The Digital Signage Insider

On January 20th, market research firm InfoTrends/CAP Ventures released a new report on the state of the digital signage industry (which they alternate between calling the Digital Display Systems market and the narrowcasting market).  The lowdown (as taken from this summary page):

[N]arrowcasting revenue is currently valued at $452 million. InfoTrends/CAP Ventures expects this market to experience a CAGR (Compound Annual Growth Rate) of over 20%, reaching $1.3 billion by 2009.

At the same time, however, the market sizing and forecast show that the largest single revenue component for this industry is and will continue to be external advertising revenues. An additional $161 million in advertising revenues were generated in 2004, and this amount is expected to increase at a CAGR of 40% to reach $857 million in 2009.

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Key findings of this study include:

• Sales of hardware, software, installation and integration services, and support for all commercial display applications totaled nearly $1.7 billion in 2004.
• For networked display systems in retail and public spaces, network operation / management services and advertising revenues generated an additional $413 million.
• This industry is expected to demonstrate a CAGR in excess of 25% over the next five years.
• The list of industry vendors continues to change as companies leave and enter the industry, but is increasingly becoming segmented into a few leaders and a larger number of companies still working to create traction and critical mass.
• Over the next five years, cost-effective LCDs will be the most popular technology for digital signage applications because of their longevity, reliability, low power consumption, and attractive price point.

There are even some pretty pictures to look at on the summary page.  Now, I'm sure I've vocalized my concerns about industry research before, however there have been relatively few professional studies of the digital signage market, so it's good to see what other people are thinking.

It's not surprising to see that advertising is expected to drive the growth of digital media display networks, since retailers have been looking for new ways to reach their customers, and ad agencies have been clambering for a way to deliver.  What's confusing to me (and perhaps would be cleared up if I read the full report) is why advertising revenues and network operations/management fees are bundled together in their growth chart.  The other thing that I found interesting was how they predict that amount of money spent on the displays themselves (e.g. the plasmas, LCDs, etc.) is expected to about equal the amount spent on the digital signage software and installation/logistics and miscellaneous hardware (mounting brackets, network switches, and so on) combined.  Now factor in the economic reality that the prices of these displays are going to drop dramatically between now and 2009, and we come to the conclusion that either a) the prices of these other things will come down as well, or b) people will continue to spend more money for bigger and better displays for their digital signage networks.

Take all of this with a grain of salt :)