The Digital Signage Insider

The Two Most Dangerous Men in the DOOH Industry

Published on: 0000-00-00

Last week, DailyDOOH posted a fun little article asking a rather interesting question: Who are the most dangerous people in our industry? Dozens of commenters (mostly anonymous) proffered suggestions, naming well-known consultants, CEOs and hangers-on who love to see their names in print. The comments were fun to read and made me laugh out loud more than once, but by the time I had read them all through, I realized that DailyDOOH honcho-in-chief Adrian Cotterill had actually asked a pretty serious question. You see, "who's the most dangerous" isn't the same as "who's the most annoying" -- even though that's how most of the commenters interpreted it. The dangerous ones, instead, are those who could inflict serious damage on the industry and restrict its growth. In fact, they tend to be some of the most successful managers of some of the biggest companies in our sector.

While chatting with Adrian about a week after the post surfaced, I lamented that while some of the people mentioned in the comment thread could be pretty irritating, none really had the ability to bring considerable damage to the industry, and hence qualify as "dangerous." To do that, I suggested, you'd have to talk a big game, go out and make a go of it, and then get shot down hard enough that nobody with money would want to touch the industry after that. Digital signage technology is so pervasive these days (heck, we've seen screens mounted on everything from automatic defibrillators to milkshake machines) that it's unlikely that anything could take the whole industry down. However, the highest-visibility sector -- digital, out-of-home advertising networks -- is still pretty fragile, so I focused my attention there. My comment to Adrian (which he then anonymously posted on my behalf since I'm generally too lazy and/or forgetful to do it myself) was that if we had a few more high-profile failures of DOOH networks, it could reset that side of the industry again by driving away potential investors and entrepreneurs. My argument looks something like this:

The bigger they are...

Image credit: Ben Crowe on Flickr
I propose that Garry McGuire (CEO of RMG Networks) and Richard Fisher (CEO of PRN) are hands down the two most dangerous men in the industry, at least from a US perspective. Are they inept? Nope. Have they been leading the industry in the wrong direction? Hardly. Are they downright evil? I doubt it. But they do represent two of the biggest and most visible digital out-of-home advertising networks in the country. And when business analysts and Madison Avenue have questions about our quirky little industry, they'll be the men who get asked those questions, and whose answers will carry the most weight.

So consider what would happen if one or both of these companies were to founder. PRN has been a stalwart of the digital signage community for... well, basically forever. They've gone from being a minion of Walmart (who at one point accounted for something like 90% of their revenues) to today's more diversified company with a larger and more comprehensive suite of offerings. While I doubt they're throwing off as much cash as parent company Technicolor would like, they're a good team of smart people with a good business model, and we more or less expect them to do the right thing when it comes to digital signage. If they were to suddenly change direction, go into receivership or experience some other life-altering event, I'd be pretty worried for other DOOH networks.

RMG is in a similar position. With a pedigreed CEO and VC money from some of the darlings of Silicon Valley, RMG has made no secret of their intent to become the premier supplier of DOOH inventory in the US. Add in a big line of credit and plans for an IPO, and the firm ought to be able to back up their big talk with big actions. While they don't have the same track record as PRN, their resources and growth so far are such that any serious missteps would almost certainly make other DOOH network owners pause and consider their growth options.

Who will be the next NGN?

Over a decade ago, Next Generation Network became the poster child for how not to run a digital signage network. Having raised nearly $100M in private equity financing, they deployed thousands of screens across the United States, only to find that they had no way to monetize them. In hindsight, their lack of a suitable ad sales model and ridiculous capex requirements is obvious. But at the time, people were astonished to find them disappear just scant months before preparing an IPO filing. Their high-profile exit slapped a giant "DO NOT TOUCH" sign on ad-funded digital signage networks everywhere. This hindered the growth of companies like RMS Networks and the early PRN (which I think was called Pics Retail Networks), and surely prevented the formation of other startups that would have shared a similar vision (for better or worse).

Long story short, there are only a handful of DOOH companies that big businesses bother to pay attention to. If these guys can't prove out the model, it's going to hurt short-term investments in other DOOH companies and make expansion and exit more difficult -- even for those companies who are successful in their own niches. Unfortunately, the reverse isn't necessarily true. The ongoing success of a company like PRN or RMG probably won't translate to increased access to funds or improved growth prospects for other advertising-based networks. So for the small guys (and that's virtually EVERYONE aside from the top 10 or 20 DOOH networks), there's little to gain, but much to lose.

How much impact does the performance of large DOOH networks have on smaller DOOH companies and newly-minted startups? Leave a comment and let us know.


0 # Clinton Gallagher virtualCable.TV 2011-06-30 19:37
Bill you are one of those guys who can be an inch deep and a mile wide as well as a mile deep and an inch wide all at the same time. DOOH is still too young to write off advertsising-based networks calling it a day and handing over the accolades and control to the handful of providers that the corporate brands buy into. Everything that moves across the WWW proves there is more than enough "left over" or "residual" and even "new money" revenue not in the pockets of the over-the-air hegemony or any other hegemony the brands have funded for so many years. And everyday some new way to advertise is being reinvented. Hence The Long Tail and Free: The Future of a Radical Price phenomena as documented by Chris Anderson.
0 # Steve Nesbit 2011-07-01 19:21
Bill: I hope all is well. I read your post regarding Adrian's "Most Dangerous" challange for the DS industry. I surely appreciate your perspective but believe that one needs to be very careful to represent the FACTS on NGN and I wanted to correct your comments about NGN. I was a principal at NGN for most of their years of business and benefited from the sale of our company to what is now National CineMedia. Your comment that we raised over $100m is indeed accurate including $35m from our largest investor, United Technologies in the name of Otis Elevator Company to represent a 25% ownership position in our company. Your comment: "only to find that they had no way to monetize them (the screens)" ..... I beg to differ with you. NGN grew to be almost a $20m company when we filed our S-1 for an IPO with Credit Suisse/First Boston. Wtth the over 7000 sites installed (and another 20,000 under contract and waiting to install) we were beginning to secure national ads. We had every 7-ELEVEN stores installed, had REALLY secured a signed contract with McDonald's (unlike others who hope to have a contract) for the top 25 DMAs in the USA representing 6500 restaurants of which we had installed 2000 when we were sold. We had almost 1000 sites installed in Manhattan to surround the ad agencies to familiarize them with the medium and to make it known to the investment community. We had installed close to 1000 elevator cabs in London, Sydney, Paris and were beginning to install elevators in selected markets in the USA. We were installing Tabac Shops in Paris (almost 500 on our way to 2000). Advetisers like Saturn, Coke, Fortune Magazine, TrackPhone, Verizon, Fox, and P&G were starting to buy national campaigns. I don't want to mis-represent this because it was hard sluggging because we had to spend 50 minutes of every one hour meeting explaining what this was in the last '90's and early 2000's when DOOH was not even a term that was used. We were THRILLED when this started to be identified in the "other" category of advertising. WE WERE MONITIZING IT. And we had a VERY bring future. Your comment, "people were astonished to find them disappear just scant months before preparing an IPO filing" The IPO was delayed and ultimately cancelled because the market crashed in late March of 2000. We were within 10 days of our IPO day when the market crashed. The week after the market crash had been secured as the week of our road-show. The filing DID NOT JUST DISAPPEAR. We were guided by a BIG TIME Wall Street firm, CSFB and followed their guidance on timing. If it had gotten out, we would have raised enough cash to weather the oncoming recession and the network would have been a valued asset. TIMING killed the company NOT business model and the IPO did NOT just disappear. Then a few months later we faced 9/11, another difficult time for advertising. We were selling MUCH advertising (almost $20m the year before the crash......... an amount that MOST companie today would kill for) and had a VERY BRIGHT future. I have to tell you that those were very painful days as we were within 10 days of going public and securing enough capital to secure our future growth to complete the installs of the Mcdonald's network and others only to have our IPO delayed/cancelled due to market conditions. We were in need of capital, which was why we had decided to go public and with the economic crash, raising capital because nearly impossible. BAD TIMING, not BAD BUSINESS PLAN. The value on IPO day was targeted to be over $485m. You say, "ridiculous capex requirements is obvious". "Their high-profile exit slapped a giant oeDO NOT TOUCH sign on ad-funded digital signage networks everywhere" I just flat out disagree with your comment here for all the reasons listed above. In the end, Phil Anschutz and Anschutz Investments acquired our company. We did not secure anywhere near the $485m our IPO would have valued, but we got more than most think for our company. Anschutz placed us under his recently acquired movie exhibitor holdings (United Artists, Regal and Edwards Theatres - all rebranded as Regal Cinemas) and branded us Regal CineMedia. This then broke off on it's own after GREAT SUCCESS and went public as a separate entity as National CineMedia. Anschutz decided in the midst of the recession, to boster up his cinema holdings by focusing only on cinemas and all the 7000 sites were deinstalled to focus the capital on digital cinema advertising. Although I disagreed at the time with the de-install decision, since NCM is now a $500m company this looks like a good decision. The idea of "digital" was a big boost to his IPO of Regal three months after the NGN acquision and the rest is history. I think it is important when talking about NGN to be accurate on what happpened for the good of our industry. We made many mistakes no doubt in plowing new grounds for an industry that was not even called an industry at the time. But your comments are ones that I disagree with and I wanted to have a chance to correct the record using the FACTS. Thanks. Steve Nesbit
-2 # Bill Gerba 2011-07-01 19:31
Hi Clinton, Agreed, it's too write off all "other" DOOH networks, and that certainly isn't my argument (or expectation). However, there are many more failures than successes in our industry, and even though they're mostly small, they negatively impact the ability of new networks (and growing networks) to raise capital. Since the **VAST** majority of networks still rely on outside funding to some degree or other, that's a really big problem. Big failures would only compound that problem, which is what I was suggesting in the article. Hi Steve, Thanks very much for your detailed reply. I apologize if my admittedly quick-and-dirty summary of the events surrounding NGN don't do the company justice. It certainly wasn't my intention to belittle or misrepresent your efforts. The original NGN has long been the whipping-boy of the industry (whether justified or not), and I expect few realize that it grew into National CineMedia, arguably the most successful DOOH network anywhere. I agree with almost all your points and won't belabor any but one: >> "Their high-profile exit slapped a giant >> oeDO NOT TOUCH sign on ad-funded digital >> signage networks everywhere" > I just flat out disagree with your comment > here for all the reasons listed above. I know for a fact that the negative press surrounding the demise of NGN made raising capital more difficult for some DOOH companies. I advised numerous VC firms in the early and mid 2000s on various digital signage opportunities. On multiple occasions (at least 3 I can think of) an analyst or partner would bring up NGN as a reason not to do a deal -- and these are people who presumably took a more academic approach to analyzing why the company failed (to be clear, this wasn't my objection, nor was I asked to comment on it specifically). Thanks again, Bill
0 # Steve Gurley 2011-07-01 19:43
You're right. A failure of either company would cause concern about the DOOH industry. The failure of RMG would far more serious as they have been held up by many as the shining example of what DOOH should be. Then again, if any company with RMG's credentials were to fail, one would have to question the viability of the ad-funded business.
+1 # Ken Goldberg 2011-07-01 20:21
Bill: Why would someone be considered dangerous based upon a hypothetical failure of their company? Think about it. PRN was the target of the biggest financial deal in the industry to date in 2005. That their value was tightly tied to their part in WalMartTV, and has since suffered due to WalMart's predictable re-working of the relationship actually provides two important insights: 1. There is great value to be created (and lost) in ad-funded networks. Steve Nesbit's comments on NGN support that. 2. PRN's retrenchment, for sale sign and brain drain has not impacted the industry at all. So it is hard to think that their ultimate demise would be earthshaking. That being said, their resilience in the face of their changing business dynamic speaks to the value of people and companies that understand how to drive value in DOOH networks. And we are talking about ad-funded networks. As for RMG, they are far more likely to hone their model and thrive than they are to fail. They are, after all, a young company and are in a position to make go forward plans based on actual performance. If they were to fail as an entity, the most valuable parts of their network portfolio would survive in other hands, just as NGN ultimately did. So I find it hard to label Mr. McGuire or Mr. Fisher as dangerous. While it didn't take much gloom and doom to smoke out the one-trick pony with his usual dirge for ad-funded businesses, the truth is that the very existence of both PRN and RMG are testament to the value in ad-funded networks, and their ultimate success or failure won't change that.
+1 # 2011-07-01 21:30
Hi Ken, I'd be about the last person to argue that there's no value in DOOH advertising. However, I'm generally not the person that new networks need to convince. I don't think I'd go as far as Steve G does above, but based on past experiences working for VCs I'm certain that another high-profile failure would make it much harder even for decent networks to raise expansion capital, and that would be troublesome for a lot of people in our industry. While relying on the availability of outside capital is dangerous, many, many, many networks do just because they have no other choice. And VCs tend to be like loan sharks -- when they get their money back, you're their best friend. When they don't, they break your kneecaps (metaphorically speaking of course).
+1 # Billboard Lease 2011-07-13 15:52
While DOOH users spend the same amount or more for the space, and they have to share with the others in the loop they have a lot of value from the option to change the ad by the minute.
-1 # Tom 2011-10-31 10:58
The people who are most damaging to this industry are those who constantly make the rounds at the industry conferences, endless press releases, ect. and discuss sales numbers and growth rates that are simply fictitious. The failures far outweigh the successes yet the stories that are spun would lead one to believe otherwise. [[ london.html|North East London Electricians]]

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