An Updated Budget for Digital Signage Hardware and Software

Author: Bill Gerba on 2008-11-13 14:15:14

It's become a tradition here at WireSpring to put together a budget for a "typical" 100-venue digital signage network each year. Our goal is to capture both the upfront capital expenditures as well as the ongoing operating expenses that a network owner would face over a three-year period. With a slowing global economy and tighter access to capital than ever, we felt that this year's update should also include a bit more background on the payroll and other costs that networks of this size typically face, in the hopes that companies thinking about shrinking, expanding, or starting out from scratch will have a better idea of what the "typical" competitor might look like.

Where do we get our numbers?

While our previous cost estimates and ecosystem components have closely matched those from other industry analysts (so we don't think we're too far off the mark), the myth of a "typical" network is more strained this year than ever before. More vendors and network owners are choosing to implement screens with new formats and more varied locations, injecting more diversity into the projects. Plus, the idea that there's a standard staffing requirement for any digital signage network is pretty ridiculous. While we and others have proposed a list of key positions that need to be filled when creating a digital signage team, some networks are still very heavy on content production, while others might be composed almost entirely of sales folks. Still, as we looked across a wide array of networks -- representing not just our products but also our competitors' solutions -- we were able to get a reasonable feel for what most companies needed as far as the human resources side of things.

What's the cost of a typical 100-screen digital signage installation?

Enough with the introduction and disclaimers. You want to see the numbers, right? (If you're reading this in an email you'll either need to turn on images or visit http://www.wirespring.com/weblog to view the tables on the web.) Well, here they are:

Cost of a digital sign for 3 years
40" LCD screen	$1,000
Player hardware	$1,100
Display mount	$200
Player software	$450
Management software & tech support	$1,500
Installation	$1,100
Initial project management	$300
Total	$5,650

How have things changed since our last pricing study?

Before we get started with the analysis, all of the usual caveats from past years apply. Namely, this is an aggregate budget, so it's not meant to reflect any one company's products. It also doesn't distinguish between traditional software licensing versus software-as-a-service (SaaS) products. Installation assumes a two-man team arriving at a venue that has existing power lines (so no high-voltage work required). That said, the cost of installing a 100-screen network has dropped about 16% in the past year. The biggest savings came from dramatic price reductions on large LCD screens, which now run about $1,000 for a 40" screen with a three-year warranty (which is a good idea in general, and may be a requirement if you're leasing your equipment). Digital signage-specific products like software and player hardware also saw a significant percentage reduction, reflecting increased competition in the market and cost efficiencies in the underlying technology. Installation and management services had much more modest (or nonexistent) reductions, indicating that perhaps these areas are leveling out. Here's how the money is spent on a percentage basis:

To cover these expenses, you would have to allocate about $157 per screen per month, not including content and additional personnel costs. If that sounds like a lot, consider that it's down more than 33% from 2004 (the first year that we started tracking costs) -- even after upgrading to LCD screens from older plasma technology and adding in additional funds for warranties. (Note: to ensure an accurate comparison, we removed the 24/7 tech support line from the 2004 numbers, since this was not included in subsequent years.) As one might expect from a relatively new high-tech industry, the capital costs have been falling for a while:

What about personnel costs?

Once you get into content and staffing, things become a little more fuzzy. We took a look at budgeting for digital signage including content production costs last year, and those numbers are still pretty fair. If anything, they may have dropped a bit since the economy is so bad and many production companies are feeling the pinch. This being the first time we've looked at staffing numbers, I can't offer a comparison. As the "average" 100-screen network takes somewhere between 7 and 15 people to run, it's also hard to come up with a baseline for staffing costs. But if we assume that the average salary is $50K, and the average staff size is 10 people, that's another $500,000 in salaries and associated costs every year, for a total of $1.5M for our three-year budget. Doing the math, that adds another $41,666/month in expenses, or $417/screen/month. Added to the $157/month in capital expenses, the "average" screen in a "typical" 100-screen network costs about $574/month. Notice that I'm qualifying all of these numbers, since there's no such thing as typical or average in this wacky industry.

Since most people out there are focused on ad-supported digital signage networks, I'll put all this into perspective. In past articles, we've learned that advertisers in the right markets may be willing to pay the rate of $130-$150 per screen (or venue) per month. That would mean that your network has to place about 4 paid ads on each screen every month to meet the expenses outlined above. Anything on top of that is gravy. I'm not an ad sales guy, so I have no idea how feasible such an expectation is, but I hope this will provide some food for thought (and discussion) for those of you who are.

So, what do you think? Are these estimates in line with your expectations and experiences, or are they totally off? What else needs to be included?

P.S. If you want to see how our estimates have changed over the years, we've created a page that lists all our articles about digital signage budgeting, cost estimates and price guidelines. This is also a handy page to link to if you want to point your friends or clients to our latest pricing data, since we'll be updating the page whenever we add another article in the series.

Comments (24)

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2008-11-14Joe Daweah, Jr. writes:

Hi, I own a small media company in Liberia called Digital Media Liberia Enterprises. What will it cost me to setup 6 40" LCD monitors with all the software and hardwares included?

Please let me hear from your with thanks.

2008-11-14Jon Turner writes:

Thanks Bill - another excellent article from you, as always.

As you note, there are not 'typical' networks, but this is still useful and interesting, especially now that you can look back a few years and see how the numbers have moved.

Regards,

Jon

2008-11-17Emilio Alonso writes:

Great job.

But once again I miss the communications cost in the model. You have to cast your contents to each and every display and it's not for free. Both if you're connecting your displays to an existing network or to dedicated new ones, you've got a significant Operation Cost there which you have to consider if willing to acquire a fully realistic view of the money you're paying for your DS solution. And network cost is not peanuts: we can be talking about 30 - 40 US$ per month and display.

What do you think

2008-11-17Bill Gerba writes:

Hi Emilio,

I feel like we had this conversation last year :) Connectivity costs can definitely be significant -- especially if you have to use something exotic, like satellite -- but here in the US practically everybody has broadband installed already. And whether we're talking doctors' offices or supermarkets, my clients have not told me that their venues are charging to use that existing connectivity. I agree with you that another $30/$40 per screen per month is considerable, but unless people are installing into brand-new venues, I just haven't heard of many cases lately where that was an expense component.

2008-11-17Vince writes:

Bill,

I think the $1000 estimate for a display is low. It's true that you can buy a 40" TV from Costco...but they are not made to run 24-7 or handle various computer resolutions. Buyer beware inexpensive consumer models = short life cycle and inferior picture quality.

2008-11-17Bill Gerba writes:

Hi Vince,

Yup, you're definitely right, a "pro" screen will tack a few hundred dollars onto that price tag. However, as we noted last year, a greater number of networks are now just using off-the-shelf hardware for their networks. Whether or not this is a good thing or not I'll leave up to them. But the net effect is that it has lowered the "average" price of the screen.

2008-11-18Francois Reeves writes:

Hi Bill,
Seems a little high to me considering the economic nightmare we're in. There is potential economy of scale for a quantity of 100. Has this been factored in for the screen? It would be nice to look at a rental model as well, although that might be hard to find these days.

If you have the capital for 100 stations than you can *deal* suppliers dying to meet their monthly quotas.

As a side note the model would have to account for the cost of capital somehow. Inflation, interest rates and price index (the price of a BigMac is often used as a comparative) would be nice side indicators. One would have to push the envelope and compare values in *absolute* dollars, dollars that factor in some economic factors ytd (year to date). If for example the same installation cost $8,500 in 2004 at 2.75% interest rate and now cost $5,650 at 4.75%, in absolute dollars, the spread is not as clear cut as it seems. The more factors you add (just as long as they are the same in comparison) the more valuable the comparative information is. I know this is not the place nor the time to be conducting complex financial modelling but I believe one should pick some financial guidelines to ground the pricing model even further in its business context.

2008-11-21Milind Parab writes:

We are looking a vendor for digital signage. Need to purchase.

2008-11-25Bill Gerba writes:

Hi Francois,

The price factors in "typical" discounts for 100 units, which are pretty easy to estimate for the hardware but admittedly not so for the software.

As for your note about interest rates, I don't account any sort of financing since the terms can vary so much. You might put your whole company on your credit card, in which case you're paying 15% APR. You might get a good leasing deal for 7.5%, or a bad one for 12%. Those small percentage changes can make a huge difference to your total cost, as you well know.

The other thing is that the cost of capital isn't necessarily any higher during a recession, but it may be more difficult to get.

2008-11-26Emilio Alonso writes:

Hi Bill,

We had the same conversation months ago indeed :-)

Our experience is that the main part of projects include an specific connectivity to make easier the infrastructure management. When we design a DS network for a client, we always include specific ADSL lines for each and every location.

Anyway, in my oppinion, regardless you're using an existing line or a new one, the fact is that the DS system is consuming broadband somehow, and the corresponding cost should be considered when calculating the real TCO per point. Yo may say that the same happens with the content creation or the operation personnel cost (which you accuratedly mention in your study), the power consumption (which is growing in importance when choosing the hardware) and so on. Well, maybe it's useful having a look on those issues too, what do you think?

Thanks a mill,
EAF

2008-11-26Bill Gerba writes:

Hi Emilio: Yup, I remember that now, and I do understand that at the end of the day somebody is actually paying for the bandwidth that gets used. I think it deserves a mention (and I'll try to remember for next year), but since it's not something that I've really heard mentioned from the majority of networks that we surveyed, I don't think I'd want to include it in our "standard" budget comparison.

2008-11-27Fran�ois Reeves writes:

Bandwidth or connectivity should be factored in, unless it is already factored in Installation charges? In Europe, bandwidth is outrageously expensive. In other countries it could be quite a deterrent. In America, we can now rely on 3G for wireless access and in some area, WiMax. Not running wires to the DS station is quite a cost saver. How does that fit in this scenario? It reduces install charges for sure.

2008-12-02Bill Gerba writes:

Hi Fran�ois,

Perhaps I'll have to try and get some additional detail from our participants in next year's budget update, but like I said, bandwidth is not something that traditionally gets mentioned by my (admittedly very US-centric) sample group.

That will certainly change if more companies decide to use wireless service instead of piggybacking on existing wired LAN connections, since 3G and WiMax aren't cheap. For that matter, they aren't particularly reliable or available everywhere yet, so we haven't seen a huge number of deployments based on them just yet.

2008-12-05Chano Lopez writes:

Hi Bill I hope u speak spanish (it�s a joke), we are a small company dedicated to install lans & wans in mexico , a few months ago, our customers began to ask for DIGiTAL SIGNAGE, so we are looking for a dealer who can supply to us of all that info to mount digital signage networks. we are new in this market and we are ready for new technologies.....
and dealers.....I hope u can help to reach this info
regards from mexico

2008-12-13Bill Gerba writes:

Hi Chano, and welcome to the industry!

I definitely recommend you take a look at some of the articles that we've written about getting into the digital signage market when you're coming from an IT background:

Can digital signage be profitable for an AV reseller or VAR?
Can POS and AV integrators make the leap to digital merchandising?

As well as some of the general articles we recommend for people just getting started (in addition to the budgeting ones, which you've obviously found :) :

The whole series on team building, starting with Building a Successful Digital Signage Team - Introduction
Digital signage project management, installation and systems integration tips
and
5 crucial steps that can make or break your digital signage project

Good luck!

2008-12-18Micheal Ajay Prasana writes:

Hi Bill,

Your article was a great read, I took it upon myself to go through all articles you had written on pricing in the previous years. I own and maintain a Digital Signage network in India and my cost of operation is almost as much as you had mentioned except for the prices you have mentioned for the "Player software" and "Hardware". Digital Signage specific hardware are now a lot more cheaper than what it was before, with most service providers allowing the customer to pick any hardware available of the shelf this price comes down even more, so what your assumption to pick $1100 as the price. And secondly there are plenty of software's available in the market today which enables monthly subscription and annual maintenance contracts along with out right software purchase, so is the basis of the price you have mentioned? Is this Wirespring software pricing or a general aggregated view of the current market. It will be great if you can throw some light on these issues.

Thanks,
Micheal

2008-12-18Bill Gerba writes:

Hi Michael,

The $1100 I budget for player hardware is again an approximation based almost entirely on deals in the US, so I could see things being less expensive in India. Keep in mind that it includes player, shipping and warranty, of course, so it's probably more like $800-900 for the player itself, and the other $200 for the rest, again ON AVERAGE.

The player software is more difficult to model for the reason you mention: some vendors sell licenses outright, some have a software-as-a-service (SaaS) model, and some do a bit of both. WireSpring typically sells in the SaaS model, but the pricing above doesn't really reflect our pricing per se, it's supposed to be an average of several vendors that we compete against. As a matter of course we do try to make our FireCast pricing competitive with everyone else's, but that's not what's listed above :)

2008-12-18Micheal Ajay Prasana writes:

Thanks for the reply Bill, so is it the same assumptions made for Management software and Tech support as well, an average pricing based on selected vendors?

2008-12-18Bill Gerba writes:

Micheal: Sort of. One of the reasons that we say
"operate the network for 3 years" is because at about 36 months the cost of SaaS and shrink-wrapped server software is about the same (if you leave out tech support, which is often extra for the shrink-wrap stuff, but included with the SaaS).

The costs vary after 3 years, because shrink-wrap TCO should drop off dramatically, but there are additional fees for upgrades and ongoing support which some may choose to buy, but others may choose not to. Every time we do this analysis, we find that ultimately the cost, whether using SaaS or shrink-wrap, is about the same, which is where we get the average above from.

2008-12-18Micheal Ajay Prasana writes:

The reason i asked Bill - is because broadsign and people are known to be quoting as little as $25 per player (avg for 50 screen network) - administrator. Are there hidden costs involved?

2008-12-18Bill Gerba writes:

Well, BS is known to be one of the lower-cost offerings out there. However, without totally bashing them, I'll offer these two thoughts and observations:

First, BS's business model is clearly predicated on having lots and lots of volume. They have a pretty big head count and spend lots of money on marketing, so they will need to sell A LOT of $25/month units to cover their costs (and I don't know whether they do or don't right now). You, the customer, have to ask yourself how much faith you have in their ability to deliver not just this month or this year, but even five or ten years from now based on that model.

Second, if they're the lowest-cost provider out there (they might be?), why aren't they winning all of the deals? Well, it's because there's more than one way to run a network, and if you don't like BS's particular tool set, you have lots of other options, priced accordingly.

BS's pricing is figured into our estimate, though. There are a lot of guys who price their software and SaaS MUCH higher than them, so the average still works out.

2008-12-18Micheal Ajay Prasana writes:

That makes sense.Last year at an expo they themselves mentioned that they have about 8-10,000 screens under operation. Have always wondered how you could run offices in 2-3 countries and yet make money at those volumes.

2008-12-18Micheal Ajay Prasana writes:

By the way bill, I have a specific query though, do you think it is necessary for the local guys where the screens are placed to participate to ensure better response. As I had mentioned earlier, I run a network here in India, and one of the problems I face is that the retailer where my screens are located wanting some amount of say on what is being played within. It takes a huge effort from my end to collate all these contents from them and then stitch it together to form a decent mix of local promos and my ad content. Is there any easier way of doing this? can you suggest any if possible.. and before that is this the way to go?

2008-12-18Bill Gerba writes:

Hi Micheal,

In general, the more invested in the system your venues are, the more invested they are in your success as well. However, I've only ever studied this from a financial perspective -- your question about whether having them use the system gets them more invested is interesting, but I don't know the answer to that.

Recently it does seem like more projects we've worked on have this requirement. I can't tell you how your software solution might work, but in FireCast we have something called SmartPages -- basically specialized templates -- that you can drop into your play lists. Then, you can create new logins for each store manager, and allow them only to modify their own SmartPage (for example, by changing a product image, a service announcement or a pricing text string). This leaves you in control of everything except the few specific areas where the manager is allowed to change (and you can even override those, if you have to).

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