I am a big fan of Bill Gerba and his blog. There is no question that he has added to education, understanding and debate in the networked-digital-signage (NDS) industry. His 3 November update of his earlier blog of 2004 in which he describes a comprehensive budget for a single-site digital-sign system over three years is no exception. (There’s a link to the blog at the end of this article.)

On my first read of the blog I agreed with it. But after I was able to really analyze it I found myself in disagreement with not only the budget it proposes, but also how it was calculated. I conclude that the 2006 budget understates costs by at least $1800 and possibly as much as $2600 over the three years.

Here are the numbers from the 2004 article and the 2006 article, followed in each case by my comments in bold. All figures refer to a three-year, one-location installation.

2004: 42-inch plasma screen $2500
2006: 40-inch LCD $2500
I agree: $2500
2004: player hardware $1500
2006: player hardware $1500
PC or Apple $1000
2004: ceiling mount $500
2006: ceiling mount $250
I agree: $250
2004: player software $500
2006: player software $500
Budget is too low: $900
2004: management software (three years) $1800 ($50 per month)
2006: the same: $1800
Included in tech support: $0
2004: 24/7/365 tech support (three years) $3600 ($100 per month)
2006: not included this time – moved to client so $0
Not realistic to push on to client: $3600
2004: installation $1400
2006: installation $1400
Too high: $1000
2004: project management $300
2006: project management $300
Too low: $800
2004: total $12,100
2006: total $8250
My total: $10,850

Let’s take a look at each item.

Display hardware

I agree that today the price of a 42-inch LCD ($2500) is about the same as that of a 42-inch plasma screen two years ago. And the use of large-format LCD screens in NDS installations is in most cases the best practice today.

The main reason for this is that plasma screens start to degrade and lose brightness as they are used. This has led some installations to look good when they are new but then look tired and worn out after two years or less. LCD screens, on the other hand, either work or they do not. The backlight burns out like a lightbulb.

The only exception to this general rule is where the NDS system owner or operator wants to run full-motion, full-HD content. There is nothing better than this type of content played on a new plasma screen. The image is brighter and the motion more fluid than on an LCD screen. You can also buy a plasma screen for $1200.

Media-player hardware
Next the article discusses the price of the media player. This is where I start to quibble. Bill states: “Media player and software costs have remained relatively static over the past few years (though the quality and capabilities of both have gone up), but the cost of ancillary equipment like mounts and stands has dropped sharply.”

The fact is that the price of player hardware has dropped significantly if you are using a standard PC or Apple player as opposed to a dedicated player like WireSpring’s. In addition, the power, functionality and small form factor you can get for this price are truly amazing. For that reason, I would reduce the budget allocation for player hardware to $1000 as opposed to $1500. So I have a saving here of $500.

Installation hardware
We are in agreement about the $250 allocation for wall or ceiling mounts. This is a supposedly small detail that some operators or owners have forgotten. When this small item is multiplied by a thousand or more locations it can add up to real money.

Player licence
Again, this is an area where I have a different perspective. The article places the price of one software player licence at $500. While some technology companies are reducing their prices for a single licence to $500 this is not the norm. A one-off player licence can run from a low of $450 to a high of $2000 (e.g. CoolSign), which frankly is too high. Keep in mind that some companies do not want to sell just one software licence and price their products accordingly.

When discussing price, one important question to ask is: “for what?”. There can be a vast difference in the functionality of software platforms. Some are simple digital-sign systems that do a great job of playing content and controlling it. Others provide full interactive functionality and full back-end integration with your CRM, inventory and other systems.

I am going to call this price $900 for a single-player licence. Obviously if you order in larger quantities suppliers are more than happy to discount. Now I have given back $400 of the savings I showed above. I am still ahead by $100.

Network operations and support
Bill goes on to state that many companies are deciding to take network management and monitoring in-house. To some degree this is true. But I always want to ask a company that does this what business they are in – the retail business or the digital-signage business?

What I have found is that many clients say they want to do this until they start to understand the work required to actually do it.

This area is where I really start to have a fundamental disagreement with Bill’s budgeting. What he is saying is that the clients can pick up first-line network support. This of course saves money - in this case, $3600 over the three years.

Remember, though, that when talking price the next question should always be, “for what?”. I have not talked to a lot of CTOs in recent years who feel their staffs do not have enough to do; few of them feel that what their IT organization needs is to run a private broadcast network in their copious free time.

So to me this is really not a reduction in price at all. It is simply moving a rather large budget item from the NDS provider’s scope of work to the client’s. So I adjust Bill’s budget upward by $3600.

Next, Bill places management software and technical support at $1800, installation at $1400 and one-time project management at $300. This brings these three items to $3500, 42 percent of the total budget.

Let’s take a look at each one. In my mind, ‘management software and tech support’ is just another way of saying ‘network operations’. We already paid for that above. I take that out and save $1800.

Installation costs
As for installation, I have talked to one rollout specialist which says a budget for the physical installation of the hardware and hooking it up to an Internet cable should be as little as $500. Maybe Bill is thinking about a different scope of work where it is necessary to install broadband and configure it on-site.

Again, this is an area where numbers can change fast depending on scope and site conditions. So maybe Bill is being conservative. I have decided to be a little less conservative, reducing the budget to $1000 and picking up a saving of $400.

Project management
I really disagree with this one. The 2004 and 2006 blogs budget the costs for a one-location project management fee at $300. In fairness, if it is only one location $300 may be right. We also know that clients hate to see a line item for this.

But this is one of the areas where many projects go wrong – way wrong. Let’s face it: it is as disruptive having the installers come to your store a day early as it is having them come a day late. Oh, and did we mention the fact that we need to get written landlord approval to put that satellite dish on your roof? And on and on it goes.

I raise the one-time project management budget by $500 to $800. I think that’s realistic. Obviously, there are many exceptions, and just because it costs $800 to do one site does not mean you can take $800 and multiply it by 1000 locations.

There are some economies of scale but fewer than you might think. Someone still has to make sure that the installers have communicated with the store managers and that the schedule is locked. A large part of this industry is service.

The elephant in the room

The one item that is not budgeted for is content. Bill’s 2006 blog talks about this, but there is no way to have a low number for this, especially if you are not spreading the content costs over multiple locations.

Barnaby Page
aka.tv staff

What more can be said about Nike? It’s a Fortune 500 company that need only show its logo at the end of a commercial to have it all make sense —even if the commercial seems to have nothing at all to do with the company’s main product, running shoes.Nike’s brand power is fueled in part by spending $1.6 billion on advertising and marketing, or what Nike calls “demand creation,” as it did in 2005 — a 16 percent increase in Nike’s spendingover 2004.That kind of increase has occurred more or less every year at Nike, regardless of the prevailing view or fad-of-The past, the-moment in marketing. So, marketers should take note as Nike present —takes another large step into the world of networked digital-media. possible future

Nike has always been in the of Nike Town’s forefront of brand marketing. It was the first company to use ath-in-store media lete shoe-endorsement contracts. Its slogan “Just Do It” is part of pop-network. ular culture. Its quirky, post-modern ads such as “Bo Knows,” are marketing and advertising lore.

One of the company’s many innovations was the opening of its own retail stores, dubbed Nike Town. Like Apple, Nike opened these stores despite their potential to alienate its existing retail channels. Also like Apple, these stores initially were designed to be a brand “show case,” and not even necessarily to make money.

The first store, which opened in Portland, Oregon in 1990, was followed by a store in Chicago in 1992. Eventually, 14 Nike Town stores were constructed with 12 in the United States and two overseas. These stores have since provided a blueprint of best practices in the development and implementation of in-store media networks.

Before installing an in-store media network, have a content strategy. When the Nike Town stores were originally built, they were jammed with what was then the state-of-the art in in-store media. The original media were used to connect shoppers to the Nike brand at both an intellectual and emotional level. Nike was able to draw on its deep, content resources to feed the media into the stores, while maintaining a quarterly update schedule.

When deploying technology into retail stores, be sure to control what it is and document where it is. To the extent possible, make sure that you have a standard and stick to it. For Nike Town, as the stores began to age, operational challenges surfaced. Some stores used digital projectors, some used CD-ROMs and still others used laser disks to play the media that was sent each quarter from corporate. and It became increasingly difficult to track and manage these varying — formats as well as the quarterly updates.

Nike Town’s challenges, coupled with the internet explosion, led a Nike AV technician, Tim Canfield, to wonder whether there might be a better way. Working together with Nike veteran, Pat Hellburg, Canfield started to explore the possibility of using a digital-network system to deploy all of Nike’s in-store media.

By this time, Nike had also developed and deployed its Factory Stores, which also used in-store media. In 2002, Canfield conducted a “bake-off” of more than 20 companies that had (or claimed to have) software or a system that could support Nike’s in-store media needs. Eventually, Nike settled on Coolsigns, Inc., which was at that time a privately held, venture-funded software company.

THE HUB SEPTEMBER/OCTOBER 2006 BESTPRACTICES

It’s critical to have “C-level” support. It also helps if your CEO is the founder of the company and is not afraid to pull the trigger on a multi-million dollar investment in what was then untested technology. When Nike’s founder, Phil Knight, was asked about the digital-network project, he reportedly asked, “What is the incremental cost of playing that media to all the people that come in our stores?” When he was told that the incremental cost was relatively modest, it’s said that he blessed the project.

Every network needs a business plan that the stakeholders understand and support. This is true even for networks not based on selling ads. To some degree, one of the issues that has shadowed the Nike network has been the question of which P&L within the company would get hit with its expenses — Brand Marketing or Retail. This led to some jockeying within the company over who “owns” the network.

Be prepared for the long-haul. Lou Giacalone, the founder of Coolsigns, says that it took well over a year to sell the system into Nike. He recalls that the major driver that led to the system’s adoption in Nike were, “the disparate media the company was using in the stores and the need to pull it all together.” The network also allowed Nike to change its retail messages when it needed to — not on a schedule as it had done previously.

In June, 2003, a three-year contract was signed between Nike and Downstream, a post-production company where Tim Canfield was now president. Coolsigns provided the software used to drive the network. Initially, Downstream acted as a general contractor and provided the entire suite of services to the Nike Network. This included connectivity, content creation, installation and operations.

An in-store network should be treated as just another marketing channel. Treat in-store just like the internet or television. Have resources under your own roof to ensure that internal content is “mined” and repurposed and its messaging coordinated with all marketing outlets.

At Nike, a full-time “producer” was assigned to work at Nike and was given access to Nike’s marketing content. This was done to ensure that the messages going out on the network were in harmony with, and reinforced, the messages being sent through Nike’s more traditional channels.

No single supplier can “just do it” all. It takes a well-functioning team. By late 2004, Nike’s network had grown to approximately 185 locations, including Nike Towns, Nike Factory Stores and Dick’s Sporting Goods, where Nike had helped install a shoe wall that incorporated its network.

However, as the network became more visible and more important within Nike, the role of Downstream was scaled back. The most significant change was that “creative control” of the content shifted from Downstream back to the Nike campus. Nike also started to expand its in-house capabilities in terms of design and content creation.

In the spring of 2006, Nike quietly let it be known that it was putting the network account up for review. John Mastrangeli of Symon Communications, reportedly the winner of the review, says Symon has “approached the digital-sign marketplace from the perspective of a technology company as opposed to a creative company.”

Symon uses its “TargetVision” system, a dedicated IP-based client-server architecture with robust scheduling and content creation software. The system uses embedded Windows-XP dedicated players in the stores.

Brand enhancement can be as important as sales. Nike’s Pat Hellburg says that Nike plans to “expand the network where it makes sense to do so and where it will work.” He also said that while “sales uplift is part of the plan” for the network that the main focus of it is “brand enhancement.”

As Nike moves forward with its network, it may well be that the company will expand it into Asia, where it has thousands of stores and is experiencing its fastest growth. This growth is somewhat complicated, however, because most stores in Asia are operated by Nike licensees and are sometimes limited by government restrictions in mainland China. In addition, there are some reports that Nike’s network may also be turned inward to help Nike communicate with its 27,000 employees.

Whatever the future of marketing or networked digital signs and interactive systems, Nike certainly has been a leader and a source of best practices in today’s rapidly emerging new-media landscape.

TERRY SCANNELL is the founder of ipSigns, a solution provider for networked digital signage systems. He can be reached at terry.scannell@ipsigns.com or (503) 789-6566.
SEPTEMBER/OCTOBER 2006 THE HUB