Devoncroft

Last week I attended the IABM’s US member meetings in both San Francisco and New York.  The meetings had pretty good attendance and were very informative.

I was there to present information about my current market research findings as part of my partnership agreement with the IABM, but the highlight of the meeting was Graham Sharp’s overview of the new IABM / Screen Digest global market study.

Over the years, I have bought just about every broadcast technology market report, and in my view the IABM / Screen Digest report is the best source for broadcast industry data on market size, growth and share. This report is ordinarily published every other year (this not being one of them), but due to the economic conditions there was significant demand for an updated report this year.  The IABM obliged, with an informative report that is priced 50% lower than the full bi-annual report.

You can find information about the new report here.  In the meanwhile, here are some of the high level findings that were presented at the meeting.

This study has very up-to-date information.  It takes into account actual results of vendors through June 2009 and adds projections through the end of 2009.  It then provides an overall market forecast through to 2012

At a high level, the study found that the overall broadcast technology market declined 9.5% in 2009.  This number was the subject of much discussion among member companies, especially in light of the following table, which shows a breakdown of how vendors reported / forecast their revenues for 2009:

Broadcast Technology Vendor Revenues in 2009:

Source: IABM/Screen Digest 2009

Clearly there is some discrepancy between the numbers in the above chart and the overall 9.5% decline for the total market.   Vendors at the meeting wanted to know how it’s possible that this report shows a (mere) 9.5% drop in the overall market when so many companies have seen such significant revenue drops (as shown in the table above)?

Indeed there is much anecdotal evidence that the broadcast technology market is down much more than 9.5% for 2009.  As I posted previously, during IBC 2009, many vendors told me that their revenues were down by 20-40%.  However I also found some bright spots at IBC – particularly in those areas that have to do with making broadcasters more efficient and saving them money – e.g. automation, workflow optimization, asset management, business systems etc.  Perhaps growth in these areas has made up for some of the losses in others.

For its part, the IABM and Screen Digest are standing behind the projections, and say that that the following needs to be taken into account when looking at these numbers:

• Sources of income to customers (advertising, license fees, subscriptions)
• Product revenue vs. service revenue and the trend towards outsourcing
• Regional differences
• ForX rates, which have been extremely volatile the past few years
• Dynamics in individual market segments and product categories

Here are some other interesting things / highlights of this report:

• The total market size is pegged at $25BN, with $16BN (63%) coming from product revenue, and $9BN (37%) coming from service revenue.  Service revenue includes Rental/hire, transmission, managed services, systems integration, support contracts and consultancy.
• This means that service providers such as playout centers and others are counted as part of the market size.  This is consistent with previous IABM reports, but perhaps not with the way most vendors count their revenues.  Indeed, to a typical vendor a playout / service provider is a customer.
• Service revenues in Europe are now higher than product revenues, and (IMO) will likely continue to increase worldwide as broadcasters move to more outsourcing in order to shift cost from Capex to Opex.
• By 2012, the market size will be back to where it was at its peak in 2008

When all of this is explained (which takes a while), you can understand how Screen Digest arrived at these numbers, but this does not mean that all the vendors at the meetings agreed with them.  What this highlights is that the industry is changing.  I’ve made several posts about this including my Impressions of IBC 2009 and Silverwood Partners’ Take on IBC 2009.  This reports is also consistent with a question I posed in the post HDTV… just a “pause” on the path to transition to IT-based broadcasting? which said that the transit ion to HD (much of which had to be done with hardware), put back the move to IT-based broadcasting by about five years.  During the biggest years of the HD transition, many vendors grew very rapidly, including a few that went public.  Today, the transition to HD is well underway, and the focus of the customers is all about efficiency.   So it makes me wonder whether when the recovery does happen, who will reap the biggest benefit — the traditional hardware vendors, or providers of efficient IT-based systems.  I think we will see some new players emerge, while some established players continue to struggle.

All-in-all the new IABM/Screen Digest report looks well worth considering if you are involved in the financial or supply side of the broadcast technology industry.  You can get more info on this report here.

Tags: IABM, Screen Digest, Silverwood Partners