Posts Tagged ‘3D’

What are the Commercial Drivers for the Global Move to HDTV Operations?

broadcast technology market research | Posted by Joe Zaller
Oct 13 2010

For the most part, large scale broadcast industry CapEx tends to be project-based.  Our most recent research into where money is being spent in the broadcast industry shows that the top two projects globally are “upgrading infrastructure for HD / 3Gbps operations” and “upgrading transmission and distribution capabilities,”  both of which are undoubtedly influenced by the move to HDTV.

As broadcasters migrate to HDTV operations much of the industry’s infrastructure is being replaced, making the move to HDTV a strong driver of broadcast industry CapEx. 

At a time when we are now several years into the HD transition, what continues to drive broadcasters to move to HDTV operations?  Are broadcasters moving to HD to for engineering reasons (e.g. delivering better image quality to viewers), or for commercial reasons (e.g. to remain competitive in the marketplace)?

As part of the 2010 Big Broadcast Survey, we asked a global sample of more than 5,600 broadcast professionals about the most important trends in the broadcast industry.  Respondents were presented with a series of industry trends, and asked to indicate which one was the most commercially important to their business over the next few years.

In order to better understand the drivers behind each trend, respondents were then asked a series of questions about the one industry trend that they indicated was most commercially important to their business – e.g. respondents who indicated that the transition to HDTV operations was the trend most important to their business were asked  why this is the case. 

The results are shown in the chart below:

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Q. Why the transition to HDTV operations the most important to your business?

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On a global basis the most important overall driver for the move to HD is simply completing the job.  In many parts of the world, broadcast professionals are now in the middle of multi-year complex HD migration projects, so this should not be too surprising.  

The second and third ranking factors cited by respondents as drivers for their transition to HDTV were delivering improved picture quality to viewers and the competitive demands of the market.  More engineering-oriented drivers such as taking a technology lead and future-proofing operations were seen by most respondents as much less important.

Like all data of this type, there are of course variations based on respondent demographics.  For example:

  • the competitive demands of the market were ranked as the most important HD driver for US broadcasters, while state funded broadcasters as well as those in Asia ranked completing the job as the their top driver
  • respondents from Australia, MEA and the UK cited more technology-oriented drivers (taking a technological lead in the market and future-proofing operations) than those from other areas where HD is perhaps more mature
  • broadcasters who derive most of their income from subscription revenues cited competitive demands of the market as their top driver for migrating to HD, while both commercial and state funded broadcasters said that completing the job was most important to them

 

Despite these differences, it’s clear that the key drivers for the move to HDTV are commercially oriented.   In today’s environment, the broadcast procurement process is usually based on carefully considered commercial factors, and often as part of a major planned project. 

As written previously, our research shows that the top priorities for the broadcast industry in 2010 include completing the transition to HD, achieving cost savings through operational efficiencies, and generating new revenue streams.  These projects all have a strong commercial justification, and will continue to drive a large share of the industry’s CapEx.

Interestingly, these results highlight why the buzz about some new technologies such as 3D has faded over time as potential buyers begin to appreciate the commercial issues associated with their deployment.  Indeed, many of those who commented on industry trends at the IBC 2010 exhibition commented that the market has become more realistic about 3D.

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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.

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Investment Bankers, Others Offer Post-IBC Assessment of Broadcast Technology Industry

broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Oct 01 2010

Quite a few people have written about their impressions of the IBC show, and given the huge scope of an event like IBC, each takes a slightly different approach depending on their perspective.  For example, here’s one from Murali Nemani at Cisco, another from David Grubb at Motorola, one from UK consultants MediaSmiths, and an announcement from industry guru Mark Schubin that he’ll be presenting a review of IBC on the 12th of October.  There’s even one from me.  

I always read all these articles, but it’s often the thoughts of non-technical industry observers that are the most interesting, because they focus on the business of the business and where it’s heading from a financial perspective.

For example, Silverwood Partners, a boutique investment bank that focuses on the media technology sector recently published their thoughts on the broadcast technology industry in a 19-page document called “IBC 2010 Post-Show Perspectives.”  Silverwood often publishes documents like this before and after major industry shows as a way to connect with broadcast technology vendors who may be looking for investment banking services.  You can read their pre-NAB 2010 document here, and their pre-IBC2010 document here.

From their point-of-view, Silverwood identifies the following as the key themes that emerged from the IBC show.

  • Industry environment improving
  • Intensifying focus on software
  • Large acquirers have substantial cash reserves
  • Focus on broader video use cases
  • Noticeable de‐emphasis of 3D
  • Concerns on sustainability of recovery
  • OTT – alternatives proliferating

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In the document, Silverwood discusses each of the above in the context of what is driving increased industry optimism; wider application of video technology (beyond broadcast and post production); what’s required to sell to other verticals; and an increased focus on software and MAM to solve complex workflow problems.

As one might expect from an investment bank who make their money through advising on transactions, Silverwood’s document has a few slides on industry M&A.  They contend that large companies have high cash balances, and that “alternative investments for cash are relatively unappealing.”  In other words the industry is changing radically and companies with cash should be using it for M&A in order to better position themselves for the future and buy growth.

They go on to illustrate the need for M&A by discussing how formerly profitable media businesses have been disrupted by market shifts and new technologies, and then graphically show the industry M&A activity from the past 12 months.

Whether you’re a broadcaster, technology vendor, content owner or distribution platform this is interesting stuff.

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You can read the full Silverwood IBC 2010 Post-Show Perspectives document here.

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Brief Impressions of IBC 2010

broadcast industry technology trends, broadcast industry trends, broadcast technology market research | Posted by Joe Zaller
Sep 22 2010

Last week I attended the 2010 IBC show in Amsterdam.  The product introductions and events at the show have been well covered elsewhere, so this is just a short note on my impressions of the show.

After spending the better part of a week in Amsterdam, and having 40-50 meetings with vendors, bankers, broadcasters and others, I came away from the show with three general impressions – the market is improving, there is more realism about 3D, and the drive toward file-based operations continues. 

It’s also worth noting that I think that these trends will probably act as a catalyst for further market consolidation as vendors seek to position themselves for the post-recession world.

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Improving Market Conditions

In terms of market improvement, many people I spoke with said that buyers were coming back and that once-delayed projects are now table. Many vendors reported that their sales and profitability have increased markedly versus a year ago.  Interestingly, there do seem to be geographic and technological differences in the market recovery.  For example, many people reported that activity in Asia, northern Europe and the middle east was strong; while southern Europe and parts of north America were still sluggish for some.  Also some types of products seem to have recovered more strongly – automation being a good case-in-point.

To get a better handle on the industry’s current status, I attended a very interesting “state of the industry” session hosted by the IABM (the international organization that represents technology suppliers), which was held on the opening day of IBC.  During the session, IABM director general Peter White presented the results of a recent survey of broadcast buyers and suppliers.  This was followed by a panel discussion that included representatives from Sony, Harris, Axon and Softel, with industry veteran Adrian Scott leading the session.

According to White, about 60% of broadcast technology suppliers are now making a profit – up considerably from last year – with European companies performing better in terms of profit performance. 

White also reported that confidence has returned to buyers, with more than half of those surveyed feeling “very or quite optimistic” about the future; and 39% reporting that they feel that the recession is over or that they are coming out of it.

However, White also indicated that things will be different for vendors in a post-recession world.  According to the IABM’s study, broadcast technology buyers are changing the way they purchase, and are also expecting more from vendors in terms of value, interoperability, support etc.

My understanding is that the IABM will be making their findings available in the near future, although I am not sure what for this will take.  It’s good information that everyone should read.

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More Realism About 3D

While 3D was a major theme of the IBC show, my feeling was that, in contrast to the CES and NAB shows earlier in the year, the hype about 3D seems to have dissipated as vendors have become more realistic about 3D’s ability to drive revenue and profitability growth.

In multiple press conferences and vendor meetings, the 3D hype was much toned down.  For example, at the Grass Valley press conference SVP Jeff Rosica referred to 3D as a niche market.  At the Harris press event, Broadcast Communications president Harris Morris referred to 3D projects as experiments.

I am on the record as a 3D skeptic, at least as far as the short term potential for broadcasters, so I was not surprised to hear this type of comments.  I should also point out that these comments are consistent with our market research findings about the most important trends in the broadcast industry, where 3D placed far down on the list versus the transition to HDTV, the move to file-based workflows and multi-platform content delivery. 

There is of course a small part of the market where 3D is and will continue to be a major growth driver.  However, it looks like the bulk of the market is now taking a more realistic approach and focusing on what customers really need.

For more on this subject, have a look at Mike Grotticelli’s article in Broadcast Engineering called 3-D Technology Finds Few Enthusiasts at IBC2010.

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IT and File-Based Technologies

It may seem obvious that IT and file-based technologies are continuing to make inroads into the broadcast market, but at IBC I was struck by the accelerating pace of change in this area.

Vendors, both large and small continue to innovate in this area in an effort to help broadcasters streamline their operations and do more with less.

The shift to IT technology is having an interesting impact on the industry, in the form of product development, M&A and outside investment.

On the product development front, some vendors have jumped into the file-based world with full force – e.g. Evertz who launched a full blown playout server and storage solution at IBC.

Others have sought to accelerate their move into the IT world through acquisition – e.g. Miranda’s purchase of OmniBus, which gives the traditional hardware supplier a highly developed IT-based playout and automation solution.  Another recent industry M&A deal between Telestream and Anystream helped Telestream consolidate its position in the encoding / transcoding / streaming space.  I would not be surprised to see more M&A in this area as traditional vendors seek to beef up their file-based expertise.

The move to IT has also helped bring new money into the industry.  For example two transcoding vendors, Elemental Technologies  and AmberFin both recently announced that they have closed funding rounds, which will help them expand their presence in the broadcast marketplace.

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Devoncroft Digest – August 15, 2010 – Earnings Galore, Broadcast Industry M&A Continues

broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Devoncroft Digest, market research | Posted by Joe Zaller
Aug 15 2010

The Devoncroft Digest is a semi-regular amalgamation of news items I’ve seen recently that I think might be interesting / important for readers and clients. 

Due to my travel schedule it’s been two weeks since the last digest post.  Here are a few of the things that have caught my eye during this time.

Earnings Season Continues

We are now in the heart of earnings season, and a large number of tech vendors, platform operators, service providers and broadcasters.  For the most part these results have been generally positive, with many companies saying that they are seeing the green shoots of recovery taking hold. 

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Broadcast Technology Vendor Earnings

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Vizrt Q2 Revenue Rises 17%, CEO Says Market is Improving

Broadcast graphics and asset management provider Vizrt announced its Q2 and 1H results. Revenue for the quarter was up 17% y/y, driven by strong growth in the Americas, which was up 48% y/y.

Gross margins for the quarter were 65%, well ahead of the 58% that the company achieved during the same period a year ago. Broadcast graphics accounted for 72% of the company’s total revenues in 1H 2010.  According to the company, Vizrt’s graphics business is up 33% y/y.

Full details here.

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Chyron Q2 Losses Narrow as Revenue Jumps 20% 

Broadcast graphics provider Chyron announced its financial results for Q2 and 1H 2010.

Q2 revenue was $6.94m, up 20% versus Q2 2009.  Gross margins for the quarter were 70%, up slightly from the previous year.  Q2 product revenue was $5.4m, up 18% y/y.  Service revenue increased 29% y/y to $1.19m.  Service revenue accounted for 22% of the quarter’s total revenue. The company posted an operating loss for the quarter of $680,000, a 52% y/y improvement; and a net loss of $710,000, 35% better than a year ago.

Full Details Here

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Miranda Q2 Revenue Up 3% y/y, +11% q/q. CEO Says Market Conditions Improving

Broadcast infrastructure provider Miranda Technologies announced their Q2 2010 results.  Revenue for the quarter was C$32.1m, up 3% from the same period a year ago and up 11% versus the previous quarter.  International sales were up 11% y/y.  Sales in the US were up 10% y/y

The company’s net income jumped 173% to C$3.5m as expenses were reduced during the quarter, and EBITDA rose by 125% to C$6m versus the same period in 2009.  Gross margins were 60%, slightly down from Q2 2009, but up from 57.7% in the previous quarter.  This is a good showing in a competitive market, which the company attributes to a higher margin mix, and increased sales of routing switchers.

Full Details Here

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DivX Q2 Revenue Jumps 29%

DivX announced that its Q2 revenues were up 29% y/y and that its licensing business was up 23% y/y.  The company, which is in the process of being acquired by Sonic (who also announced their numbers recently) posted a GAAP Loss of $2.8m, and non-GAAP NI of $760K

Read the Divx earnings press release here 

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DG FastChannel Reports Record Q2

Advertising and broadcast content delivery specialist DG FastChannel reported record results for its FY2010 second quarter, blowing past the expectations of equity analysts. 

Revenue for the quarter was $60.3m, well ahead of the $55.6m consensus estimate of equity analysts.  This represents a 38% revenue increase versus the same period a year ago, and an increase of 11% from the previous quarter.  Net income for the quarter was $9m, up 150% increase versus Q2 2009 and up 12.5% versus the previous quarter.

Significantly, the company’s revenue from the delivery of HD advertising content increased 99% to $23.9 million versus the same period of 2009.

The company also that it retired all of its outstanding debt, thanks to a recent public equity offering that raised net proceeds of approximately $108m. As a result of this offering, the company reported that as of June 30, 2010, it has $79.6 million in cash and no debt.

Company Chairman & CEO Scott Ginsburg said “The Company continues to execute on its strategic business plan… revenue, margins, earnings and net debt show marked improvements during the second quarter.”

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Harris Broadcast Records $21m Operating Loss

Harris Corporation reported its Q4 and full year 2010 results.  While the company as a whole did well, the broadcast communications division continued to struggle.

For the full year, revenues from the broadcast communications division were down 17% versus the previous year.  For Q4, the company’s broadcast revenues were down just 1.9% y/y, although orders were down 12.5% versus the same period last year.

In the 4th quarter of FY 2010, Harris posted an operating loss of $21m.  According to the company, this “includes $7 million in charges related to cost-reduction actions and $6 million in inventory write-downs associated with weaker demand.”

Harris CEO Howard Lance said the following about the revenue of the broadcast division: “we continue to expect revenue in a range of $490 million to $510 million with break-even operating results. We expect to see continued operating losses in the first half of the year with profitability improving in the second half of the fiscal year.”

Full Details Here

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RealD Reports 1st Results As Public Company

3D specialist RealD announced its first results as a public company, and reported huge y/y increases in revenue and EBITDA, which were up 152% and 387% respectively.  The company announced that it has now deployed 7500 screens, significantly more than Technicolor, who announced recently that they have now deployed 250 screens, 

Read the RealD earnings press release here.

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Broadcaster & Platform Operator Earnings

DISH Network Reports Second Quarter 2010 Financial Results 

DISH Network reported total revenue of $3.17 billion for the quarter ended June 30, 2010, a 9.1 percent increase compared with $2.90 billion for the corresponding period in 2009.

DISH Network lost approximately 19,000 net subscribers during the quarter ended June 30, 2010, ending the quarter with approximately 14.318 million subscribers.

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Ascent Media Reports Lower Revenue, Higher Losses

Digital media service provider Ascent Media reported increased losses and lower revenue for the second quarter ended of 2010.  The company attributes the lower results to market volatility and lower capital spending by customers. 

Revenue for the quarter dropped 13% to $99.5m, while revenue for the first six months was off 11% to $204m.  The company said that the decline in second quarter and year-to-date revenue was driven primarily by a reduction in revenue from the Content Services segment.

Q2 losses from continuing operations before income taxes were $17.5m, compared to a loss of $12.4 million in the prior year period. Year-to-date, the loss from continuing operations before income taxes was $28.6 million compared to a loss of $23.2 million for the six months ended June 30, 2009.

 “Ascent’s year-to-date operating results have not met our expectations as uncertainty about the timing and pace of the economic recovery has led to ongoing volatility in the media marketplace,” said William Fitzgerald, Ascent’s CEO. “A consequence of the current environment is that our customers have continued to take a cautious approach to capital spending.”

Fitzgerald was more upbeat about the rest of 2010, saying “We are beginning to see positive indications of an upturn, including first half revenue improvement in our creative services business, a strengthening pipeline of feature film and other projects, and rising industry advertising estimates for the second half of 2010.”

Ascent’s full earnings press release can be found here.

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Scripps Reports Second-Quarter Results 

Scripps reported operating results for the second quarter of 2010 that showed a continuing trend of significantly improved year-over-year revenue performance in the television division – up 22 percent from last year.

You can read the Scripps earnings release here.

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Liberty Media Reports Second Quarter 2010 Financial Results

The Liberty Media press release is here.

Liberty Media investor conference call transcript here.

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DIRECTV Q2 Rev Up 12%, Net Income up 33% Buys Back Stock 

DTH satellite operator DirecTV announced that it grew revenues by 12% to $5.85Bn and Net Income 33% to $543 Million.

DirecTV Q2 Press Release Here

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Cablevision Systems Corporation Reports Second Quarter 2010 Results 

Cablevision’s Q2 profits fell by 30% but its revenues were up 5.8% to $1.802 billion versus the same period a year ago, which the company says reflects solid revenue growth in Telecommunications Services and Rainbow, offset slightly by a decline at Newsday. Consolidated adjusted operating cash flow grew 9.0% to $677.6 million and consolidated operating income grew 23.0% to $416.8 million, both compared to the prior year period.

You can read the Cablevision press release here

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WSJ.com – Net Rises at Time Warner Cable, Falls at Cablevision

According to a Wall Street Journal article, Time Warner’s second-quarter earnings rose 8.2% on solid revenue growth, but the nation’s second-biggest cable-television provider saw the same weakness in subscriber additions in July felt by its larger cable counterpart, Comcast Corp.

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News Corp Reports Q4 and Full year Results – TV Station Operating Income up 13%

News Corp’s Q4 revenue increased by 6% and it hauled in Net Income of $875m.  Significantly, the company’s TV Operating Income was up 13% versus the same period last year, driven by an improved TV station advertising market.

Here’s the full News Corp press release 

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CBS 2Q TV Station Revenue Climbs 31%

According to leading industry website TV News Check, TV station revenue at CBS jumped by 31%. The company also realized a 17% increase in local broadcasting revenue (TV stations plus CBS Radio) to $678.2 million from $579.5 million in the year-ago quarter. Sumner Redstone, the company’s executive chairman called the results “Terrific”

Full story from TV News Check

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Sinclair Broadcast Group Reports Q2 Results.

Sinclair Broadcast Group, one of the largest US TV station groups reported that its net broadcast Q2 revenues from continuing operations were up 19.3% versus the prior year.  The company had net income of $17.3 million versus $2.8 million in the prior year period.  Local net broadcast revenues, which include local time sales, retransmission revenues and other broadcast revenues, were up 16.6% in the second quarter 2010 while national net broadcast revenues, which include national time sales and other national broadcast revenues, were up 27.7% versus the second quarter 2009.

Full story from TV News Check

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WSJ.com – Discovery Turns In 40% Decline in Profit 

According to an article in the Wall Street Journal, Discovery Communications posted a 40% drop in its second-quarter profit, hurt in part by costs related to its recent $3 billion debt refinancing. Still, the cable-network operator showed revenue and operating-profit growth, and announced a $1 billion share repurchasing program.

Full article from the Wall Street Journal

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Barrington Sees 14% Jump In 2Q Revenue

Barrington Broadcasting Group announced that gross revenues for the quarter ended June 30 increased 13.6% to $32.7 million from $28.8 million for the same period a year earlier. The company said the increase was primarily due to 16.7% increase in national revenues, a 4.7% increase in local revenues, and an increase in political revenues of $900,000 to $1 million.

Full Story from TV News Check

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Gray Beats Street

According to TVB, Gray Television came in ahead of analyst expectations for the second quarter. The pure-play TV group posted revenues of $75.6 million for the 36 stations, up 16 percent from a year earlier. Net income was $534,000 compared to a loss of $6.6 million a year ago. After payment of $6.4 million in dividends, net loss to common stockholders was $5.9 million, or 11 cents a share.

Full Story from TVB

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Broadcast Industry M&A Continues

Blackmagic Buys Assets of Echolab

As predicted here last month, Blackmagic Designs announced that it has acquired “all the assets of Echolab,” putting Blackmagic in the production switcher business.

Echolab was forced into liquidation a few months ago when its primary shareholder stopped funding its operations.  The company had been in business for more than 35 years, specializing in low-end production switchers.

Blackmagic is buying Echolab for the latter’s ATEM product line, which was introduced about two years ago and has been continuously upgraded since under Echolab’s former CEO Nigel Spratling, who apparently not part of the Blackmagic deal and has now joined Ross Video in a marketing role.

This is great news for the affected Echolab employees, who were left jobless in an instant when the company shut its doors in mid-May.  It’s also good news for the industry, because the ATEM switcher product line, which looks like a pretty good product, will continue to be available through Blackmagic.  In fact, Blackmagic has said that it is adding to the engineering team responsible for ATEM.

It will be interesting to see how Blackmagic approaches the production switcher market, which is different than the company’s core post production market.  The part of the production switcher market where Echolab is active has considerable competition. In addition to Echolab, Sony, Panasonic, JVC, For-A and Ross Video are all very active players in this space.   

In addition to the competitive aspects of the deal, it seems to me that selling production switchers is a bit of a departure business-wise for Blackmagic.  Production switchers are a “high-touch” product category.  They are mission critical elements of the live production workflow, and as such they can require extensive demonstrations and training.  The majority of Blackmagic’s products are plug-in cards or stand-alone units, which are sold primarily through third-party dealers.  

At this point, I am unsure whether Blackmagic’s all-dealer sales approach is a positive or a negative for Echolab.  On the plus side, the compact HD production switcher market is a large and somewhat amorphous, running the gamut from broadcasters to corporation, to churches to education –  so it requires a large dealer network, which Blackmagic already has in place.  On the other hand production switchers require a specialized sales approach. Every buyer wants a demonstration, which typically involves shipping equipment and people, thereby increasing the cost of each sale.  Blackmagic will probably have to augment their approach somewhat in order to be successful selling production switchers.

Still if they can get the distribution right, Blackmagic may have a good chance of making their purchase of Echolab a success.  Blackmagic most likely paid very little for Echolab’s assets, and since it’s buying the assets and not the company, it gets a brand new HD switcher line, but not 35 years of legacy products that need support.  And Blackmagic does have experience buying distressed “traditional” vendors and changing their approach.  Last year, Blackmagic acquired leading color grading vendor Da Vinci Systems, and proceeded to radically change Da Vinci’s market approach, not to mention its pricing, turning a $200,000 hardware product into a sub-$1000 product according to TVB Europe.

Arguably however, Da Vinci’s color grading products (which are used off-line in post production) were easier to port to software platforms – and they still require a very expensive hardware controller.  Live production switchers are a different kettle of fish than off-line color grading systems for post production.  They are the key element of any live broadcast production, and they are still a relatively expensive hardware platform that requires specialist sales and support.

Blackmagic CEO Grant Petty is obviously familiar with this.  In the company’s press release that announced the deal he said: “I have been using live production switchers since I was in school where we covered local theater, sports, racing and bands. I think it’s the most exciting way to do production because it’s all live and thousands of people are watching what you are doing! Production switchers need to be powerful while also being familiar and easy to operate.”

Petty also said that “Since the acquisition, we have already dramatically expanded the engineering team working on ATEM. This fresh engineering team, which is a combination of new as well as experienced EchoLab staff, will allow us to move faster in adding new features to the ATEM product.”

Blackmagic will be displaying the ATEM on its booth at the IBC show next month. 

Here is a link to the full press release announcing the deal.

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Transcoding Consolidation — Telestream to Acquire Anystream

Over at his always informative Business of Video blog, Streaming Media’s Dan Rayburn writes that Telestream is to Acquire fellow transcoding provider Anystream from parent Gab Networks.  This is a deal has long been rumored, and according to Rayburn has now been confirmed by the management of both companies.

There’s been quite a lot of activity in the transcoding space recently.  Ripcode was sold to RGB networks and Elemental Technologies announced other week that it had raised $7.5m of new venture money, bringing its total to $14m

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Other Broadcast Technology Vendor News

Chyron Appoints New Chief Commercial Officer 

Chyron has appointed Susan Brazer as its new Chief Commercial Officer.  According to the company’s press release, Brazer has a big job, taking responsibility for “commercial strategy and all product and services revenues, directing its worldwide sales network of direct sales, resellers/systems integrators and joint ventures in Europe, Asia, Latin America and the Middle East.”

This is the second C-Level appointment recently.  The company previously announced that it had appointed Bonnie Barclay as VP and Chief Marketing Officer.

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New COO at Vizrt

Vizrt has appointed François Laborie as its new Chief Commercial Officer. Laborie replaces David Zerah who left Vizrt to become managing director of gaming firm Dragonfish.

Laborie joined Vizrt at the beginning of 2006 as the Company’s Executive Vice President Marketing. At the beginning of 2010, he took on the additional role of Regional President for the EMEA region.

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3D News

Technicolor announced this week that it has now installed its 3D system at 250 screens – good progress, but far less than clear leader RealD’s 7,500.

 

Mobile TV News

 According to an article in TVB,  Broadcast and WiFi Take Wind Out of FLO TV Sales 

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Other News

The Financial Times reports that News Corp has refused to refuses to raise its offer for BSkyB 

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Also in the FT, the BBC is under fire over Canvas project 

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Market Research Note of the Week:

Who are the Most Important Decision Makers in Broadcast Technology?  Vendors Predict Shift Towards Operations and IT

In a recent article, “Broadcast Industry’s Largest Market Study Reveals Most Important Technology Trends,” the move toward file-based, tapeless workflows was highlighted as one of the most important issues to broadcasters today.

But how will this shift affect how broadcast technology products are purchased, not to mention who buys them? Traditionally, these products have been purchased primarily by engineers. Will this be the same for products that are increasingly IT-based, or will there be a new set of buyers? Broadcast vendors need to know this because a new set of buyers may require a new market approach.

To find out, we asked the nearly 800 broadcast technology vendors who responded to the 2010 Big Broadcast Survey who they feel is currently the most important decision maker in the sales process, and who they feel will be most important in two to three years.

Let’s start with the most important buyers today. Respondents were asked, “When selling your products/services, which category of customer is typically the most important decision maker today?” According to responses, broadcast tech vendors see engineering staff as their most important customers, followed by operations, IT and finance personnel. Engineers are clearly seen as the most important decision makers, with operations staff a distant second.

But what about the future?

To read the full article, including four charts that break down the results, click here.

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Devoncroft Digest — July 30, 2010 – Earnings Season Continues, Grass Valley Finds a Buyer, More Broadcast Industry M&A, Harris Creates New Division, Elemental and Envivio Close Funding Rounds

broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Devoncroft Digest, market research | Posted by Joe Zaller
Jul 30 2010

The Devoncroft Digest provides an overview of and insight into industry news items that I think might be interesting / important for readers and clients. 

Here are a few of the things that have caught my eye this week.

Earnings Season Continues

A number of broadcasters, TV platform operators and broadcast technology vendors announced their earnings this week. With one or two exceptions the results were generally positive.

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Broadcast Technology Vendor Earnings

Harmonic posted strong Q2 results.  The company’s revenue was up 18% versus the same period last year, and up 13% versus the previous quarter.  More importantly, the company’s net income of the quarter was $4.4m vs. a loss of $7.9m during the same period last year.

On the company’s earnings conference call and slide presentation Harmonic executives also discussed the pending acquisition of video server company Omneon, and provided a bit more information on Omneon’s business.  Omneon recorded bookings of $57.8m during the first half of 2010, a 19% y/y increase.  For the full year, Omneon is expected to have revenues of $120-$125m, with (non-GAAP) gross margins of 57-57% and (non-GAAP) operating margins of 6-7%.

The market seemed to like what Harmonic had to say.  On the day after the earnings announcement, Harmonic shares were up by almost 17%.

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Technicolor announced its results for the first half of 2010 this week, which saw revenues decline 18.5% versus the previous year.  The company achieved EBIT of €15m from “continuing operations,” but recorded an EBIT Loss of €109m from “discontinued operations.”  The company attributed this EBIT loss “mostly to Grass Valley,” which found a buyer this week after being for sale for more than a year (more on that below).  More information about Technicolor can be found in the slide presentation that the company used during its analyst earnings conference call. 

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Belden issued strong numbers for Q2, beating the expectation of equity analysts.  Driven by strong results from the Americas (which were up 27% y/y), the company’s revenues rose 24% versus the same period a year ago, and 6% versus the previous quarter.    The company issued an upbeat forecast and raised its guidance for the future.

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Audio (and now video) specialist Dolby Labs delivered strong results for its 3rd quarter.  The company’s revenues rose 34% versus the same period last year, and its net income increased by 25% versus Q3 2009.  Dolby which has been pushing aggressively into the 3D and Digital Cinema markets, recorded a non-cash impairment charge of $9.6 million in cost of revenue related to digital cinema systems provided under operating leases to exhibitors.

Separately, Dolby announced an additional $300m for its stock repurchase program, which has the objective of offsetting dilution from the company’s equity compensation programs.

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Cable technology vendor ARRIS announced its preliminary Q2 Results.  The company’s revenues were up slightly, but its net income and gross margins were both down.  Investors were unhappy with these results and sent the company’s shares down sharply.

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Leading set-top box vendor Pace announced strong results for the first half of 2010.  For the first six months of the year the company’s revenues rose by 21% and profit jumped by 46% versus the same period in 2009.  Separately, the company announced its intention to acquire 2Wire (see below).

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Broadcaster & Platform Operator Earnings

European satellite operator Eutelsat announced this week that it achieved a record year, and that its revenue and EBITDA growth both exceeded 11% versus 2009.  The company’s earnings press release that it now delivers 3,662 broadcast TV Channels, and that the number of HDTV channels had grown by 80% during 2010.

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Belo, one of the largest pure-play TV broadcasters in the US delivered strong results for its second quarter of 2010.  The company’s revenue for Q2 was up by 13% versus 2009, and its net income almost doubled.  Significantly the company’s revenue from the automobile sector was up by 51% and its digital (website) revenues grew by 14%. 

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US cable operator Comcast reported that its revenues increased by 6.1% in its second quarter of 2010/  The company’s operating income and cash flow were both up, but it lost 256,000 basic video subscribers.  The company, which is currently seeking approval to purchase NBC-Universal, disclosed that it spent a total of $59m on the deal during the quarter

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UK-based Virgin Media delivered strong results for its second quarter.  The company’s revenue, operating income and cash flow all increased. 

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Broadcast Industry M&A Continues

Multiple broadcast technology M&A deals were announced today:

  • Grass Valley is to be acquired by Francisco Partners, a private equity firm
  • Ross Video is buying Codan
  • Pace announced  proposed their acquisition of 2Wire

 

Francisco Partners has made a binding offer to buy 100% of the shares in Grass Valley. 

After more than a year on the block, and several rumored bids, Technicolor appears to have found a buyer for Grass Valley – a Private Equity firm called Francisco Partners.    According to Technicolor CFO Stephane Rougeot “This binding offer is a key step in the largest of the disposals we decided to make as part of the strategic refocus of our activity portfolio. This will clarify and solidify our financial profile. This is also positive news for Grass Valley Broadcast employees and customers who will benefit from the engagement of a new shareholder recognized as a leader in technology-based businesses.”

Francisco is buying all of Grass Valley, except for the transmission business, which is being retained by Technicolor.

Technicolor certainly did not get rich from this deal.  It paid $172m for Grass Valley in 2002, and then acquiring multiple companies (including Canopus for more than $100m) over the past few years, the company has now struck a deal with Francisco Partners which according to a Technicolor press release values Grass Valley at $100m.

After reviewing the structure of the deal, one industry insider told me that Grass Valley was sold at what one industry insider described to me a “fire sale.”  In fact it appears that no money will change hands, and that Technicolor will actually pay €20m to Grass Valley in order to fund “ongoing management of the activity.”

For its part, Francisco Partners will sign an $80m IOU, which carries capitalized interest of 5% per year.  This means that Francisco will not pay anything for Grass Valley for at least five years, and that Technicolor will make a large cash injection into the company to keep it going. 

Clearly Technicolor wanted to get rid of Grass Valley and its associated losses so it can focus on its now core business activities.  The only silver lining for Technicolor is that it has the right to “receive additional consideration from the buyer based on the potential future remuneration of the new owners of the disposed entity.”

Grass Valley announced the deal in a press release and a letter to customers.    The company has set up a deal-oriented website where information about the transaction has been published, and has also created an “Ask Jeff.” (as in Jeff Rosica, head of the Grass Valley Broadcast & Professional business) email address where questions about the deal can be sent directly to the company. According to Rosica, who was interviewed by industry website TVNewsCheck, it’s Business As Usual At Grass Valley.

Grass Valley is one of the industry’s great companies and I am sure that the people there are happy to finally have resolved their fate.  Let’s hope they can now focus on making great products – and of course money for their new owners.

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Ross Video Acquires Codan

Ross Video, which is best known for its production switchers and newsroom automation systems, announced that has it entered into a letter of intent to buy 100% of the shares of Codan Broadcast Products Pty Ltd. The sale, subject only to the finalization of due diligence, is scheduled for completion on 31 August, 2010.  The deal will expand the Ross portfolio by adding Codan’s product range of routing switchers, signal processing and audio monitoring.  It also strengthens Ross Video’s foothold in the important Australian broadcast market. This is the second Ross acquisition in the past two years. In 2009 Ross purchased Dutch graphics firm Media Refinery.  

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Pace to Acquire 2Wire

Leading set-top box vendor Pace plc announced its proposed $475m acquisition of 2Wire, a provider of residential gateways and associated software for the broadband service provider market.  According to the press release, 2Wire has established customer relationships in the tier one telco market, including AT&T, which has been a customer of 2Wire for 10 years and uses 2Wire solutions in its U-Verse platform.  2Wire is currently owned by a consortium including Alcatel-Lucent, AT&T, Telmex, and Oak Investment Partners.

Pace says that following the completion of the acquisition it will be the number one provider of telco residential gateway devices in the US and the number three globally.

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3D News – RealD Insiders Cash in on IPO

The Wall Street Journal reports that following on from their successful IPO, insiders at 3D firm RealD Insiders Made More Money in IPO than Company Did.  A skeptical Wall Street equity analyst is quoted in the article as saying that the only reason for the IPO was to generate liquidity for investors.

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Other Broadcast Technology Vendor News

Harris Creates New Division, Names Means GM

The changes continue at the broadcast communications division of Harris.  The company announced this week that it has created a new “Workflow, Infrastructure & Networking” (WIN) business unit, and named newly hired Doug Means as its General Manager.  According to the company’s press release, Means will lead the newly formed WIN business unit, which encompasses the Harris Broadcast infrastructure, networking, server, automation and asset management product portfolios. WIN was formed as part of an overall strategy to create scale, reduce organizational complexity and deliver more interoperable solutions to address the continually changing needs of Harris Broadcast customers.

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 Ross Video Appoints Nigel Spratling to Marketing Role

Production switcher specialist Ross Video has appointed industry veteran Nigel Spratling to a marketing role at the company.  Spratling was most recently the CEO of Echolab, which was forced to liquidate earlier this year when its primary shareholder pulled the plug.  The fate of Echolab is still undetermined, but I have been hearing rumours that Blackmagic Designs is set to announce that they have acquired the company’s assets. 

 

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Evertz Lands Big International Order

Canadian infrastructure vendor Evertz, which prides itself on not doing marketing, took the unusual step of issuing a short press release to announce the fact that the company has received orders in excess of C$7m from an unnamed international customer.   

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Elemental Closes $7.5m Funding Round

Video transcoding firm Elemental Technologies, which uses GPU processing announced that it has closed a $7.5 funding round, bringing the total VC money raised by Elemental to more than $14 million.  The round was led by Steamboat Ventures, with Voyager Capital and General Catalyst Partners also participating.  Interestingly, according to an SEC document filed by Elemental earlier this year,  the company had provisioned to raise up to $9m.  The company says it intends to use the capital to expand its business in the United States and internationally.   Transcoding is a tough business as evidenced by the recent sale of Ripcode (who had raised considerable financing) to RBG.  Perhaps Elemental’s unique GPU-based approach will enable the company to thrive – it gets pretty good reviews from broadcasters according to an article about Pitch Blue which appeared in Broadcasting & Cable magazine this week.

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Envivio Raises $15m

GigaOm property NewTeeVee reported this week that Envivio, another player in the video encoding / transcoding space,  has secured $15m in additional funding and shaken up its management team. 

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Other Platform Operator News

Ascent Media Hires 3 New VPs

Ascent Media has appointed three new vice-presidents for its media and digital services operations in Burbank, CA. 

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MobileTV News

The Wall Street Journal published an interesting article about the state of the mobileTV marketin the USA, which discusses Qualcomm’s Plans for FLO TV, the US broadcaster-backed Open Mobile Video Coalition and mobileTV operator MobiTV.  The WSJ’s finding?  The picture for mobile TV in the US is “fuzzy.”

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Other News

Broadcasting & Cable magazine’s Glen Dickson wrote an interesting article about the new HD file delivery platformsthat are being rolled out by Ascent Media and DG FastChannel. 

According to B&C, Pitch Blue, the new HD file delivery platform from Ascent Media and CBS is now delivering HD content to 1,350 US TV stations, while the new system from DG FastChannel has been deployed in 500 US TV stations.  The B&C article also highlights the need for transcoding systems in TV stations to convert these HD file to house formats.  As mentioned above, Elemental gets a good review from stations.    

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Market Research Note of the Week: Reliability Rankings of Broadcast Technology Vendors — The Top 30 Globally

Broadcast technology products are purchased by discerning customers for what are often mission-critical applications. Thus, the reliability of products is a paramount concern for buyers of these products.

To measure the rankings of the reliability of vendors, respondents were asked to rank broadcast technology vendor brands for “reliability” on a 10-point scale, with 10 being best in the market and one being worst in the market. The top 30 ranked brands are shown in the graph for the global sample of all respondents. There are a wide variety of vendors on this list, including large and small companies and those who produce audio and video products.

When reviewing these results it’s important to understand how many products are produced by each vendor on this list. This will help us to understand if reliability comes from small, focused companies or large, multiproduct vendors.

The 2010 BBS evaluated 27 separate product categories. As with the previously published top 30 quality rankings, single-product companies (those who were covered on only one product category in the 2010 BBS) dominate the rankings for reliability.

To read the full article, including a breakdown and analysis of the findings, click here.

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Devoncroft Digest July 24, 2010 – Earnings Season Begins, More Broadcast M+A (and an IPO), Echolab Rumors

broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor Brand Research, Devoncroft Digest, Top Broadcast Vendor Brands | Posted by Joe Zaller
Jul 24 2010

The Devoncroft Digest is a semi-regular amalgamation of news items I’ve seen recently.  Here are a few of the things that have caught my eye recently.

Earnings Season Kicks Off for Broadcasters and Broadcast Tech Vendors:

Quarterly earnings are starting to roll in from both broadcasters and broadcast technology vendors.  For those who are on an annual fiscal year, it’s a chance to see how the first half of the year went, and to hear management thoughts on the second half of 2010.

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Broadcast Technology Vendor Earnings:

Avid reported their numbers for the second quarter. Sales for the quarter were $162.2m, an 8% y/y increase – and the company pointed out that this was the first quarter of y/y growth for both audio and video since 1997.  The company’s shares jumped on the news.

While discussing uses of cash on the company’s earnings call, Avid executives talked about the amount of cash used for the Euphonix acquisition.  I was not aware of the purchase price for Euphonix, but it turns out that according to an SEC filing, Avid paid 17.6m for Euphonix, including cash of $12.6m and cash of $5m.

For more on Avid’s results, here’s a link to a transcript of Avid’s Q2 earnings call, and an article from Barrons about the results.   

Speaking of Avid, Post Magazine’s Jonathan Moser recently published an interesting Q&A with Avid COO Kirk Arnold about present & future status of the company.  In my opinion, both Arnold and CEO Gary Greenfield have done a good job recently with this type of interview.  One of Avid’s strengths is their user community and the company is clearly working to communicate with their base.  Here’s another example.

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Barco reported strong results for the company’s Q2 and first half of 2010.  In the earnings press release, company President & CEO Eric Van Zele said that Q210 “Must have been our best quarter ever.”  Van Zele also said that Barco is “experiencing explosive growth in demand for our digital cinema projectors and are working very hard to deal with the supply chain issues this creates.”

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Storage vendor Isilon also reported their Q2 numbers this week, and they were pretty good.  The company’s Q2 revenues of $45.1m represented increases of 15% q/q and 56% y/y respectively. The company also had positive net income in the quarter.  Shares jumped 18% on the news.  With Isilon apparently firing on all cylinders and Omneon now part of Harmonic, the storage space is going to be interesting to watch over the next year or so.

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IPTV provider KIT Digital published strong preliminary results for their Q2.  In an upbeat press release, the company said that its Q2 revenues of “at least $22.7m” were up by more than 110%.  The company also said that its EBITDA for the quarter would be at least $4 Million

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Broadcaster and Platform Operator Earnings:

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Broadcaster LIN TV reported 2Q revenues of 99.5m, which represents a 21% y/y increase.  The company’s earnings release highlighted the fact that digital revenues were up by 44% y/y, and that political revenues more than doubled versus last year.  Lin President and CEO Vincent Sadusky said: “Our results demonstrate continued, sustained improvement over 2009. Television advertising has experienced a strong recovery and our digital business, which now constitutes 15% of our total revenues, continues to grow and differentiate us as a local multimedia company.”

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According to industry website TVNewswCheck, The McGraw-Hill Companies reported that its Broadcasting Group’s revenue grew by 24% to $25.3 million in the second quarter compared to the same period last year. Increases in national, local and political advertising all contributed to the improved performance.  The company as a whole reported net income for the second quarter of 2010 increased by 16.4%, or $27.0 million, to $191.1 million. Revenue in the second quarter was up 0.6% to $1.5 billion.

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Media General reported that the company’s broadcast revenue rose 13% in the second quarter, driven by increases in automotive and political advertising (publishing revenues fell by 7%). The company’s digital revenues rose by 8% during the quarter.  The company issued upbeat guidance for its broadcast properties saying, that “Broadcast revenues in the third quarter are expected to increase more than 20 percent, mostly reflecting significant Political revenues.”

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Finally, DVD rental and streaming video provider Netflix reported its Q2 results this week.  Although the company’s subscriber, revenue and net income numbers all numbers increased, it was not enough for investors who were looking for higher sales revenues.  The stock tanked.

For more on Netflix, check out the take from website VideoNuze, who penned an interesting post called 5 Key Takeaways from Netflix’s Q2 ’10 Results.

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Broadcast M&A

Echolab Rumors Continue

Since Echolab was suddenly put into liquidation, there has been great speculation about what would happen to the company’s IPR – particularly the Atem production switcher line up.  Well if rumors are to be believed, Blackmagic Designs is set to announce that they have purchased the assets of Echolab.  This is information is not confirmed, but I have spoken to several people about it.  

As many know, Blackmagic made headlines earlier this year when they purchased color correction specialist Da Vinci.    Coincidentally, TVB Europe just published an article about how Blackmagic took Da Vinci’s $200,000+ products into a sub-$1,000 product for the Mac and kept all the functionality.   If this rumor is true, it will certainly be interesting to see what Blackmagic has in store for Echolab’s Atem product line.  Watch this space. 

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Vitec Multimedia (not to be confused with the Vitec Group) announced the purchase of the Focus Enhancements’ Systems Group.  In the press release announcing the deal, Philippe Wetzel, CEO of VITEC Multimedia said “In combination with our recent acquisition of Optibase, this acquisition furthers our objective to provide a complete line of advanced digital video solutions to our customers around the globe. With innovation at its core, the VITEC R&D division — now with more than 100 esteemed engineers — is uniquely positioned to deliver innovative solutions for a wide range of advanced digital video applications — managing the entire video process from source to display.

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Vizrt announced that it has completed the acquisition of Adactus by buying the additional 71% of the company that it did not already own

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Other Broadcast Technology Vendor News

Vizrt’s Chief Commercial Officer appears to have left the company.  According to a press release from online gaming firm 888, David Zerah has become the managing director of Dragonfish.  While at Vizrt Zerah spent seven years as EVP of worldwide sales before becoming CCO.  Vizrt has not yet announced a replacement.

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3D News

The official IBC blog had an interesting entry on 3DTV the other day, which says that 3D will probably only impact the industry in “small dimensions”.

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OTT Video News

As mentioned above, Netflix reported their Q2 revenues.

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NewTeeVee Reports that Redbox readying a streaming offering.  Streaming media expert Dan Rayburn says Redbox Won’t Challenge Netflix’s Streaming Service, Here’s Why

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Digital Cinema

According to the Wall Street Journal, Imax has signed an exclusive 2-year deal with privately held Laser Light Engines. The company says that the resulting laser-power projectors will deliver brighter images for digital cinema, which will be especially beneficial for 3D.

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3D News – RealD Goes Public

3D provider RealD went public this week in a $200m IPO, which raised 33% more than expected, a testament to the strong interest in all things 3D.  The company’s shares were up 22% on its first day as a public company.

The company’s 100+ page IPO documents are worth reading for an overview of the company’s financials as well as the state of the 3D and Digital Cinema Markets.  Files 100+ Page IPO Doc. Worth Reading for Financials and #3D Industry Overview. #3DTV #Broadcast http://bit.ly/bCanRM

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Market Research Note of the Week – Quality Rankings of Broadcast Technology Vendors

This article looks at how a global sample of several thousand broadcast professionals ranked broadcast technology vendors for one of the most important metrics for any technology company: quality.

The broadcast industry prides itself on the fidelity of its sound and images, so the perception of quality is a very important metric for broadcast technology vendors. Many vendors use quality as one of the key components of their market positioning.

To determine the market’s perception of the quality of broadcast technology vendors, respondents to the 2010 Big Broadcast Survey were asked to rank broadcast technology vendor brands for “quality” on a scale of one to 10, with 10 being best in the market and one being the worst.

As with the top 30 innovation rankings published earlier, this list contains a broad mix of vendors including both audio and video companies. There are also interesting similarities and differences in terms of the types of products produced, geographic location and company.

To read the full article, including analysis of the findings, click here http://bit.ly/cY2nZO

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Devoncroft Digest for the w/e May 21, 2010 – Echolab Liquidates, Earnings Season Continues, Bankers on Broadcast, Google Gets into TV

broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials | Posted by Joe Zaller
May 23 2010

Devoncroft Digest – Recap of the week ending May 21 2010

It was a busy week in the broadcast & digital media world.  Echolab was forced to liquidate, multiple companies reported their quarterly earnings (which were mainly positive), two investment banking houses published notes on the broadcast industry, and Google made a little announcement about their plans to transform the TV viewing experience.

Here’s a recap of some of the things that caught my attention this week

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Echolab goes into liquidation

Long-established broadcast production switcher vendor Echolab announced via email this week that the company has been put into liquidation by its owner.  Echolab, which has been in business since 1974, had been on the ascendance recently under the leadership of company CEO Nigel Spratling.   

Spratling revamped the company’s product line-up, which culminated in the launch of the Atem production switcher family.  At NAB 2010 Echolab announced that it had signed an OEM deal for the Atem line with the broadcast communications division of Harris (who has now removed the press release about the deal from their website). 

The email from Spratling said the company’s primary investor was no longer prepared to fund the company, and that the news was a great show to everyone.  

Read the full text of Spratling’s email.

 

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Viewcast losses narrow

Streaming technology provider Viewcast announced their results for the first quarter of FY’10. The company’s reported that their losses narrowed. Revenue for the quarter was up slightly versus the previous quarter, but down 13% versus the same period a year ago.  The company also filed an 8K with the SEC this week, detailing the compensation plans of their CEO and CFO.

 

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More Broadcast M&A — Tektronix acquires Mixed Signals 

Test & measurement leader Tektronix announced this week that it is acquiring Mixed Signals, a provider of digital content monitoring including digital services, transport streams, ad insertion, switched digital video and interactive content.

According to said Eben Jenkins, General Manager of the Tektronix Video Business, “The acquisition of Mixed Signals, Inc. brings to Tektronix a strong team that has delivered leading innovation to the video monitoring market. The combination of Mixed Signals and Tektronix accelerates our ability to provide unmatched next-generation video test and monitoring solutions to our customers.”

 

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Continued growth for Ross Video

Privately held Ross Video said in a press release Ross Video that the company had achieved 7% growth in the first half of its fiscal year.  Although private, Ross has been vocal about their success in the face of the economic downturn of the past 18 months.  During the IBC show last September, company CEO David Ross told the IBC Daily News that the company had continued to grow during the recession.  In the most recent press release, Ross says “We continue to buck the downward trend and have enjoyed some record months.”

 

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Vizrt posts operating profit on big revenue gains

Broadcast graphics and asset management vendor Vizrt reported that their revenue grew by 38% in the first quarter of 2010 versus the same period, but fell 9% versus the previous quarter.  The company made an operating profit of $200K during the quarter, versus a loss of 2.4m during the same period a year ago. Company CEO Martin Burkhalter issued an upbeat statement saying that “broadcast markets are slowly recovering and … that CAPEX budgets and discretionary spending are being restored.”  Burkhalter, who recently stepped into the role of CEO after the death of Bjarne Berg concluded by saying “In terms of revenues, we believe that we are heading back towards the levels we achieved prior to the global downturn and anticipate to reach these levels in the coming nine to twelve months.  With this recovery, we expect our profitability to improve as well.”

 

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Autodesk M&E revenue declines by 4%

3D animation leader Autodesk (the parent company of Discreet and others) posted strong revenues for the first quarter of 2010.  In the earnings press release, which breaks out financials by industry segment, the company revealed that revenue for its Media & Entertainment group was $46m in the quarter.  This is basically flat with the previous quarter and represents a 4% decline versus same period a year ago

 

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Trouble at JVC Kenwood

The Wall Street Journal also reported that JVC Kenwood Holdings fell 21% to Y38 on heavy volume after the company’s Friday announcement of its plan to submit a resolution for 1-for-10 reverse stock split at its upcoming shareholders meeting. One brokerage manager, citing past reverse stock split scenarios, said that without fundamental business improvements, it would be hard to expect the company’s stock to show long-term appreciation.

 

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DG FastChannel added to S&P SmallCap 600 index

Standard & Poor’s announced this week that it is adding DG FastChannel to its S&P SmallCap 600 Index.  DG FastChannel, who recently raised $100m in a secondary public offering, has been on a tear recently.  The company’s stock has more than doubled in the last eight months, and it recently reported record results for its first quarter based on increased advertising revenue. 

 

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Ascent Media CEO dies at age 44

Ascent Media this week announced the sad news that Jose Royo, the CEO of the company’s AMG subsidiary had died at age 44.  “José was a thoughtful and caring business leader, mentor, partner, and friend,” said William Fitzgerald, Chief Executive Officer of Ascent Media Corporation. “José played a significant role in the media services industry, where he left an indelible mark. He was truly passionate about Ascent, its customers, and its people. José was a wonderfully devoted husband to his beloved wife, and father to his two young children. Our thoughts and prayers are with them at this difficult time. José will be missed.”

 

 

Google, coming to a TV near you soon?

As covered extensively this week, Google has unveiled a strategy which it believes will transform the TV viewing experience by combining it with the web. The company has partnered with Sony, Intel and Logitech to create a new type of TV experience.  Watch this space.

 

 

TiVo and Technicolor Team Up to Offer Integrated PVR Solution

I have been a big fan of Tivo since buying their very first PVR in 1999 (which still works great, and in my opinion provides a significantly better experience than the alternative from my pay TV provider), so I was interested to see that the company has teamed up with Technicolor (formerly Thomson) for a new set-top box solution.  You can read the details here…

 

 

Two Investment bankers weight in on NAB 2010 and the broadcast space

Two boutique investment banks, Silverwood Partners and Pharus Advisors have recently published notes to clients detailing their impressions of the NAB 2010 show.  Both companies gave me permission to re-publish them here.

Silverwood has been involved in a number of broadcast M&A deals includingBlackmagic / DaVinci and Avid / Euphonix. Prior to the 2010 NAB show the company published, which is worth reading to get their full perspective on the broadcast market.  

Pharus has also been involved in a number of industry transactions including Neural and Virgin Media / Two Way Media. The company published their post-NAB thoughts in their industry newsletter, which also includes a summary of recent M&A transactions in the digital media space, and a comparison of publicly traded companies.

More info on this here…

 

 

3D news

Broadband TV News reports that UK satellite broadcaster BSkyB is bullish on 3D.  An article on the website says that Sky says there could be up to 1m 3D screens in UK by

Speaking of 3D, the Schubin Café website posted a link to an article which says that watching 3D can make you sick. 

 

 

Market Research Note of the Week:

What factors most influence the purchase of broadcast technology products?

Regardless of “how” broadcast technology products are purchased, what many in the industry want to know is “why” they are bought — i.e. what are the most important factors that influence the decision to buy one product over another.

When it comes to selling broadcast technology, there are several strategies that vendors have adopted. This includes positioning their offerings as having the best technology, the best feature set, the lowest cost, the best value, the best service, the most recommended etc.

But which factor is the most important to the most buyers?

To find out we asked several thousand broadcast professionals around the world what is most important to them when buying broadcast technology products.

You can see the results, including a chart that ranks 10 different factors that influence the purchase of broadcast technology products here…

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Two Investment Banks Offer Post-NAB Thoughts, Insight on Broadcast Industry

broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials | Posted by Joe Zaller
May 18 2010

Two boutique investment banks, Silverwood Partners and Pharus Advisors have recently published notes to clients detailing their impressions of the NAB 2010 show.  Both companies gave me permission to re-publish them here.

 

Silverwood has been involved in a number of broadcast M&A deals including Blackmagic / DaVinci and Avid / Euphonix. Prior to the 2010 NAB show the company published a 40 page report about the broadcast industry for their investment banking clients, which is worth reading to get their full perspective on the broadcast market.  

Pharus has also been involved in a number of industry transactions including Neural Audio / DTS and Virgin Media / Two Way Media. The company published their post-NAB thoughts in their industry newsletter, which also includes a summary of recent M&A transactions in the digital media space, and a comparison of publicly traded companies.

 

 

Silverwood NAB Perspectives:

Revenue Flow versus Work Flow.  Broadcast and media customers are principally focused on sustaining advertising revenue from traditional outlets and driving incremental revenue over emerging outlets. The focus over recent years on cost containment through automation and technology efficiencies has been eclipsed by the need to adapt technology infrastructure to a changing business model.  The Newspaper industry provides an instructive lesson on the need to be responsive to external challenges to traditional business norms.  Technology vendors are faced with customers that have shifting purchasing priorities and that are scrutinizing expenditures on conventional broadcast infrastructure.

 

3D will not Reverse Industry Revenue Decline.  While 3D may drive some additional short term revenue, widespread adoption is still in question because certain content will never lend itself to the 3D medium.  Furthermore, with the exception of large screen environments showing purpose produced content (Avatar, Alice in Wonderland), the current 3D experience requires additional improvement.  There are no clear standards for end user devices (TVs and glasses) so mass end-consumer device adoption – if it is to occur – will take time.  Consider that the ongoing HD transition began with the first HDTV broadcast in 1998 and is still only 40% complete in the US market.  Lastly, production methods themselves must also adapt to the creation of 3D content – there is no consistency in the content acquisition process, much of which is based on trial and error and research.  3D requires a new approach in the creative production process as fast switching and cuts can prove to be nauseating to the viewer.  There are also concerns that poorly produced 3D will lead to negative customer perceptions in the near term which will slow adoption and the long term success of the medium.

 

Pricing is Collapsing.  Years of substantial profitability for media and broadcast customers masked poor cost discipline in the sourcing of technology.   Recent weakness in the advertising market and the broader economic disruption has caused customers to focus on capital budgets and look for more cost effective solutions.  Compounding this challenge, inexpensive general purpose IT infrastructure continues to replace purpose built hardware solutions, creating good enough solutions at attractive prices for many use cases.  This is putting pressure on margins for many traditional Broadcast technology vendors who organized their cost structures for the high price, ‘boom’ years and cannot adapt quickly enough to the changed industry circumstances.

 

Value Separation: Software, Hardware, Connectivity.  Historically, broadcast and post-production customers purchased purpose built solutions where the discrete software, hardware and connectivity components were blended within a hardware solution.  As the hardware portion becomes increasingly standardized, vendors will need to focus on defensible segments of the value chain, particularly within the software layer.  In many cases specialized hardware vendors are effectively software companies burdened with a legacy hardware orientation.  It is expected that vendors will need transformative change rather than evolutionary adaptation to address the fundamental changes in the media technology industry. 

 

Growing Software Opportunity.  It is expected that software companies will continue to be a growing presence in the media technology industry.  Differentiation from IT solutions for incumbent vendors resides in the software layer.  Well-positioned companies have software solutions that extend and leverage basic IT functionality, which will continue to improve in speed and capability.  From a product perspective, technology vendors should examine their product portfolios to identify and extract the unique software functionality that is truly differentiating their offerings.  In addition, the increasing use of standardized IT platform technology is creating a growing market for software vendors that can use the standardization to scale efficiently. 

 

Commercial Opportunity: Customer Diversification.  Well-positioned companies are diversifying and selling to a broader customer base, particularly customers outside the traditional broadcast market.   Targeting other industry verticals is not feasible with a customized hardware solution and an industry focused direct sales model.  In contrast, software solutions that extend standardized hardware and that are deployed through VARs and channel partners can be more easily adapted to large, adjacent industry verticals (Medical, Military, Enterprise).

 

Business Model Disruption.   For NAB exhibitors there remains fundamental weakness in the traditional broadcast technology industry.  The reduction in industry revenues will highlight one of the principal difficulties for many NAB exhibitors: sales and marketing expense is too high for revenue levels.  With pricing pressure, many vendors will need to change to a distribution model or become part of a larger solution that can support the fixed sales expense.   Well-positioned, well-capitalized vendors will have a unique opportunity to acquire established, respected brands with large user bases over the coming year.

 

Service Opportunity – Revenue Flow.  Broadcasters and media companies are faced with a proliferation of technologies and monetization possibilities, and an accelerating rate of technology change.  Historically, broadcasting challenges were solved by buying incremental technologies to plug into an existing well-understood technology infrastructure.  Current business challenges require business model innovation coupled with technology platform innovation to drive revenues across a growing range of end-point devices and outlets.  Given the lack of clarity on the optimal revenue model and the rapid pace of technology change, broadcasters and media customers are reluctant to invest in standalone technology purchases.  This is creating an attractive service opportunity driven by the ability to provide incremental revenue growth with a low barrier to entry, a receptive customer and an attractive ROI.

 

 

 

 

PHARUS ADVISORS

PUBLIC MARKET AND M&A UPDATE ON MEDIA AND BROADCAST TECHNOLOGY INDUSTRY

NAB OVERVIEW

We recently attended the NAB 2010 conference in Las Vegas. We came out of the conference feeling the media and broadcast technology market is experiencing a healthy recovery from 2009. The recurring comment echoed by many industry players was that the deals in the customer pipeline that were stalled in 2009 are now morphing into real opportunities. The RFP activity is showing decent improvement, however, the sales‐cycle continues to be long and spending not completely flowing.

Even though the network spending in North America, which was driven by conversion to HDTV over last few years, is slowing, other factors like changes in customer preferences, and pressure to generate new sources of revenues and reduce costs are expected to continue to drive technology capital expenditure for networks. These new developments are adding new dynamism to the sector, which can be witnessed by the plethora of vendors and solutions.

Here are some of prominent themes that we witnessed at the NAB show this year.

  • Emergence of 3D television broadcasting: As expected, this was the major theme at NAB similar to what was the case at CES earlier this year. TV manufacturers continue to be enthusiastic about this trend. CES expects 4.3 million 3D TV sets to be sold in 2010, with about 25% of total TVs sold in 2013 to be 3D‐enabled. Even though some major players (like DIRECTV, Discovery, IMAX, and etc.) have made announcements over last few months about launching 3D content, a lot of the content producers and broadcasters are still not sure about how quickly this market opportunity will grow in the near term. As a result, they tend to be reticent to make investment in this area at this point.

 

  • Development of multi‐platform content distribution (broadcast, web and mobile) capability: The spending on TV advertising is gradually declining. According to Yankee Group, the TV ad market declined 21.2%, from $52 billion to $41 billion, between 2008 and 2009. During this same period spending on Internet advertising grew as a result of consumers spending more time online and less time watching TV. With more and more eyeballs consuming video content on Web and mobile devices, broadcasters are investing in technologies which enable delivery of content over multitude of platforms.

 

  • Adoption of file‐based workflows: One of the important areas of investment for broadcasters remains implementation of file‐based workflow infrastructure. This is viewed as important by broadcasters to augment flexibility in day‐to‐day operations, facilitate reduction in operational costs, and enable efficient multi‐platform content distribution.

 

Emergence of Over‐the‐Top (OTT) Video and convergence of TV and Internet: The other recurring trend at the show was the focus on growing convergence between broadcast TV and Web video. Internet users are increasingly interested in streaming full length video directly onto their TVs and as a result variety of models are appearing to provide consumers with this capability. According to report by Tender Research from October 2009, about 7% of households will forgo Pay TV subscriptions by 2012 in favor of OTT services and free over‐the‐air television. OTT market is moving very fast with proliferation of enabling devices like Roku, Xbox, and a range of new HDTV models and growth of online video sites such as Hulu, Netflix,

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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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