers to cut back on advertising of all forms. One fear is that ad spend may never fully recover, thus giving no incentive for companies to swap-out printed poster ads for digital signage.
On the other hand, if ad spend doesn’t fully recover, Connery said it could open the door for new forward-thinking companies to enter into the market, ones who are willing to pay up-front for infrastructure changes changing the playing field.
The biggest challenge, Connery says, is going to be the “leap of faith” that digital signage companies are going to have to take when entering the DOOH advertising realm.
“The question isn’t when DOOH advertising will come, but who can or will take the CapEx risk,” Connery said.
