2017 State of the Industry Report: What does the future have in store?

by all | 7 December 2016 9:50 am

Compiled by Peter Saunders
The sign industry is showing patterns of growth that should continue throughout the year to come, according to the International Sign Association’s (ISA’s) latest economic reports. Compiled by market research firms IHS and Vandiver and Associates and sponsored by the National Association of Sign Supply Distributors (NASSD), the reports assess a range of industry segments, including wide-format printed graphics, electric signs, digital signage and architectural signs, all of which are expected to show growth well above historic patterns through 2017 and even into 2018.

Such predictions of continued success are credited to a relatively stable outlook for the global economy and, more specifically, the North American market—but they also have much 
to do with the rising importance of signage within the economy and with the rapid technological developments that have revolutionized how signs are produced.

“Even after more than a decade of growth, the sign and graphics industry continues to outperform the national economies of Canada and the U.S.,” says Catherine Monson, president and CEO of FastSigns International, a signmaking franchise system. “This is due in part to customers having a better understanding of the role visual graphics can have in helping them sell, inform and direct. It is also because of the development of new products, technologies and applications.”

Illumination
As per ISA’s economic reports, electric signs remain above-trend. On the supply side, for instance, total revenue for hardware and services was expected to increase by 12.4 per cent for 2016 over 2015.

Light-emitting diodes (LEDs’) dominance of the illumination market for such signage continues apace. The value of chip-on-board (COB) LEDs used to illuminate all types of signs and professional displays, by way of example, is forecast to grow by 71.3 per cent annually through 2020, according to the latest market study by ElectroniCast Consultants.

Overall, the report found the worldwide 
value of all types of LEDs for signs and displays reached nearly $2.3 billion U.S. in 2015 and will increase each year by an average of 9.5 
per cent to top $3.6 billion U.S. in 2020. The trend will vary significantly, however, for different LED package types.

Compared to what ElectroniCast describes as ‘explosive’ growth for COB and multiple-COB (MCOB) LEDs, for example, the consumption value of dual in-line package (DIP) LEDs is forecast to increase by 13.3 per cent each year, while that of surface mount diode (SMD) LEDs will experience negative growth.

In other words, the sheer number of LEDs being installed in channel letters, lightboxes, sign panels and other applications continues to grow, but the particular types of LEDs being specified for such projects are changing.

Wide-format printing
The North American wide-format inkjet printing market, which was valued at more than $20.3 billion U.S. in 2014, is expected to grow to $24.4 billion in 2018, according to another recent study, conducted by International Data Corporation (IDC).

The market research, analysis and advisory firm interviewed printer manufacturers, distributors, industry experts, print service providers (PSPs), marketers and retailers on behalf of the Print Industries Market Information and Research Organization (PRIMIR). Buyers cited banners, posters and signs as the top three applications. PSPs, for their part, also mentioned photography and presentation graphics. With the commoditization of these and other mainstream products like billboards, however, the PSPs were focusing on new, more profitable applications.

With this in mind, the PRIMIR report—
titled Wide Format Inkjet Printing Trends and Opportunities—suggests IDC’s forecast for future growth will be contingent on both (a) the further conversion of traditional analogue printing methods for display graphics into digital processes and (b) the development of new applications based on innovative combinations of inks and media.

IDC’s research shows ultraviolet-curing 
(UV-curing), durable aqueous ‘latex’ and dye sublimation printers are all benefiting from the shift—at the expense of older devices, such as lower-end aqueous inkjet printers—as PSPs seek (a) the ability to print graphics at faster speeds and (b) new markets for their services.

“The growth of these alternative ink technologies in the graphics business has made up for declines in more mature methods,” says Tim Greene, an IDC research director.

One trend that has played directly into the strengths of digital wide-format printing is ‘versioning,’ whereby display graphics produced for the same client do not all feature the same message or image. Versioning has enabled more highly targeted marketing even while the overall number of printed graphics rises.

In addition, as they face competition from digital signage and mobile marketing, more than 40 per cent of print buyers have added Quick Response (QR) codes or other ‘interactive’ elements to their display graphics and the majority plan to continue to do so.

Research compiled for ISA by InfoTrends predicts wide-format print volumes across North America will continue to rise at a compound annual growth rate (CAGR) of 14 per cent through to 2019, driven by the ability to place inks on an ever-broader range of substrates. In this respect, both UV-curing and latex printers are overtaking market space once dominated by traditional aqueous and solvent inkjet systems, which are not compatible with as many different types of materials.

Further, the number of printing companies that operate within the sign and graphics community and classify themselves as ‘entirely digital’ continues to grow. A 2016 Specialty Graphic Imaging Association (SGIA) survey found 55.6 per cent of respondents describing their businesses as fully digital, compared to 41.5 per cent in 2015. Overall, digital printing was used by 98.9 per cent of printing companies in the sign and graphics sector, followed by screenprinting at 36 per cent and lithographic/offset printing at 20 per cent.

SGIA also asked businesses about the new purchases they had made over the previous year. The most common were not printers, 
but instead related software and pre-press production tools. Among new printer purchases, meanwhile, latex roll-to-roll (RTR) inkjet systems smaller than 2.4 m (8 ft) topped the list, followed by UV-curing RTR printers larger than 2.4 m.

On the side of the industry serving these companies, the global market will be worth more than $8.4 billion U.S. by 2022, according to recent reports from Research and Markets and MarketsandMarkets. Both predict a CAGR of three per cent for large-format printing hardware and 4.4 per cent for after-sales services between 2016 and 2022. In terms of volume, they forecast approximately 398,300 units will be shipped to sign shops and other printing companies during that period. They cite increased demand for out-of-home (OOH) advertising, printed interior décor and textile graphics, with UV-curing printers leading 
the pace of adoption due to their ability to produce durable graphics on both flexible and rigid substrates.

One growing concern for sign shops, however, is how wide-format printing is becoming an important profit centre not only for them, but also for small commercial printing companies. Already, signage accounts for an average of 9.8 per cent of these companies’ total sales, according to the National Print Owners Association’s (NPOA’s) 2015-2016 Signs & Wide-format Pricing Study.

Digital signage
Global shipments of digital signs for public display applications were estimated to grow by 9.3 per cent in 2016, with associated revenue increasing by 15.3 per cent, according to IHS. The firm predicted approximately three million units would ship throughout the year and revenue would climb to $9.7 billion U.S., thanks to an increase in the average selling price (ASP) of a public digital display from $1,826 U.S. in 2015 to $1,926 U.S. in 2016.

Shipments of premium ‘4K’ ultra-high-definition (UHD) liquid crystal displays (LCDs), for example, are expected to increase market share from 1.4 per cent in 2015 to 12.1 per cent in 2020.

As for screen size, IHS reports 1.4-m (55-in.) LCDs comprised 18.4 per cent of the market in 2015 and should reach 28 per cent in 2017, but then decline to 21 per cent in 2020. Meanwhile, 1.8-m (70-in.) LCDs will grow from 3.9 per cent in 2015 to 8.9 per cent in 2020, while the 1.8 to 2-m (70 to 79-in.) category will increase from 2.6 per cent in 2013 to 11.8 per cent in 2020.

With LED-based displays, strong increases in unit shipment numbers have been accompanied by declines in prices, hampering revenue growth. In 2016, IHS reports, prices shrank by 26 per cent compared to 2015, while shipments rose by 
27.5 per cent, resulting in only a slight bump of 4.9 per cent for revenue.

Outdoor and retail installations, where the benefits of LEDs’ high brightness and durability compared to LCDs are particularly clear, represent nearly 40 per cent of total market share. IHS expects this share to drop to 35 per cent by 2020, however, as the current 63 per cent year-over-year growth for outdoor displays is outweighed by 98 per cent growth for indoor installations in public spaces, control rooms and other venues.

The shift indoors is another reason pixel pitches are becoming finer. While outdoor displays commonly feature a 5 to 10-mm (0.2 to 0.4-in.) pitch, increasing numbers of indoor (and outdoor) displays are in the 2 to 5-mm (0.08 to 0.2-in.) range.

Pixel pitch measures the distance between the centres of each cluster of red, green and blue (RGB) LEDs within a display. The shorter the distance, the higher the resolution of the screen and, hence, the closer the viable viewing distances. It is these shorter viewing distances that have allowed LED-based video walls to move from outdoors to indoors, where their lack of bezels (i.e. edges of panels within a video wall) makes for a more seamless appearance than can be accomplished with LCDs.

In 2017, even though prices will continue to decline, revenue momentum is expected to pick up as shipments shift to finer pixel-pitch categories and, for that matter, these LED displays begin to replace LCDs and other large-format digital display technologies.

The two fastest-growing categories of LED displays, according to IHS, have been those with a pixel pitch of less than 2 mm (0.08 in.), which saw a 366 per cent increase in 2015 over 2014, and those between 2 and 5 mm, which grew by 129 per cent. They were forecast to grow by a further 84.8 and 77.1 per cent, respectively, in 2016 over 2015.

Given the size limitations of current LED packaging, IHS expects the rate of technological advancement with finer pixel pitches will slow significantly in the short term. And the price difference represented by a pixel pitch under 
1 mm (0.04 in.) and those between 1.2 and 
1.9 mm (0.05 and 0.07 in.) is almost a factor of two, so it is generally cost-prohibitive to build a large-scale video wall using the very narrowest pixel pitch LEDs.

For these reasons, some markets—including education, hospitality and health care—remain elusive for LED displays, as lower budgets have restricted them from moving on from LCDs or front-projection systems. Indeed, technological diversification has been a key factor behind the widespread adoption of digital signage, as an increasing number of organizations find it affordable in one fashion or another.

Video walls, for example, are experiencing double-digit growth in global sales, according to Futuresource Consulting,  as well-established products like super-narrow-bezel (SNB) LCDs and rear-projection ‘cubes’ (RPCs) for tiled displays are joined by emerging, disruptive technologies like narrow-pixel-pitch (NPP) LED arrays. Both RPCs and SNB LCDs are expected to gain further market share in control room applications, where near-zero bezels are highly desirable, while NPP LED video walls are enjoying success in the corporate, exhibition and broadcasting sectors.

And while fine-pixel-pitch LED displays tend to cost at least three times more than LCDs or Digital Light Processing (DLP) projection, Transparency Market Research predicts continued research and development (R&D) and growing competition will bring prices down in the coming years. The company expects the worldwide fine-pixel-pitch LED display market will grow from $677 U.S. in 2015 to $3.1 billion U.S. by 2024, representing a CAGR of 15.8 per cent.

At the other end of the market, meanwhile, commercial-grade LCDs are seeing competition from consumer-grade TVs.

“As technology improves and prices fall, more users will risk buying consumer TVs for use in commercial environments,” says Sanju Khatri, director of digital signage for IHS. “Businesses that do not need to display sophisticated content may find they perform well enough for their purposes. We expect this trend to increase in the future.”

So, either way, digital signage in general is on the rise, which may pose a threat to the market for printed graphics and other ‘static’ signage.

“Digital signage will displace a portion 
of static signage in certain environments, such as stadiums, restaurants, airports and hospitals,” says FastSigns’ Monson. “This is why staying on top of digital signage trends 
is more critically important than ever to those 
of us in the sign and graphics industry.”

The monthly revenue opportunity for digital signage in all types of venues across North America, according to a recent report compiled by Charlottetown-based software developer ScreenScape Networks, is just over $300 million U.S. To quantify the size of the market, ScreenScape started with the number of locations within a particular geographic zone. Every business with a physical venue, after all, is part of an overall addressable market for digital signage.

Based on government data, including information from Statistics Canada, the Retail Council of Canada (RCC) and the U.S. Census Bureau, ScreenScape estimated there are 190,100 retail establishments within Canada and just over a million in the U.S., for a total 
of around 1.2 million. Next, for the average revenue represented by each venue, ScreenScape estimated a monthly subscription fee of $40 U.S. This suggests a North American retail revenue opportunity of just over $50 million U.S. per month.

There are many additional venues well-
suited for digital signage, as mentioned, including hospitals, clinics, universities, 
fitness centres, hotels and golf courses. As a rule of thumb and based on government data, ScreenScape points out, there are five such public establishments for every one retail store. Hence, the overall revenue opportunity is six times that of retail stores alone, for a total just greater than $300 million per month.

The company notes not all public-facing venues will necessarily feature digital signage, but these are compensated for by other venues that represent a greater revenue opportunity because they host many digital signs, rather than just one each.

“The broader, longer-term market opportunity is actually much bigger,” says ScreenScape founder and CEO Mark Hemphill. “The first phase is building out the infrastructure of 
digital signage through the sale of software and hardware, which is what our report focuses on, but a secondary opportunity exists in the 
metered flow of content and in the growth of digital out-of-home (DOOH) advertising.”

OOH advertising
The OOH advertising industry, as mentioned, is seeing continuous growth. The OOH Marketing Association of Canada (OMAC) cites data from Nielsen showing ad revenue grew by six per cent in the first quarter (Q1) of 2016 compared to Q1 of 2015. And having already experienced significant increases over the past five years, global OOH revenue was forecast to rise by another four to five per cent over the rest of 2016. The association credits this trend to a number of factors, including ‘audience erosion’ for other media, an increasingly mobile and active populace and new investments in digital OOH (DOOH) technology.

At the same time, OOH is also exerting an increased influence on consumers, according 
to new research shared by OMAC. First, a study of more than 40,000 Canadian shoppers by BrandSpark International examined the role OOH plays in relation to consumer habits. It found more than 75 per cent of shoppers paid attention to OOH ads, in part because people are particularly active and alert when outside their homes.

Next, an OMAC-commissioned study showed audience recall for DOOH ads was particularly high in major cities, where more than one half of surveyed shoppers could recollect the ads on a weekly basis. The study found four in 10 shoppers were interested in interacting with digital ads to obtain information about or promotional offers of products and services. Further, more than seven in 10 survey participants agreed digital signage was a good means by which to communicate with them.

“DOOH is seen as an effective way to pass 
along timely and relevant information to Canadians,” says Rosanne Caron, president of OMAC and a member of Sign Media Canada’s editorial advisory board (EAB). “It is the ideal medium for everything from public safety messages to product promotions.”

Indeed, some of OOH’s most significant new growth is on the digital side. ISA’s economic reports suggested global revenue for DOOH advertising would surpass $1.6 billion U.S. by the end of 2016; and its share of the OOH market within the U.S., by way of example, would top 17 per cent for 2016 and will reach 22.4 per cent in 2020.

REFLECTIONS AND PREDICTIONS

“The move to energy-efficient light-emitting diodes (LEDs) will continue to grow. With slower growth in the retail sector, we can expect to see more acquisitions and mergers, which will lead to the installation of new exterior signs. And with rising energy costs, the retailers will look at cost savings whenever a sign needs to be replaced.” – Jean-Pierre Lacroix, president, Shikatani Lacroix Brandesign “Canada’s sign industry will continue to grow at a steady pace in 2017, thanks in part to infrastructure programs. We see a continuous demand for signage projects in Canada, in the U.S. and overseas. The quality of the Canadian sign industry is competitive on an international level, while the low Canadian dollar is an attractive incentive for clients abroad.” – Udo Schliemann, principal creative director, Entro “Fabric and other textile printing will have a long-term effect on the industry because of the benefits of using environmentally friendlier materials, the ability to stretch, shape and illuminate graphics, the ease of packing and the lower cost of shipping.” – Catherine Monson, CEO, FastSigns International “Fifteen years ago, the industry had a much higher barrier to entry, due to the high cost of equipment. Today, by becoming a broker, you can get into the game by making a lot of phone calls. You just need a mobile phone and a laptop. This increased competition is a danger because it beats down our margins.” – Justin Boudreau, director of finance and administration, Mattatall Signs “With new standards like those developed, implemented and enforced under the Accessibility for Ontarians with Disabilities Act (AODA), accessible sign fabrication has a role to play in new and innovative wayfinding applications for built environments, as part of the promotion of independence through mobility.” – Keith Francis, vice-president (VP) of strategic planning, Acumen Visual Group “The next frontier for outdoor digital signage is ‘smart cities,’ with interactive kiosks sending information to people’s smartphones. Let’s say you’re at Toronto’s Union Station and you want to travel to Niagara Falls, Ont. You’ll be able to go to a kiosk, find the schedule and buy your ticket. This is a major topic of discussion for the Canadian Urban Transit Association (CUTA).” – Myung Kune Moon, executive vice-president (EVP), Nanov Display “I started out as a sign artist with a few cans of lettering enamel and a fistful of quills, but the sign business is no longer the hands-on art is used to be. Now it is little more than technicians using clip art to print vinyl wallpaper and repairmen servicing electronic menu boards. Short of the occasional place that wants a hand-lettered window for a nostalgic look, the art has died. I see where the future lies and I don’t want to go there. My decision to retire is the correct one.” – Brent Harrison, Franklin Studio Signs “Recent studies show OOH advertising reaches consumers when they are in an alert state of mind, which has a positive impact on purchasing behaviour, as they are more likely to act on ad messages they see outside the home, compared to inside the home.” – Rosanne Caron, president, OMAC and COMB

With files from ISA, IHS, IDC, PRIMIR, 
InfoTrends, SGIA, Futuresource Consulting, Transparency Market Research, ScreenScape Networks and OMAC,. For more information, 
visit www.signs.org[1], www.ihs.com[2], www.idc.com[3], www.primir.org[4], www.infotrends.com[5], 
www.sgia.org[6], www.futuresource-consulting.com[7], www.transparencymarketresearch.com[8], 
www.screenscape.com[9] and www.omaccanada.ca[10].

Source URL: https://www.signmedia.ca/2017-state-of-the-industry-report-what-does-the-future-have-in-store/

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