Archive for April, 2010

Devoncroft Digest — Week Ending April 30, 2010 — Good new outnumbers bad news for the week

broadcast industry technology trends, Broadcast technology channel strategy, broadcast technology market research, Broadcast technology vendor financials | Posted by Joe Zaller
Apr 30 2010

Devoncroft Digest – Week Ending April 30, 2010

 

Is the market picking up?  Good new outnumbers bad news for the week.

TVB reported that broadcasters have resumed their HD newsroom upgrades.  The article lists multiple stations that have moved ahead with the transition to HD news.  This is welcome news for broadcast vendors, and further reinforces my post-NAB thoughts that the market is picking up.

TVB also reported that, according to BIA/Kelsey, US broadcast station income will increase by 7.5% this year versus 2009.

Further signs of the market is improving were see this week with the four big US broadcast networks seeing a healthy increase in upfront ad sales.  According to Media Post (via TVNewsCheck) Barclays Capital estimated a 20% jump in the upfront market, giving the Big Four broadcasters a combined $8.26 billion.

 

 Earnings Season Continues

 Earnings season is in full swing this week, with Arris, Belden, DivX, Dolby, Discovery and Harris reporting their results.

For the most part, the results were positive, indicating that the market has picked up:

  • Belden announced strong results for their first quarter of 2010.

 

 

 

  • Discovery Communications also posted strong earnings, beating analyst expectations.  Both revenue and profits increased, with an especially strong showing in the international market

 

However, not all results were positive:

  • Arris reported a revenue increase of 5% versus the same period a year ago, but its net income declined 11% versus the previous quarter.  The stock was downgraded by several banks.

 

  • The Broadcast Communications Division of Harris posted a $5m loss for the quarter and took a $1m restructuring charge.  The company lowered guidance for the broadcast division for the full year and announced that it would be taking a further $6m restructuring charge in the current quarter in order to achieve further cost reduction.

 

Other interesting things this week:

According to the Wall Street Journal, RED Cameras has paid almost $20m for a house in Beverly Hills, CA that will be used for guests of the company.  How do I get invited to that house warming party?

Google is reportedly working on Android-based software to enable set-top boxes, TVs and other devices to more content from the Internet.  According to the Wall Street Journal Google’s move has attracted interest from partners that include Sony Corp., Intel Corp. and Logitech International SA, which are expected to offer products that support the software, these people said. None have so far discussed the efforts publicly.

 

 

Market Research Note of the Week:

How are broadcast technology products typically purchased – Direct from vendor, SI or dealer?

As part of the 2010 Big Broadcast Survey I asked several thousand technology buyers (including broadcasters, playout centers, cable/satellite/IPTV operators, education, film studios etc) in 120+ countries how they typically buy broadcast technology products – direct from a vendor; through a systems integrator; through a dealer; or some other way.

It turns out that there is considerable variation in the way broadcast technology products are purchased, with each category of buyer exhibiting different purchasing preferences. 

These results help readers to better understand the channel structure in the broadcast market.  They are interesting because they highlight that there are some times when it makes more sense for vendors to use a channel than go direct.  They also show that there are some types of buyers who are more used to buying through the channel versus direct.

To see the results, including a chart that breaks responses down by company type, please click here.

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Harris Q3 Results for Broadcast Comms Division

broadcast industry technology trends, Broadcast technology vendor financials | Posted by Joe Zaller
Apr 28 2010

Earnings season continued today with Harris Corp. releasing their Q3 numbers.  The bulk of the company’s business is in the RF and defense industries, and this has been covered elsewhere.  This post looks only at the company’s broadcast communications division.

According to the company’s earnings press release, “operating performance for the (broadcast communications) segment is being impacted by a still relatively weak U.S. broadcaster market and continued investment to pursue opportunities in the international and new media markets.  Additional cost-reduction actions will be implemented in the fourth quarter, which are expected to improve operating performance and allow continued investment in opportunity rich international and new media markets… Orders in the second and third quarters suggest that the market is bottoming and showing some signs of improvement.”

The company’s broadcast communications division achieve the following result in Q3:

  • Orders of $130m, which is a 20% improvement versus the same quarter a year ago, but about 5% lower quarter over quarter

 

  • Revenue of $123m versus $132m last year (-7%), but higher than second quarter revenue of $117m (+5%)

 

  • An operating loss of $5m, which is the same as the previous quarter, but worse than the operating income of $2m a year ago

 

  • Several large orders, including $12m from Cox broadcasting, $4m from Abu Dhabi Media Company and $4m from the country of Rwanda

 

On the earnings conference call, Harris CEO Howard Lance provided further insight into the company’s broadcast communications division.  Among Lance’s comments were the following:

  • Revenues in the broadcast communications division continue to be impaired by lower US broadcaster capital spending

 

  • New media and international markets represent significant new business opportunities for the company in the future

 

  • Order momentum over the previous two quarters in the broadcast communications division suggests that the broadcast market is at the bottom and starting to show signs of improvement

 

  • There is strong interest in “new media” initiatives, such as the in-arena network built for the Orlando Magic combines IPTV and digital signage and merge broadcast technology with IT infrastructure to enhances the fan experience

 

  • The company’s efforts to create synergies by combining technology and expertise of its broadcast video and defense businesses through its FAME  (Full-Motion Video Asset Management Engine) are beginning to bear fruit

 

  • Responding to a question from an equity analyst, Lance said that to date, defense represents about 2-3% of the broadcast communications division’s revenues, but there is a strong opportunity pipeline, and this could grow to 5-10% of the broadcast division’s revenue over the next few years.  He called this a “pan-Harris opportunity” citing the importance of ISR activities (Intelligence, surveillance and reconnaissance), all of which require the processing, storage and management of large quantities of video material.

 

  • The broadcast communications division took a $1m restructuring charge for the quarter, bringing the year-to-date restructuring charges for the broadcast business to $3m

 

  • The company intends to take additional restructuring charges in Q4, which will take the total of broadcast division restructuring charges to $10m for the full fiscal year.  According the earnings press release, these additional actions are expected to improve operating performance and allow continued investment in opportunity rich international and new media markets

 

  • The company has reduced its expected revenue from the broadcast communications division to $480-$490m, and expects to post a $20m operating loss, including the $10m in restructuring charges

 

  • The reduction from previous estimates is due to: lower sales volume; higher investment in international and new media markets; and restructuring charges associated with additional cost reduction actions

 

  • For FY2011, the company expects the broadcast communications division to break even on revenues of $490m-$510m

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How are broadcast technology products typically purchased — direct from vendors, through an SI or a dealer?

broadcast industry technology trends, Broadcast technology channel strategy, broadcast technology market research | Posted by Joe Zaller
Apr 28 2010

This article is based on the findings from the 2010 Big Broadcast Survey (BBS), a global study of industry trends, technology purchasing behavior and the opinion of vendor brands.  With more than 5,600 people in 120+ countries participating, the 2010 version of the BBS is the largest and most comprehensive market study ever done in the broadcast industry.

I have previously discussed marco findings from my market research such as the most important technology trends in the broadcast industry, where money is being spent in the broadcast industry, and what broadcast technology products are currently being evaluated for purchase.

Today I am going to look at the way broadcast technology products are purchased – i.e. what purchasing channels are typically used by buyers of broadcast technology products.   

Survey respondents were asked how they typically buy broadcast technology products – direct from a vendor; through a systems integrator; through a dealer; or some other way. 

To show the variation in response, the results in the chart below are broken out by organization type.

Question: How do you typically purchase broadcast technology products?

Breaking out the answers to this question by organization type shows that there is considerable variation in the way broadcast technology products are purchased, with each type of broadcast technology buyer exhibiting different purchasing preferences.  These results are interesting because they highlight that there are some times when it makes more sense for vendors to use a channel than go direct.  They also show that there are some types of buyers who are more used to buying through the channel versus direct.

For example, cable/satellite/IPTV operators showed a strong preference to purchase directly from vendors (perhaps because of the relatively small number of these platforms as well as the large amount of equipment they require).

Respondents from educational institutions, film studios, post- production, and recording studios reported that they tend to purchase broadcast technology products via third-party dealers. 

Systems integrators (SIs) sit between the vendor and the dealer in terms of the percentage of customers who prefer to buy through them, but keep in mind that these rankings show only the number of customers who prefer to buy in a certain way.  They do not look at the value of the purchase that goes through any individual channel. 

SIs play a strong role across all customer types, but particularly with playout centers, cable programmers, and broadcasters.  It’s worth noting the customer types who show the strongest preference for systems integrators tend to the ones with the largest and most complex projects.

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Devoncroft Digest: A Busy Week for Broadcast Technology Suppliers

Broadcast technology vendor financials | Posted by Joe Zaller
Apr 23 2010

In a week when many in the broadcast industry were busy following up from the NAB show (and quite a few volcano-stranded travelers still struggling to make it home from Las Vegas),  there was quite a bit of activity among broadcast suppliers.

Here are a few highlights:

* Barco reported that the company has “returned to profitable growth.” In the company’s earnings announcement, CEO Eric Van Zele said he is “cautiously optimistic” about the remainder of 2010.  The company also published a 20 page quarterly report in e-book form.

* Avid reported their Q1 FY10 earnings this week.  Losses narrowed on y/y revenue improvement, but the stock was still downgraded by JP Morgan.   Avid also announced that it has completed the acquisition of audio console vendor Euphonix, which was announced last week at the NAB show.

* Storage vendor Isilon released their Q1 FY10 numbers, which saw revenue increase 5% sequentially and 46% versus the previous year.  The company’s stock shot up on the news.  Isilon also filed its 10Q with the SEC.

* Wegener was delisted by the NASDAQ and will now trade on the OTC BB

* Privately held UK-based broadcast systems integrator TSL was ranked #77 in the Sunday Times “Profit Track 100.”  According to the poll, the company’s profits have grown at 47% to £4.28m.

* Harmonic was sued by Arris over VOD patents

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Brief Thoughts on NAB 2010

broadcast industry technology trends, broadcast technology market research | Posted by Joe Zaller
Apr 20 2010

Like thousands of others (some of whom are still there because of the Icelandic volcano), I spent last week at the NAB show in Las Vegas.  The events of the show have been well covered elsewhere, so this is just a short note on my impressions of the show.

After a week in Las Vegas and more than 40 meetings with vendors, bankers and broadcasters, my take-away from NAB was not about any one technology, company or product. Instead it was the general feeling that the tide has turned, and that things in the industry are starting to improve. 

Most vendors conceded that 2009 was less than stellar, but several companies such as Pilat Media, Ross Video, and Utah Scientific reported that they saw growth and made money in 2009. 

The question is whether 2010 will be better for the industry as a whole.  Many vendors I spoke to at NAB reported many projects did not go away, they just “moved to the right”, and that some projects which had been shelved are now back on the table.    In an industry where major projects drive product purchase, this is reassuring news for the battered supplier community.

Prior to NAB, and at many of the booths and press conferences during the show, the majority of attention seemed to be focused on 3D.  Yes there was a lot of 3D at the show, but as reported by Ken Kerschbaumer at the Sports Video Group, It Wasn’t All About 3D (Seriously!) As Exhibitors See Bounce in 2D Business.

As I have said previously, I am skeptical about 3D at least for the near term. Despite the hype, it’s just not that important commercially to most broadcast professionals.  My recent global study of the broadcast market found that the most important industry trends in the broadcast industry are about completing what’s already been started (transition to HDTV operations), cutting costs while creating efficiencies (file based / tapeless workflows), and creating new revenue streams (multi-platform content distribution).  If you look at the 2010 Global Broadcast Trend Index, you’ll see that 3D is near the bottom in terms of commercial important to broadcast professionals.

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TV Tech Interview with Head of Harris Broadcast Business Reveals Mobile DTV Revenues

broadcast industry technology trends, broadcast technology market research, Broadcast technology vendor financials | Posted by Joe Zaller
Apr 09 2010

TV Technology magazine recently published an interview with P. Harris Morris, the new head of the Harris Broadcast & Communications business unit.

In the interview with TV Tech, Morris talks about the broadcast business, gives an overview of company’s NAB plans and discusses their interoperability labs in the US, Canada and the UK.

Most interesting to me is that towards the end of the interview when the subject turns towards mobile DTV, Morris reveals that the company has “delivered more than 45 systems nationwide already and, at the upcoming Washington, D.C., Mobile Consumer Showcase, our systems will be used in at least six of the eight over-the-air broadcast stations.”

Morris then goes on to say that he “wouldn’t be surprised to see 100 to 150 more stations roll out mobile capabilities during the next year.”

As I said in January just after returning from CES, and more recently while being interviewed by Harry Jessell, the market hype may be about 3D, but for US broadcasters and the vendors that sell to them, there’s much more action in mobile. It looks like Harris is one of the companies that’s taking advantage of this trend and turning it into significant revenue.

I’ve been told by broadcasters that the incremental cost of enabling mobile DTV broadcasting (for a station that has already made the switch to DTV) is about $150,000 per station.  Thus the numbers in the TV Technology interview with Mr. Morris indicate that Harris has already brought in revenue of ~$6.75m from mobile DTV; and the company has the potential to sell an additional $15m – $22.5m worth of this technology over the next year.  Even if the $150K per station estimate is high, there is still good money here for Harris and the other companies who are targeting this space.

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TV New Check “Tech One on One” Interview

broadcast industry technology trends, broadcast technology market research | Posted by Joe Zaller
Apr 08 2010

I was recently interviewed by Harry Jessell, editor of industry website TVNewsCheck.com about my 2010 study of the broadcast market.

Jessell published the interview today as part of his “Tech One on One” series, which profiles key technology players in the broadcast market.  In it he asks me a number of question about industry trends, major projects being planned by US broadcasters, the capex plans of broadcasters, and which product categories I thnk will do well this year based on my research.  We also discussed 3D, which as I’ve said before,  I am skeptical about when it comes to the average US broadcaster.

You can find the full interview here.

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What Broadcast Buyers Are Evaluating for Purchase in 2010

broadcast industry technology trends, broadcast technology market research | Posted by Joe Zaller
Apr 08 2010

This is the third in a series of articles about the findings from the 2010 Big Broadcast Survey (BBS), a global study of industry trends, technology purchasing behavior and the opinion of vendor brands.  With more than 5,600 people in 120+ countries participating, the 2010 version of the BBS is the largest and most comprehensive market study ever done in the broadcast industry.

NAB 2010 is less than a week away, and as the industry prepares to gather in Las Vegas for its biggest event of the year, the question on the minds of many is what technologies are in demand by customers around the world.

In previous posts I have discussed the most important technology trends in the broadcast industry and examined where money is being spent in the broadcast industry in terms of major projects planned for the year.

These industry trends and major projects drive technology purchasing in the broadcast industry, and that’s the focus of this article — the products that are being evaluated for purchase this year by broadcast professionals.

As part of our 2010 global market study we wanted to help our readers understand what broadcast professionals around the world are shopping for this year.  We presented technology buyers with a list of relevant product categories, and asked them to indicate which product type they are currently evaluating for purchase. 

The results, which are shown in the table below, demonstrate a broad range of industry demand.

 What broadcast technology products / services are you currently evaluating for purchase? 

These responses show that production technology such as editing, ENG cameras, along with test & measurement and key audio products will be in demand around the world as broadcast professionals upgrade their facilities to HDTV operations, which was ranked #1 in terms of planned projects for the year (link to article).

The transition to file-based / tapeless workflows will be facilitated by purchases of production servers along with transcoding products, which facilitate multi-format interoperability in the file-based domain.

The new studios, OB vans and channels that are being planned will drive evaluation of a wide variety of equipment including multiviewers, servers, signal processing, routing switchers and storage.

A significant number of respondents indicated that they are currently evaluating products that increase operational efficiency and streamline working practices.  These include library / storage management, automation and workflow / asset management.

Video transport and transmission gear should also see strong demand as customers around the world seek to use improve compression efficiency, connect operations by IP links, and increase the number of channels delivered to consumers.

Keep in mind when reading this information that this table presents the responses of all global participants in the 2010 BBS, regardless of organization type, size or location; and shows the number of respondents that are evaluating products without regard to size of project or value of purchase.  Granular analysis of these results, including breakdown of data by geographic region, customer type and customer size, is available as part of the full 2010 BBS Global Market Report from Devoncroft Partners.

Published by Devoncroft Partners, the annual Big Broadcast Survey (BBS) is the largest and most comprehensive studies of broadcast industry trends and technology vendor brands.  The BBS provides insight into market trends, technology budgets, plant, equipment upgrade plans, and the perceptions of leading broadcast industry vendor brands by a wide variety of broadcast professionals across the world.  It also delivers vendor brand ranking “league tables” in a variety of product categories; all of which can be segmented by geography and customer type.  More than 5,600 people in 120+ countries participated in the 2010 BBS project. Information about the 2010 BBS can be found at www.devoncroft.com

 

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DG Fastchannel Announces Intent to Sell Shares Valued at More than $100m

broadcast technology market research, Broadcast technology vendor financials | Posted by Joe Zaller
Apr 07 2010

There’s money in advertising, or at least the delivery of advertising to radio and TV broadcasters.

Content and advertising delivery specialist DG Fastchannel announced today that it intends to sell 3.175m shares of its common stock, which closed today at $32.83 per share.  The company says it will use the proceeds to pay down debt, future M&A activity (although it states none are currently planned), and working capital.

The company has had a great run over the past year and is clearly doing something right.

Here is a link to the press release.

Here’s a link to the full SEC filing, which provides a comprehensive overview of the company’s business.

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Two Broadcast M&A Deals: HME Buys Clear-Com, EVS Buys OpenCube

broadcast technology market research | Posted by Joe Zaller
Apr 06 2010

Two broadcast industry M&A deals have been announced since I wrote last week about the 40 page note put out by boutique investment bank Silverwood Partner, which says that vendors in the broadcast industry need to consolidate.

Last Friday HME announced that is acquiring Clear-Com from Vitec, a move that will strengthen their position in the broadcast intercom / talkback market.

Today EVS said that is is buying MXF specialist OpenCube, a bolt-on acquisition that brings additional file-based and MXF expertise in-house.

There have also been a number of industry partnerships announced such as the deal between Harris and Echolab, which sees Harris reselling Echolab production switchers.

NAB 2010 is now a week away, and it’s common that these deals are announced around major trade shows. It will be interesting to see if there are more deals coming.

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