Revisiting the make-buy argument for digital signage software now that Coolsign is for sale...

If Adrian's DailyDOOH update is to be believed (and hey, why not?), one of the more established digital signage software packages out there -- Coolsign -- is to be sold:

Just over a month ago Planar engaged an investment banking and asset management firm with instructions to sell its Coolsign division.

Planar remember is primarily a high end screen manufacturer (and very much struggling itself at the moment) but in July 2006 it bought itself into the software arena with the acquisition of Clarity Visual Systems (Coolsign) for the not insignificant sum of USD 46 million in cash and Planar stock.

Coolsign is not surprisingly running at a loss at the moment but has revenues of USD 6.6 million. The folks looking after the fire sale are looking for a price of 3 times revenue - i.e. USD 20 Million or so.

We doubt if there will be many takers even at that price.

Yeah, I'd definitely have to agree with that last part. But the fact that Coolsign is even on the block indicates a larger problem, for Planar and perhaps for the industry at large.

First off, Planar has been hurting for a while. Their stock has taken a pummeling, and now they're trying to raise cash by any means possible. While at one point they might have been able to go back to the market and sell some new shares, the current climate on Wall Street makes that close to impossible, even for a company with good financials.

However, Coolsign, with over $6M in revenue (which is pretty good for digital signage software vendors), is still running at a loss. With smaller firms like Localvision signing off, Focus Enhancements's recent bankruptcy (with more on the way), and bigger players like Broadsign and Enquii either announcing new private capital raises or admitting to having done them in the recent past, we're starting to see several factors come together in a perfect storm of digital signage doom and gloom:

1. Too much competition, not enough innovation: We track over 300 competitors -- firms that claim to sell digital signage software. Seriously, 300. There isn't enough differentiation between them, and I'd be surprised if the vast majority had fewer than 100 sites installed by now. But they suck up capital and add hype and confusion to the market.

2. Tightening credit markets mean less capital to work with: It seems like too many digital signage software companies spend WAY more than they actually make, which is a big problem now. Panicked VCs are tightening down and parent companies have less to spend on their digital signage subsidiaries. Plus, with access to credit now all but out-of-reach, fewer networks can lease equipment for new installations or factor advertisement revenue streams to stay afloat.

3. It costs a boatload to make this stuff and keep it up to date: WireSpring probably has one of the more sane cost structures out there, and we can easily spend over a million bucks a year on R&D and basic QA and support. When you consider the number of competitors I mentioned above, plus all of the guys that are building their own software to "save money" for their internal network (which is how Coolsign started, actually), you can imagine that there are very few software guys out there that are actually turning a profit, and thus very little software that generates a positive return.


So, what has to happen?


Simple. First off, there will be more messy bankruptcies and quiet "going out of business sales." Just like after the dot-com bubble, lots of companies will try to sell their half-finished, never-quite-worked-right software and other "intellectual properties." Hopefully, nobody will buy them, and they will die quiet deaths.

Next, there will be consolidation. Some industry players will band together to form better-capitalized entities with bigger customer bases. Others will choose vertical integration, forming full-service companies that can count on revenue from more than just technology.

Finally, the "builders" will eventually go away, and the "buyers" will at last win the make-buy argument. Just as practically nobody builds their own inventory or accounting systems anymore, more people will realize that making in-house digital signage software is a losing proposition. More people will turn to off-the-shelf solutions and customize them instead.

I know what you're thinking: this sounds self-promotional. After all, my company stands to win if this happens. But point out a flaw in my logic above that would suggest otherwise and I will happily debate it with you.


The bottom line: if Coolsign, with a significant revenue stream and excellent market presence, is going down, rest assured that many more will follow.


Tags: digital signage, software, coolsign, business

Get your free digital signage software!

Back in 2006 when I first wrote this article, it was just a snarky response to an equally snarky blog post from a fellow industry blogger:

Dave Haynes at Digital View is apparently competing against me for this year's Digital Signage Sarcasm Award (DSSA), and has put up a good fight with this post about free digital signage software from the latest entrant into our already-crowded industry. His take on the newcomer summarized in one line:

I never really thought our business was on the precipice of revolt, waiting for somebody to rise up and stick it to the man. But there you go.

Ouch.

I'm with you, Dave. Our list now has over 300 competitors somehow, and I shudder at the thought of how high that number would be if we were to add in the bulk of our European and Asian competition. While it would seem that the barrier to entry into the digital signage industry is quite low (as evidenced by the number of players in the market), to win any significant business takes not only a great product, but also years of history, expertise in your target market, and of course an absolutely killer staff that your customers will all love (so really, it's like every other B2B market).

However, traffic to this page, compellingly-titled "get your free digital signage software," continues to be pretty steady, and I'm guessing it's not just because you like my style of curmudgeonly humor. No, you're probably here because you're actually looking for digital signage software that is free. Well, there's some good news, and some bad news. First of all, folks, nothing in life is free. I know, I know, the curmudgeon rears its ugly head again, but it's true.

See, there are some open source digital signage packages out there (at least one built for the task, and a few that are bolt-on modifications to popular content management packages like Joomla), and those are generally free as in "free speech" and free as in "no money for this software." Of course, unless you value your time at ZERO, there's still the time it takes to assemble the components, get them running, and then maintain them, and a cost associated with that. Maybe you're an IT pro with Linux kernel hacking skills, and that's no problem. Maybe this is a fun hobby for you, which is great. Or maybe you just have to meet some business objective, and after that you have better things to do with your life.

If you're looking for low cost digital signage software or systems though, there are a fair number of options. Lots of vendors now sell low-cost turnkey packages designed for small networks. And of course, there are plenty more options for digital signage software as a service (SaaS), which you can think of as paying for help with the software (and ancillary stuff like bandwidth, storage, etc.), which might ease your sleep at night. It should certainly improve your operations.


Tags: digital signage, software, retail media