Silverwood Partners, a boutique investment bank that specializes in the broadcast industry issued to clients last week a 40 page report, which gives their take on the state of the broadcast market.
The report, which is aimed primarily at broadcast technology vendors, starts by looking at some themes and trends in the industry including the revenue models of broadcasters, the rise of over-the-top video, and the decline in advertising revenues. It then moves on to discuss how these trends will impact the broadcast technology value chain — including an explanation of how the broadcaster’s buying model has changed along with their business model and broadcast workflows.
According to Silverwood, media companies now asses technology purchases according to two criteria — revenue flow and workflow. In this model, product that fit into the “revenue flow” category help broadcasters to increase revenue, while those that fit into the “workflow” category reduces costs.
The argument here is that if vendors don’t fall into one of these two camps, they face increasing difficulties in the future. And according to Silverwood, this future is uncertain. The big revenue drivers of the past decade – the DTV mandate HD conversion – are coming to an end, leaving a question about what will drive broadcast technology revenue in a future where the broadcasters themselves are fighting to develop new business models, and very large IT vendors are beginning to take market share from traditional broadcast vendors.
Silverwood sums this up by saying “consolidation is inevitable” and that “doing nothing is not an option.” They back up these statements with a review of the past year’s financial performance of more than 40 vendors – showing that nearly 75% saw revenue declines in 2009 versus 2008.
The report concludes with a review of recent M&A transactions in the digital media space. It’s a document that’s intended to make broadcast tech vendors think about their future — after Silverwood’s business is M&A and they need to find more deals to fill their pipeline.
I think it’s an interesting report that’s worth reading before the NAB show.
If you’d like to read this report, please follow this link.