Forrester Research recently released a report entitled “How Video Will Take Over The World”. I will not summarize the summary - suffice it to say that the report’s title says it all. Video will be everywhere, and that likely includes places where you would rather not see it (i.e. watching a promo for American Gladiators in the back of a video-enabled taxi on the way to the airport).
Essentially, the systems envisioned in the research note exist today. But what is this new area? Basically, these systems take content from their source (a digital file) and push the file across the internet to a player (computer) in a store, a taxi (American Gladiator, here we come) or an airport waiting room.
In turn the digital file is played in its original state (including full HD content 1080p) on a flat screen panel, digital projector or even a TV. In the vast majority of instances the content is not streamed but rather sits on a hard drive at the site where it will be played.
A signal is then sent to the “player” and the content is played. This is the “simple use case” known as “ a passive application.” There are now systems that are fully interactive and can use barcodes, active RFID chips and the like to trigger them and collect data (think the Gap store in Minority Report with Tom Cruise).
When all the “technological magic” is pulled away, these systems are really communication devices. Like any tool, they can be used to inspire us, sell us, inform us or drive us all to distraction.
It is very difficult at this time to identify “leaders” in this industry. This is due in large measure to the fact that the “digital sign” “narrowcasting” or “video everywhere” business is really composed of several entire industries. To put a system in you have to, have a screen, have a internet connection to the screen, have software that controls the system, install the system, have content to play and have a business plan. Today, there is still no one company that does all this without the liberal use of subcontractors. To some degree this is a function of the current market size (est. $1.5 billion).
Nonetheless, there are several stocks to track. First, is Focus Media (NASDAQ:FMCN) out of China. This company had been a success story (hitting a high of $55.00 per share) but it is questionable if their business model can be duplicated. The reason is that Focus (which has its installed base in elevator lobbies in China) did not (in the majority of cases) pay landlords for the initial screen placements. Chinese landlords are not likely to renew for free when the placement agreements come up again. In addition, content (ads) have to be physically delivered(using DVD’s) to each screen. In China it makes sense to pay a person on a bike $100 a month to do this for 40 buildings when China Telecom (NYSE:CHA) would charge $100 per month per building.
Another company to watch closer to home is Wireless Ronin (RNIN). Trading at $5.30 on June 27th 08, this company has seen its stock go up and down. While it is down from its highs of around $9.75 per share, it has staged a comeback from a low of $2.55. Ronin is primarily a software play in the space.
Another company to keep an eye on is Planar Systems (NASDAQ:PLNR). This stock has gotten the stuffing beaten out of it. Planar primarily a high end LED screen manufacturer. In the last two years it bought another Oregon company that had some interesting technology in this area, a software called “Coolsign.” Coolsign is a solid software option for very large systems that are primarily based on selling ads as a business model. Recently, the company’s CEO announced that the company was “exploring its strategic opportunities” which is a good idea. Planar’s last “strategic move” was buying a high end home theater company for $40.0 million in cash which was a disaster. A company with a long term perspective and deep pockets could come in and buy Coolsign and make something out of this.
Bottom line, this is going to be a huge market; right now, not so much. The best advice is to keep a close watch and move when the river is flowing fast and in an upward direction.