This comes against long odds both in terms of the state of the US economy, the state of the trade show business and the state of the Digital Sign Industry itself.

The “unofficial do not quote us” wink wink…numbers coming from unnamed people not in any way associated with the show is that exhibitors are up around 33%. But more amazing is the fact that foot traffic is up possibly in the double digits.

Many are asking if the foot traffic is up due to “industry types” looking for a job (and there is a lot of that going on) as opposed to people who are here to actually buying digital signs. But, the consensus seems to be there are a good number of clients and potential clients here.

One of the most important trends here is what I am calling “the return to our roots.” What is meant by this is that the digital sign industry seems to be moving from the relatively easy money days in the US economy to become better grounded and be more focused on innovation and real business.

The evidence of this are several people who were instrumental in the start of the industry who have (after selling their companies) decided to return. First among these innovators is John Eisenhower and John Kirkpatrick (aka JK)

When someone says, “no one has made real money in this industry” there two guys are the exception. They teamed up and had a good run with Mercury Online which was sold to 3M for what is rumored to be “a lot of money.” As someone said…”these guys are my heroes…they built the company and exited and made a lot of money.”

Unfortunately, 3M did to their company what big companies do. They totally messed it up. While 3M had a great opportunity in this business they did not have a clue and it has gone from being a potential giant to well…3M who?

These two people could, let’s face it, take the money and day trade. Instead they are both involved in new start ups. JK has a new company which he is not talking a lot about. What it will do is all closely guarded. But, one thing to say..he is not with 3M anymore which is their loss.

John Eisenhauer is something like a combination of a night club act and a serious business person is more forth coming. His new project is software that will combine elements of the digital sign industry with mobile marketing and social networks. Certainly if he has what he says he has (and he says it’s ready to ship) may have found an app that short circuits the need to invest large amounts of capital to get some of the great results of digital signs.

Finally, Lou Giacalone once of Coolsign fame, then of Clarity and then of Titan Outdoor …and now…President of Coolsign again. Lou cannot likely claim the financial success of the other two BUT he is a visionary and important innovator. His move to Titan is controversial (and will be covered in more depth). He said, “this is my passion and what I have been talking about and doing since 1998.” While a private equity firm is part of the picture and you have to wonder about that…it is another data point which indicates to me that key people in the industry are getting back to what they like to do.

The real story at this year’s DSE is that entrepreneurs and positive cash are back in vogue. I say it’s about time!

However large the DSE show is this year…it’s doing great! I hit the convention center. While not exactly the center of the known universe it is moving right along. I get my badge and it’s off to where I will find something to write about.

First stop…the Digital Sign Association meeting. Not sure I was invited but…what the heck. The association Executive Director shows slides that the association has grown in membership to nearly 200. One of main focuses of the association is building its website and bringing traffic to members.

The DSA has produced a software comparison guide of many digital sign software products on the market. The guide is interactive and allows you to put in various “needs” and it will present options to you. Non member cost is USD 399. This would be a good investment to narrow your options if you are thinking about build a system and do not have the time to sort it all out yourself and are not inclined to use a consultant. If you have a software that you want considered it might be a good idea to get it on the next release which they are working on.

The questions in the group indicate that they are feeling cost pressures from their clients and prospects. It appears that many of the members are facing cost questions not on the CapEx costs (which is the norm) but rather the costs of installation labor.

This is an area that does not get a lot of attention. One theory is as the installation companies get more experience with these projects it appears that the costs may be going up not down. This is likely the result of these companies finding out just how many “small things” can happen when doing installations. On the other hand one industry pro said, “it’s just too high.” But, it could also be that the installation labor costs are not going down as did the costs of the hardware and software.

Quick. to the mobile marketing session. This was very interesting and is worth a focused piece. Stay tuned.

Lunch, one thing to notice is that the Las Vegas Convention Center is filled with digital signs. They provide directions, information and there is an interactive system for way finding system. These were not in place five years ago…maybe not even two years ago. This is a good thing.

Finally, off to the content break out. It is very well attended. The presenter is Paul Flanagan from Best Buy. Best Buy operates its own in-store network in three areas of the store. He gives an animated and interesting presentation. He tells the audience that Best Buy is focused on the “people in the blue shirts.” For those few who have never been in a Best Buy store these are the store personnel.

The company has setup and uses feedback on the company intranet from store employees about the quality of the content and how customers are responding. Currently, they use a one hour loop that has about 50 to 60 “clips” in it. He also said, whenever he goes into the stores he asks employees for feedback

He tells us that Best Buy has found that spending more money on content does not necessarily make for better results. He gives several examples of where they spent hundreds of thousands on content and got less than spectacular results and where they spent zero and got great results. Not exactly what all the content production companies wanted to hear. He also shows a very impressive list of “partners” who provide free content. Well…they are Best Buy.

One of the most important pieces of information he shares other than the fact that suppliers pay for spots on the system (no surprise there) is that the system is moving product. In addition, in response to a question he says that while the system started off being a project for the merchandisers (product buyers) it has transitioned and is more of a collaborative project with marketing.

Probably the most important comment Flanagan makes is that as the importance of the in-store system has grown and as the company itself has focused more on what happens in the store there has been more and more integration between all the disparate parts of Best Buys marketing program. To some degree he offers that to some degree the in-store system has helped bring this about as much as it has been a part of it. Recently, Best Buy initiated a formal integrated marketing committee where all the various “channels” be it web, tv or in-store are coordinated. If there is one best practice that has been demonstrated over and over again…this is it.

It’s getting late… time for some warm milk and cookies here in Vegas….nah! I think I will do something else.

Planar had picked up CoolSign as part of its USD 46 million dollar acquisition of Clarity Visual Systems. Clarity in turn had picked up CoolSign (the brain child of industry guru Lou Giacalone) for almost next to nothing after CoolSign had been injected with USD 20 million in VC money in the late 1990’s and early 2000’s but failed to deliver (meaningful) sales.

Price

With good yearly sales figures of approximately USD 6 million we believe that CoolSign was sold this last time around for anywhere between USD 1 million and USD 3 million – with the best estimates being that it was sold closer to USD 1 million rather than 3 !!!

This would be ‘sold for a song’ whichever way you analyse it but especially so if you consider the large ‘investment’ (aka losses) made and sustained by Planar in CoolSign during the former’s ownership of the latter.

Good Deal / Bad Deal

All well and good, but what does this and other information gleaned from the corporate machinations of Planar and other high profile digital signage companies tell us about what is going on and what we can expect in the future? What has gone right and wrong with ‘the deals’ in the industry to date?

As has been reported elsewhere Planar had the idea, as many hardware companies did / do, that having a software business as a bolt on sale to their existing LCD business would be ‘easy’ and somehow be a natural fit. It wasn’t and Planar also, unfortunately had other issues to deal with…

I believe that Planar combined a naive understanding of the software business with the even greater sins of arrogance and lack of leadership. In fairness to Planar they made many important improvements to the product but they simply did not understand or care to understand the nature of the digital signage industry (and certainly did not listen to many of the folks employed to run CoolSign).

Entrepreuners

First off, Planar did not understand that the digital signage business is still largely an entrepreneurial business. Almost all efforts, if NOT every effort, to pour large amounts of investment capital into the sector in order to ‘buy’ success has failed to date.

The history of CoolSign is case study number one for this observation (there are many others) – as Warren Buffett has said “the only thing to know about history is that people do not read history” – in this particular case, not even the history of the product they were acquiring.

Corporate Overheads

Instead of immediately cutting overheads and running CoolSign like a start up (which it was) they hired highly paid executives and sales people who were used to getting the ‘big bucks’ selling hardware and expensive services.

When Planar acquired CoolSign they brought it into Planar’s beautiful class A office building in the technology corridor in the Portland area AND no doubt Planar’s management hit it also with the ‘appropriate’ corporate over head charges – as it would with any new business division.

These payments we would guess, also helped pay for the many more highly compensated VPs in the Planar organization and of course for the CEO.

Planar took CoolSign to every trade show in the US and often took out the largest space.

They poured money into the development of the product (which someone will eventually monetize – BUT not Planar) and reportedly had the software team on a monthly update cycle – a schedule that any software development company would find ludicrous!

Instead of partnering with content companies (like other digital signage software vendors have typically done) they started their own.

If you ever wanted to sell the product they had a large stack of over lawyered papers for you to sign – for example, even if you did not want to buy CoolSign on credit they wanted to know all your financial information. Oh, and did I mention the price point. It was the highest in the digital signage industry.

In short, they did everything ‘right’ if Planar/CoolSign had had an overwhelming market penetration and positive cash flow to support these activities which of course they didn’t!

RUNCO

A reasonably short time after Planar acquired CoolSign it also acquired a high end home theater business called RUNCO for USD 40 million in cash.

RUNCO never made a dime and started to immediately bleed lots of cash. If an analysis of Planar’s balance sheet is done just before and just after the RUNCO deal an argument can be made that Planar in effect traded USD 40 million in cash for a like amount of account receivables. This acquisition depleted any cash Planar had that could have been invested in a leaner, meaner CoolSign.

Lessons Learned

What can be learned?

1. First, I believe that the digital signage business is still primarily an entrepreneurial one.
2. The most important goal for a new business in this industry is to get to positive cash flow and stay there. If you cannot do that quickly you are fooling yourself and your investors.

   Many companies, like Wireless Ronin (RNIN), who have taken on lots of investment capital are not doing well and will likely not emerge from this storm.

3. Leadership and good management matters. The business world is going through a profound change right now. This is being driven by the breaking of the first ‘worldwide all asset class bubble’.

   During the decade(s) that led up to this a premium was placed on style over substance – how else can you explain an executive buying a USD 35,000 toilet when his company is getting a bail out!!!

   What looked good, was good, isn’t that right?

   What the business world is learning now is that substance; a measurable track record, a history in this industry, hard work, drive, and yes leadership all count.