Better digital signage: Coming soon to a Cineplex theatre near you

Cineplex Inc.’s deal to buy EK3 Technologies Inc. is a sign that client-focused solutions are outshining piecemeal software in the Canadian digital signage sector, according to one industry veteran.

Cineplex, Canada’s largest movie theatre operator, announced recently it will acquire privately held EK3 in a deal worth $40 million. (It could hit $78 million if certain performance targets are met by the end of 2015.) London, Ont.-based EK3 counts Tim Hortons, Target, Walmart, RBC, BMO and McDonald’s among its clients. Its core product is a proprietary SaaS-based software solution for indoor digital merchandising.

Cineplex already operates its own digital signage division called Cineplex Digital Solutions whose clients include CIBC, Scotiabank, Rogers and NHL arenas in Ottawa, Calgary and Edmonton. EK3 is to be renamed Cineplex Digital Solutions and will be run by current EK3 president and CEO Nick Prigioniero.

Pairing EK3’s patented technology with Cineplex’s strong brand recognition “is a powerful combination…(that) provides a platform for significant growth throughout North America,” said Cineplex president and CEO Ellis Jacob in a released statement.

The deal gives Cineplex an alternative revenue stream whenever its core box office receipts are sagging. But EK3’s focus on delivering a complete suite of services – rather than just software alone – was also one of its strongest draws for Cineplex, says Dave Haynes, a digital signage industry consultant at the Preset Group in Burlington, Ont.

“(EK3) really likes to take it from inception to delivery,” Haynes says. “There’s a pretty good business model around making yourself indispensable to your clients.”

Besides its proprietary software, EK3 also provides clients with an entire roster of services including creative content design, production, installation, management, consulting, media sales and strategic planning.

“It’s a turnkey solution where they provide the planning, the technology, the operation of the network and the content as well,” says Lyle Bunn, an independent digital signage consultant based in Brighton, Ont. and author of The Digital Signage Planning Guide.

This one-stop shopping approach to providing a full-service solution has helped EK3 retain the lucrative Tim Hortons account it won back in 2004, says Haynes, who was recently granted a behind the scenes look at EK3’s Tim Hortons operations centre in London, Ont. The approach not only takes care of all the technical details for clients, it’s also centered around meeting their business needs and goals, he says.

“(EK3) services the hell out of a contract,” Haynes says. “In a lot of cases, software companies are just software providers and don’t do a lot else. But EK3 is pretty central to the in-store messaging operations at Tim’s (i.e., Hortons), so they largely do the whole thing for them.”

EK3’s focus on serving clients rather than pushing technology became a competitive advantage for them and also meshes well with Cineplex’s overall approach, Haynes says.

“The Cineplex Digital people (have) got perspective and experience and they’re not leading with technology, by and large. That’s a mistake a lot of software companies make. They think the solution is about their stuff and tend to lose sight of the fact their solution is just an enabling technology,” Haynes says.

EK3 was also an attractive buy for Cineplex because it already has a strong presence in the American market (it has clients in 32 U.S. states) as well as the UK and Middle East.

“The importance of the U.S. market to any Canadian technology company can never be overstated,” says Bunn, estimating that about 40 per cent of the global digital signage market is in the U.S.

Another appealing factor for Cineplex is EK3’s emphasis on innovation, Bunn says. The firm was founded in 1998 by two University of Western Ontario engineering students who were researching how humans engage and interact with visual media technology. This shifted the traditional focus of digital signage from a purely design-based element to measuring and improving its effectiveness.

“They were able to turn these insights into relevant approaches for content creation and ultimately content delivery. They were really approaching it on much more of a scientific basis,” Bunn says.

Haynes and Bunn both predict further consolidation in Canada’s digital signage sector. As the cost of hardware (particularly large, high quality screens) has fallen dramatically in recent years, adoption of digital signage technology has skyrocketed, leading to a flurry of startups in the industry. Consolidation will occur as the sector and the startups both continue to mature, says Haynes.

“I think it’s inevitable. There are far too many software companies trying to make a buck out of this space,” Haynes says.

EK3’s story may suggest that a focus on client services and innovation could perhaps give other Canadian digital signage firms a competitive edge in the current wave of consolidation.