Overpriced Digital Signage SaaS: $60 SAAS a Thing of the Past

Posted by on Jul 1, 2011 in DOOH

DSE is always a great eye-opener. You are able to analyze your competition, view the latest and greatest interactive app, brush shoulders with some great people, and get more educated. Since attending my first expo a couple of years ago, I have been waiting for a few things to occur that have not yet. Specifically, I have been waiting to see a drop in price in those offering software as a service (SaaS) solutions. Yet, I’m still seeing a recurring trend among digital signage vendors: the software is overly expensive. And, even more so, given our current economic situation.

Digital signage, although proven in many cases to lift ROI, engage customers, and provide an overall benefit, is often a luxury item for many institutions. Yes the prices of LCD televisions have dropped substantially in the last several years, but the software for digital signage remains exorbitant. Let me give some examples. The expo still had folks peddling SaaS bundles for a single screen from $60 to $100 a month. You’re kidding right? A single screen without content creation, content management or any other bundled services? Of course, when economies of scale come into play, we can widdle that price down a bit, but seriously give me a break!

It’s once AGAIN the “chicken vs. the egg.” You could easily sell such a pricey solution to a company who had a solid long-term media buy in hand. Easily. But from my narrow perspective, digital signage vendors at DSE are still scrambling for business from the same customers. It’s still a dog-eat-dog, ocean of red, knock-down-drag-out swirl of competition. We would like to all be friends (it’s certainly in my nature–I don’t like to offend). However, we’re all at the same shows and on the Internet, competing for face time with the same crowd. If that is not competition, fill me in. And, I find it painful, yet interesting, to see the prices companies are still charging for hardware and software. The margins are still ridiculous. Perhaps that’s why digital signage is still considered a “growing” industry, even in our current economy.

Interestingly, and perhaps to their advantage, those selling the solution outright to companies willing and able to manage their own networks are finding a growing niche. The generally trend: purchase a server, buy the media players, and pay a minimal “annual maintenance and support.” This works especially well for companies looking to install and manage their own private network. In such a case, the vendor handles support for the software and hardware, but is hands off for hosting, content creation, and asset scheduling. For integrators and small, local media companies working on a citywide, self-sufficient network, an entire system purchase can be more price conscious than they might think.

And the general trend for server purchases? I have seen ranges between $5k and $20k. Big spread. But from what I could see, the stark differences made the price gap worth the hike. The media players on the other hand don’t show vast differences in functionality. Most work as simple playback devices for content and content schedules. The difference in price is quite a contrast, however. Does $250 vs. $3,500 paint a picture for you? Quite a broad differential. But, of course, there are still differences in functionality with those price ranges, and Cadillacs generally don’t run near $250. However, the broad price-gaps have keep you wondering, “what could make the players that much different?” Finally, what is an industry trend for maintenance and support on such a system? 10 to 20 percent of the initial software/hardware price annually is a fair estimate.

Now, contrast these numbers with a hosted solution at $100/month (a price many companies are still charging on a per media player basis). In this case, you still have to pay approximately $1,000 for a player, but your recurring fees require you to “bend over and take it.” Your ROI crumbles when you crunch the numbers. Let’s say you’re only doing 10 displays (which, by the way, is going to be the size of many networks going forward). In the case of 10 players, you’re not at “bulk” volumes yet so you’re not eligible for a monthly discount. You’re up front cost is $10k for the players with recurring costs of $1k monthly. In the case of a $5k server purchase, your ROI on a decent low-end server would have been five months with this particular example. An ROI of five months makes the expensive hosted model look like a ride to the cleaners.

Now, without bashing too much on hosted digital signage solutions, I just need to clarify, by saying the following: unless you are offering content creation services, content scheduling and overall management of the network, simply hosting one media player for >$60/month is going to price you out of the market for many customers, especially as digital out-of-home moves mainstream. Just because digital signage has predicted growth in a bear market, does not mean you can charge rapist prices to eak out the margins. Contrastingly, it means the opposite, the overall market will drive digital signage, meaning your prices need to adapt, or you’ll price yourself out….of home.

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