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Homegrown Electronics:
Inside the LED Market With Daktronics
By Lori Andreozzi
In the current era of overseas production, some American companies stand tall and proud as employers of locals and as manufacturers on this country’s soil. Daktronics of Brookings, South Dakota, is one of them.
A preeminent visual communications company with a rich history of building a successful business here at home, Daktronics is currently celebrating its thirty-eighth anniversary. From its humble origins as a small, six-person operation to the current employee tally of over 1,600, the development and ultimate success of Daktronics began with—and is still sustained by—the students, engineers, and other professionals from South Dakota and neighboring Minnesota.
Today, Daktronics is known for their many LED display systems, from spectacular displays in Times Square for Morgan Stanley, Lehman Brothers, and Coca-Cola to sports scoreboards in major U.S. stadiums and universities.
When Drs. Aelred Kurtenbach and Duane Sanders, then in their tenth year of teaching at South Dakota State University (SDSU), decided to start a business with their wives, they had a vision to grow something large, even as they began in their garage. The product, however, would change a few times before it became message displays—and ultimately, Dr. Sanders would return to the university while Dr. Kurtenbach stayed with the business full-time.
A key vision at the onset was to employ graduates of SDSU, encouraging them to stay in South Dakota for employment. This became a selling point when they started looking for investors.
“We used to say, ‘We have no money, but we’re rich in children,’” says Dr. Aelred Kurtenbach, who currently serves as chairman of the company’s board of directors. The company’s source of “riches” would also change as they utilized a unique opportunity to fund their business. Through a now defunct regulation termed “Reg A,” Daktronics was allowed to raise money by selling stock that was not being traded on the Exchange. Essentially, the original investors were “a few people in town,’ according to Dr. Kurtenbach. In 1974, they put their roots down formally, buying a 14,000 square foot building at an affordable price and next to major interstate highways.
Today, the company’s facility has expanded to 368,000 square feet (with 275,000 square feet dedicated to manufacturing). In 2005, they completed a 25,000 square foot addition and are in the process of constructing another 100,000 square foot addition scheduled for completion this year.
Daktronics remains one of the few American companies that does not purchase all of their display modules and other subassemblies from overseas. Their manufacturing division designs and manufactures most of the subassemblies used in their products, including scoreboard digits and display modules. The final assembly of all their display products happens in Brookings.
The ability to develop a solid, knowledgeable workforce is paramount to achieving success in any business; in a large communications display business, an exceptional engineering staff is crucial. The company employs approximately one hundred engineers, many of which are graduates from SDSU. Indeed, Daktronics’ unique partnership with SDSU has been invaluable to their growth. The College of Engineering has had a particularly special relationship with Daktronics as they provide assistance in the design and testing of products. Approximately one-third of the company’s employees are from SDSU and other post-secondary institutions, offering their talents in communications, writing, graphic arts, sales, and administrative positions. A large number of students—approximately 500—work as interns or part-time around their class schedules. It seems that the founders’ original mission to entice graduates to remain in South Dakota has come to fruition.
In 1968, the original vision for the company was to manufacture biomedical equipment, but soon after, it shifted to electronic voting systems. Their first installation for an electronic voting system was in the Utah House of Representatives. Today more than forty legislative assemblies in over thirty states feature Daktronics voting or sound systems.
“In the ’70s and early ’80s, designing and manufacturing electronic voting systems provided us with cash flow to develop other products,” says Dr. Kurtenbach. “We’ve since sold this segment of our business.” Another early patented product was the Matside® wrestling scoreboard, the first product in the company’s line of “catalog” scoreboards. Still used today in large wrestling tournaments, this scoreboard led to the design of Daktronics’ All Sport® line.
The LED Marketplace
Daktronics focuses on four distinct markets. The sports division encompasses large sports venues, which includes universities and small sports stadiums, while the small sports venues includes high schools and parks/recreation departments. Approximately 60 percent of their revenues are from sales and services in the sports market. The third market division is transportation, which includes roadway and airport signs, while the fastest growing market is commercial, made up of retail and other non-sports venues.
Daktronics Commercial Marketing Manager Sue Almhjeld remembers the early days well. She joined the company in 1976 when there were about 50 people employed. She was very involved in helping “keep the company afloat” in those days, facing the often challenging, but rewarding tasks of developing markets.
“Our main product for the commercial market were ‘time and temperature’ displays sold to a few states," she says. "The only businesses interested were banks since there was an abundance of banks in South Dakota and surrounding states. In the ’70s and ’80s, these displays were relatively common, used as a public relations tool and community event board. Generally, they weren’t used for advertising, just for local community-related messages.
The decade of the ’70s was the heyday of incandescent light bulbs, which were not energy-efficient. In the ’80s, Daktronics tried a reflective light display, but it wasn’t reliable and didn’t go very far, according to Almhjeld.
The company then developed Glow Cube®, a patented technology of Daktronics, which “did make a run for a while,” she says. These displays are bright yellow on a black background. Over twenty years have gone by since Daktronics invented this technology and they’re still used in scoreboards for PGA events. “A large scoreboard can run on a golf cart battery for a day with Glow Cube®,” says Almhjeld.
The next lighting technology was wedge-based lamps, which are used in car taillights. They operate on only 3-7 watts, as opposed to a typical lamp use of 30 watts. This, Almhjeld says, was a much more energy-efficient method that was very successful in the mid- to late-’90s. Still, even with these advantages the lamps burnt out and had to be replaced. “With lamps out, your products didn’t look so good,” she adds. It was on to another discovery, one that would change the face of Daktronics’ business: LED lighting.
The display ticker on Morgan Stanley world headquarters in Times Square was the company’s first major outdoor installation. It stands next to their newer, brighter projects in the Square, namely Coca-Cola and Lehman Brothers. In designing Morgan Stanley’s LED façade, they were learning from scratch. “I remember when they were building the pixels by hand, we didn’t have the machines,” says Almhjeld. “It was so new to us.”
From that first major installation, LED became the product most sought after by clients. In the ’90s, LED technology overtook the traditional CRT displays made by Panasonic, Sony, and Mitsubishi that were used for sports instant replays. The CRT displays were too expensive for most sports stadiums; only the major facilities could afford them.
With the introduction of blue LEDs in 1993, the displays were bright enough to be used outdoors and compete with sunlight. Ultimately, it was the development of the blue LED that allowed Daktronics to enter the video business, says Almhjeld. Before the invention of the blue LED, Daktronics would sell their scoreboards to a stadium, but Sony or another company would provide the video board.
Expanding Markets
Clearly, while Times Square and Las Vegas will always have opportunities for one-of-a-kind spectaculars, there’s a growing retail market throughout the U.S. now finding LED advantageous for them too. To zero in on this commercial market, Daktronics is also setting its sights on signs outside of hot spots like Times Square. Smaller retail businesses such as auto dealerships, shopping centers, convenience stores, gas stations, and car washes are just a few market niches that are vastly expanding each day. Even churches and other non-profit organizations are willing to pay for video technology to promote their business, especially since the cost of the blue LED is coming down.
Lakewood Church, in Houston, Texas, is a recent example of a non-profit organization requesting LED video screens for its arena. Though larger than the typical church or small non-profit, their interest in switching to LED video demonstrates how this technology is expanding to the masses. Lakewood Church recently purchased three Daktronics ProStar® video displays which provide a backdrop to their stage, and the resolution needed to project images to an average crowd of 16,000.
“Every day different types of businesses are becoming interested in LED displays: grocery stores, heating/air-conditioning businesses, car washes, and auto parts stores,” says Almhjeld, adding that the company also counts chain pharmacies such as Walgreen’s and CVS stores as two of its clients.
“The pharmacy industry is very interested in electronic displays. Walgreen’s and CVS are installing displays for all new stores across the country if their permits are secured. The existing stores will not add the displays; only select stores that have exceptional performance.”
“Retail businesses have found it’s a good investment of their advertising dollars to have an electronic display,” continues Almhjeld, pointing out that libraries, fire stations, churches, and other small non-profits are choosing electronic displays over changeable copy boards simply to display community service messages, just as banks were doing in the ’70s.
Heading the Commercial Market since 1991, Almhjeld was previously involved in advertising, marketing, and estimating as a sales coordinator. “We’ve experienced so much growth in the commercial market, my head is spinning most of the time,” she says.
Building Markets
The commercial market division sells Daktronics’ products through three distribution channels. The first are resellers, primarily sign companies that tend to be local or regional businesses. The second channel is national accounts, corporate and regional clients that utilize electronic signage as part of their advertising. Pharmacies, fast food restaurants, and the petroleum market all fall under this category. The third channel is large video products designed for high-profile clients that want spectaculars in areas such as Times Square and Las Vegas.
With the growing demand for LED displays at retail venues across the country, Daktronics Commercial Business Development Manager Jeremy Johnson has got his hands full. For the past three years, he’s been working on understanding market niches. Essentially, Johnson’s job is both managing the current niches that already utilize LED displays and aggressively studying those niches that are poised to become the newest market for LED displays.
The other part of his job involves keeping a close eye on different market niche trends. For example, right now, Daktronics is seeing a growing market among hospitals. Sign companies are bringing in orders for hospitals, something Daktronics has not seen in the past.
When a new market is identified, Johnson and the rest of the commercial market division try to find a path to get to that market. Part of that task involves putting together literature so resellers can take materials to that niche. It might involve attending specialized tradeshows to generate leads.
Currently, Johnson is keeping track of about ten different market niches. “If we can truly learn and understand a specific advertising niche, how they advertise, and how they buy, we can then put together the tools and generate the knowledge of how to be successful there,” he says.
Another developing market is petroleum. Approximately four years ago, Daktronics started seeing a lot of interest in LED from gas stations. “We didn’t have a product to fit their needs,” says Johnson. “We had a similar one, but it was not exactly what was needed. We went into a product development phase and took something from our sports market. From that division, we utilized digits that were then specifically designed for the needs of the petroleum market including a POS interface, which automatically updates the price of gas.”
Another developing area in the commercial market is third-party advertising. Five years ago, Daktronics had very limited work with billboard companies. Starting in 2001, Johnson started seeing more interest (especially as full-color LED became more popular). Since the billboard industry is heavily regulated, the industry saw an opportunity to make more money within the confines of what’s allowable, creating tri-face displays. The next step was to make them electronic so that many more advertisers could be on one billboard.
“We knew this industry was ready,” says Johnson.
Education Pays Off
To keep the electronics display business flourishing, much attention is paid to sign codes. This area of work is also Johnson’s forte. “Municipalities are always finding ways to regulate against electronic displays,” he says. “They don’t understand our product; they think there are safety concerns.”
Johnson works with the International Sign Association (ISA) and the United States Sign Council (USSC) to inform municipalities. He also works market by market to educate sign companies on how they can best approach municipalities. “We rely on sign companies to fight this battle,” he explains. “The sign companies are best at this. They’re used to being in the permit office.”
The Future
As Daktronics continues this upward spiral, their vision is that LED full-color displays are here to stay for quite a while. “Full-color message displays are really the hot product right now,” says Johnson. “Every month, our sales are higher for color versus monochrome signs, the cost is coming down, and it’s just common sense. If you’re looking to generate advertising revenue, it’s better received if it’s in color.”
Johnson makes the analogy of the invention of color televisions. In the 1950s, the public certainly preferred them to black-and-white. As far as developing any new technologies, the writing is on the wall: LED technology is here to stay.
“LED is the first light emitter that’s been able to compete with the sun since the light bulb,” says Dr. Kurtenbach. It seems that LED technology has not only opened the doors of opportunity for Daktronics, but it has come with a guarantee of long-term growth.
Going International
Although Daktronics’ is an American-based company, they are very interested in international markets these days. Their office in Germany is now a few years old, they just opened an office in the United Kingdom, and they’re in the process of opening an office in Shanghai. Dr. Kurtenbach describes their work on the Kuwait Stock Exchange as a big project that generated a lot of interest in Daktronics.
When it comes to the European markets, "the display communications industry faces a steep uphill battle with sign codes," says Dr. Kurtenbach. "Education is needed to open this market."
The author would like to personally thank Kathy Spolum of Daktronics for all her assistance in coordinating the research for this article.
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