“Losses this year are especially jarring for the digital signage industry because it has seen uninterrupted growth since its inception.”
Complexity was the central theme of Invidis Consulting’s keynote remarks at the Digital Signage Summit (DSS) Europe on 29 July 2020. COVID-19 represents an unprecedented industry backdrop, and digital signage is as buffeted by those winds as any solution in the AV industry. Fundamentally, digital signage is an in-person technology, putting its investment at risk in the current, remote-centered environment. But as Invidis Managing Director Florian Rotberg and Partner Stefan Schieker explain, digital signage is also malleable, multipurpose, and exceptionally capable of being part of the solution in these turbulent times.
Double digit declines expected for digital signage before growth resumes
The AVIXA® Industry Outlook and Trends Analysis (IOTA) shows that digital signage represents US$31 billion of revenue this year, 13% of the total AV industry revenue of US$239 billion. That revenue figure is down 11% from 2019’s mark, but the decline is counterbalanced by a 5-year compound annual growth projection of 6.6%, lifting the solution’s revenue to US$43 billion in 2025.
Invidis also estimates a significant drop in digital signage revenue in Europe this year, accounting for a wide range of possibilities, from a 10% decline if things really pick up smoothly from here to a 30% drop if a second wave hits and lockdown must be widely imposed again. Within that range, Invidis sees a 15 to 18% drop as most likely. This aligns with IOTA’s projection for Europe, which predicts a 13% drop.
Losses this year are especially jarring for the digital signage industry because it has seen uninterrupted growth since its inception. Invidis reports that some businesses are at risk of failure. For smaller companies that are tied to only one or two vertical markets – especially verticals like transportation and hospitality – revenues may be completely dry. Not all companies will make it through this year.
Digital signage recovery will vary along with markets’ recovery
Though Invidis sees many positive signs for the industry, the company stresses that this is only the beginning of the crisis. Business is beginning to ramp up, to recover, but the process will be slow. For Rotberg and Schieker, the recovery will take the shape of a Nike swoosh rather than a V. Everyone agrees the drop was fast, but Invidis anticipates a long, slow recovery rather than a quick rebound.
Even as digital signage experiences a swoosh shape overall, Rotberg and Schieker suggest COVID-19’s impact will vary substantially by segment. In education and healthcare, the demand remains high while fashion and restaurants will have a slower recovery after the pandemic. Almost all segments are supposed to experience pronounced, long-term change.
IT represents another source of change. Invidis notes that IT integrators in the European market are larger companies than their AV counterparts, which enables them to have large, professional bidding teams. Their market entry is squeezing margins, motivating consolidation, and forcing AV players to adapt.
Ultimately, the GDP contraction currently underway will have economy-wide effects as buyers simply have less money to spend on any and all solutions. This will bring segments down across the board. AVIXA’s most recent Macroeconomic Trends Analysis (META) report found strong evidence that once the pandemic is behind us, post-COVID consumer and business buying patterns and preferences will closely resemble pre-COVID activity. The world is resilient, and long-run changes will be more muted than it may seem right now.
Digital signage technology and content continues to advance
As much as there are these negatives for digital signage, there are so many positives as well. Invidis’s experts highlight this time period as a catalyst for change. The challenges of COVID-19 are forcing companies to get creative and get smart.
Technology-wise, Invidis highlighted the proliferation of AI, the rise of chip on board (CoB), Samsung deemphasizing LCD and LG investing in OLED. The emphasis is on AI in particular, which they see as a platform for almost every headline trend. AI gives machines eyes, ears, and a voice. Perhaps its most valuable capability is its insight ability, as it can make recommendations about what consumers want most.
COVID-19 catalyzed changes extended beyond the purely technological side of the digital signage industry. The business shakeout is driving continued mergers and acquisitions. Invidis highlighted the private equity backed M-Cube: Digital Engagement as a particularly aggressive buyer in recent months.
Signage content is changing every bit as much as the technology behind it. Invidis highlights three forms of communication common in the COVID era:
- Compliance communication, with explanations of mandatory safety guidelines;
- Feel good communication to reinstate a buying mood, including statements like, “We care about you” and “We’re wearing masks and cleaning all surfaces;” and
- Emotional communication with sentiments like, “Great to see you again,” “We’ve missed you,” and “Buy local, save jobs.”
This last form is of particular interest because it had previously been an unusual form of communication in the European market, which fostered a more formal relation between business and consumer.
The complexity and the contraction make this an arduous time for businesses. Though digital signage is an in-person technology, it is part of the solution rather than the problem. Powerful forces are at play, but opportunity is out there for companies willing to adapt and meet the new needs amidst the turmoil.
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