Who Pays for Digital Signage Infrastructure Change?
March 26th, 2008by Chris Connery, Vice President, PC and Large Format Commercial Displays
In the highest rated session of the 10th annual USFPD conference, industry leaders NEC, LGE and Samsung all presented their outlook for the future of large-size FPDs in commercial environments, most notably in the Digital Signage market. Signs of collaboration between display companies and out-of-home (OOH) media companies such as JCDecaux, ClearChannel and others are all around but it seems that each of these two very different markets (the FPD industry—including both the LCD and the Plasma sectors—and the OOH Media Industry) look at the market from very different perspectives. Many of the largest players in the FPD industry clearly see the out-of-home advertising market as THE next big market for flat panel displays.
In the case of LCD manufacturers, these companies have enjoyed cyclical growth in the average size of displays which they produced starting with notebook applications in the 1990s, to larger size “displays” in the form of desktop monitor applications in the late 1990s and early 2000s (which required larger glass substrates) now into televisions have an even larger average display area on average than monitors (thus again requiring larger glass substrate sizes). But beyond the home where few truly envision every home having 65”+ flat panel TVs, in order to increase production yet again, FPD manufacturers are looking beyond the home to out-of-home digital signage, or the replacement of adverting bulleting boards as the next wave of growth for the industry. Any quick run through an airport or a shopping mall reveals a significant installed base of printed poster board advertising which most FPD manufacturers envision as being replaced with larger size LCD or PDP displays (typically 70” and larger).
From the FPD producers’ point of view, whether it be LCD or PDP producers, they feel that the CAPEX for producing such larger size displays has either already been spent or is already in the pipeline (the recently announced Sharp/Sony Gen 10 fab, for instance was announced to be an investment of ¥380 billion; equivalent to about $3.9B). From the standpoint of OOH media companies, however, questions of whether or not the move to dynamic digital signage will allow them to make more money either by turning over ads quicker, allowing for day-parting (selling ad space for say the morning rush hour to a coffee company, the noon hour to a sandwich company and the evening hours to alcohol companies) or increase their revenues in other ways are still mostly theoretical with the industry not yet having enough momentum to standardize on a CPM rate (CPM=cost-per-thousands; a standard metric for advertising of all types ranging from television ads with the most costly CPMs to radio advertising with much lower CPMs). So from their point of view, they cannot yet justify the capital expenditure necessary on their part to swap-out their static poster-board ads with LCD or Plasma displays and thus often look to FPD companies to help subsidize various pilot projects.
While some sort of cost-sharing or subsidizing business models are quite far from current industry practices for FPD producers (which are accustomed to making product and selling them for up-front dollars as opposed to say, “loaning” it out in exchange for a portion of ad revenues) some argue that this is the catalyst necessary to make the Digital Signage market THE next big market for FPD displays. While full details of the business model remain officially undisclosed, Samsung’s quite visible partnership with JCDecaux referenced in their presentation can clearly be seen at New York’s JFK airport were forty (40) 70” LCD displays are being used in an extremely impressive digital signage solution.
There was a clear call from NEC at the conference that when display companies do entertain such business practices (and help subsidize the cost of a visible digital signage installation) that they are sending the wrong message to media companies who have little or no visibility to the costs already incurred by FPD producers. So the question remains, is Digital Signage the fourth wave of growth in the FPD market as LGE indicated in their presentation and if so are closer partnerships between FPD companies and media companies the solution necessary to catapult this market from its current steady-strong state-of-growth to one of exponential growth?
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