Posts Tagged ‘broadcaster buying preferences’

Broadcast Technology Vendors Predict Strong Increase in Software Revenue

broadcast industry technology trends, broadcast industry trends, Broadcast technology channel strategy, broadcast technology market research | Posted by Joe Zaller
Nov 01 2010

When I recently saw the headline “Solving the TV Station Hardware Dilemma” on the Broadcast Engineering website, I stopped to read.

Although the article turned out to be about integrated playout (a.k.a. channel-in-a-box) automation servers rather than a debate about hardware versus software in a broadcast facility, it got me thinking about the shift in broadcasting towards IT-oriented technologies, and what vendors are doing about this market transition.

Our research has found that the move to IT-based operations is one of the broadcast industry’s most important technology trends. This will obviously have a major impact on the broadcast technology vendor community. 

Some commentators like boutique investment bank Silverwood Partners say that there is a diminishing hardware opportunity and that value is migrating to software-based products.  So what are broadcast technology vendors doing to change their product ranges and business models?

To better understand these issues we asked the nearly 800 broadcast technology vendors who responded to the 2010 Big Broadcast Survey, about the make-up of their current and future product portfolio.  Vendors were asked to break down the sources of their revenue by product hardware, software, maintenance, and service. 

Here’s what we found:

.

Current Sources of Vendor Revenue – Product Mix

.

Hardware products represent the largest percentage of vendor revenue, with more than 80% of respondents indicating that hardware sales represents greater than 20% of revenue, and 31% reporting that hardware products represent more than 80% of revenue.

While more than half of vendors reported that software represents a significant portion of their revenues, only 6% identified software as representing more than 80% of their sales.

Maintenance and service revenues represent a small part of the overall vendor revenue stream today.

But what are vendors projecting for the make-up of their future revenue?

.

Future Sources of Vendor Revenue – Product Mix

Vendors were also asked to predict how their revenue by product mix would change over the next several years.

More than half of vendors report that they expect sales of hardware products to stay the same or increase over the next several years, while 20% expect hardware product sales to decline over the same period.

.

 .

Vendors expect to see large growth in software sales, with 76% of vendors predicting sales of software products will increase over the next 2-3 years.  Included in this number are an impressive 51% of vendors who expect software product sales to increase by more than 10%.

Vendors are also clearly looking towards maintenance and service revenues to expend their businesses.  Whereas the previous chart shows that today’s revenue from these sources is not huge, vendors are almost all anticipating that maintenance and service income will stay the same or increase over the next several years. 47% of vendors predict that maintenance revenue will increase, and 48% of vendors predict that customer service revenues will increase during this period.   

.

Projected Future Vendor Hardware / Software Revenue – by Company Type

To better understand these responses, it’s helpful to profile the research participants according to the type of company they represent.

In the charts below, I have broken out the responses to the projected product mix question based on whether the respondent works for a company that provides primarily hardware products, primarily software products, or has a mixture of both.  In this case “primarily” is defined as more than 70% of a company’s revenue.  Responses for the average of all vendor responses are also shown for the sake of comparison with charts above.

.

Hardware Sales

Firstly, let’s look at what vendors predict will happen to their hardware sales.  The chart below shows that 20% of respondents expect hardware product sales to decline over the next few years, while more than half expect hardware product revenue to stay the same or increase over the same period.

.

 

.

However, there is a clear difference between those vendors who currently produce primarily hardware products versus those who currently produce primarily software products.

73% of respondents from companies who primarily sell hardware products think that their hardware revenue will grow over the next few years.  Conversely, just 39% of respondents from software-oriented companies think their hardware revenue will increase.

.

Software Sales:

What about revenue from software products? The chart below shows how vendors project their software sales will change over the next 2-3 years.

.

Virtually all vendor respondents predict that their revenue from software will increase over the next few years.  Just 5% of respondents believe that software revenue will decline during this timeframe.

67% of vendors respondents whose company sells primarily hardware products predict that their sales from software products will increase over the next few years, while 86% of respondents from software-oriented vendors believe their software revenue will grow.

These results show that while hardware product sales are not going away any time soon, technology suppliers are responding to market demand for software-oriented products.  Although this analysis does not attempt to put a value on or quantify the percentage of future software sales, it appears that vendors are gearing up to provide more software solutions in the belief that this will help drive revenue growth.

.

.

 

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.

.

.

What factors most influence the purchase of broadcast technology products?

broadcast industry technology trends, broadcast industry trends, Broadcast technology channel strategy, broadcast technology market research | Posted by Joe Zaller
May 17 2010

This is the third in a series of posts about how broadcast technology products are purchased.

Previously I have looked the purchasing channels typically used by different types of broadcast technology buyers, as well as whether these buyers prefer a best of breed or one-stop-shop approach when sourcing broadcast technology products.  The information in these posts reveals that there is considerable variation in the way different types of buyers purchase 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.  The results are shown in the chart below.

Question: When purchasing / evaluating broadcast technology products, which of the following are the most important factor?

These results show that in a highly technical business like the broadcast industry, when it comes to purchasing broadcast hardware and software products, technical specification and technical performance is the most important factor for the majority of today’s buyers.

In fact, technical performance in the broadcast industry is so critical, that at least three times more respondents cited technical performance / specification than the next most important factor.  It looks like in this case “the only race is for second place.” 

Having said that, other factors such as operational features, service and support, total cost of ownership, and purchase price are also seen as very important criteria for product purchase. 

The challenge for vendors is to deliver sufficient technical performance that is “fit-for-purpose” for the customer’s application and then work to differentiate their offering through the factors that are seen as most important to each type of customer.

They key to this is understanding how these results can vary when broken out by demographic factors such as organization type, company size, job title, and kind of product that is being evaluated for purchase.  Indeed a granular breakdown of this information shows that there may be considerable variation in purchase criteria based on a number of these factors.

If you would like more information, please contact Devoncroft Partners.

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.

Devoncroft Digest – Week Ending May 14th 2010. Earnings Season Continues

broadcast industry technology trends, broadcast technology market research, Broadcast technology vendor financials | Posted by Joe Zaller
May 16 2010

Earnings season continues with good numbers from broadcasters, and mixed results from vendors.

Broadcaster Earnings Continue to Rise

Broadcasting & Cable reported that Gray Television reported first quarter revenues of $70.5 million, up 15% from the revenue it announced in the first quarter of last year. Gray said the number exceeded its initial expectations.

B&C also reported that Scripps saw its revenues rise 11% y/y. The company is also forecasting strong results for its second quarter.

US Satellite broadcaster Dish Networks was in the news several times last week.  It posted its Q1 results at the beginning of the week, which showed revenues rise by 5 percent, but net income fall by 26 percent.  The company also said it was prepared to shut down its DVR service if it loses its protracted patent battle with DVR pioneer Tivo. But then on Friday a US federal appeals court said the case between Dish and Tivo. This sent Tivo shares down by more than 40%.

 

 

Broadcast Technology Vendor News

EVS Reports 5th Consecutive Growth Quarter, Disappoints Analysts

Broadcast server and storage vendor EVS reported its Q1FY10 numbers this week.  According to the company’s press release to company reported its 5th quarter in a row of growth.  However both the revenue and profit were below the expectations of analysts, and the company’s stock price fell by 10% to a 10 month low following the announcement.  A Reuter’s article quotes analyst Nico Melsens of KBC as saying “the order book was okay, first quarter sales were okay, but the gross margin was below consensus forecast.”                        

Harmonic Holds Analyst Day, Discusses Omneon Deal

Following the release of its earnings last week, Harmonic held meeting for analyst day during which the company’s CEO and CFO presented an overview of the company’s business to equity analysts. One of the topics of interest was the company’s recent acquisition of broadcast server and storage vendor Omneon.   You can listen to a reply of the analyst presentation here.  Information on the Omneon deal is presented at the 21.5 minute mark, as well as in the Q&A. 

Sony Expects to Return to Profit

According to an article in the Wall Street Journal, Sony says expects to return to profit this fiscal year after two straight years in the red, as painful restructuring measures give way to an improved outlook for its troubled television and video game units. Sony said its restructuring is finally paying and that it expects its television business, which has lost money six years in a row, to return to profitability, boosted by 3-D TVs which it hopes will drive new interest and slow the price declines that eat into profits.

Vizrt CEO Passes Away

TVB Europe reported the sad news that Vizrt CEO, Bjarne Berg, has passed away suddenly at the age of 59.   

New CMO at Chyron

Broadcast graphics vendor Chyron announced that it has hired a new VP and CMO.   Bonnie Barclay comes from The Branding Iron, LLC – an Atlanta-based television and branding company.  She has also worked at Scripps, Cox, and Belo.

 

 

Market Research Note of the Week:

Purchasing Preferences of Broadcast Technology Buyers – “Best-of-Breed” or “One-Stop-Shop?

How do buyers of broadcast technology products prefer to purchase: using a best-of-breed approach (evaluating products from multiple vendors) or a one-stop shop where one vendor provides a complete solution?

To find out, we canvassed the opinions of several thousand broadcast professionals around the world as part of the 2010 Big Broadcast Survey.

There are a huge number of vendors in the broadcast technology space, and the industry’s vendor community is fragmented. Major international trade exhibitions such as NAB and IBC often have between 1000 and 1500 exhibitors at their shows.

On the one hand are the many vendors who are relatively small and specialize in one or two product types. There are also a small number of large international vendors who produce dozens of product types. There are obvious advantages that come with the scale that large companies have achieved, but small companies often argue that their more nimble, focused approach results in superior products.

This has led to an ongoing debate within the broadcast industry about whether it’s better to buy so-called best-of-breed solutions from a variety of suppliers or go to one large company and buy everything from a single vendor.

There are pros and cons to each approach. Dealing with a number of companies may indeed enable buyers to assemble a best-of-breed system, but this approach may introduce interoperability issues and potential finger pointing between vendors if things go wrong. Dealing with a large one-stop shop gives buyers the peace of mind that interoperability issues have been solved, that there is one phone number to call if things go wrong and that there will be no finger pointing.

To see the results of this research, including a chart with a breakdown of different types of buyers, click here.

Purchase Preferences of Broadcasters, Broken Down by Geography and Organization Size

broadcast industry technology trends, Broadcast technology channel strategy, broadcast technology market research | Posted by Joe Zaller
Oct 22 2009

In a previous post I wrote about the IABM’s US market workshops, which I attended last week in San Francisco and New York. During my presentations about the 2009 Big Broadcast Survey, a few people asked for clarification on some data and/or for a cut of the data that is different than what I was showing at the time.

When I got back from the meetings, I extracted this additional information and sent it to the relevant parties. I figured that others might be interested to see this as well, so here it is.

One question was about whether there is significant regional variation in the preference for broadcasters to purchase from a single vendor versus a range of “best-of-breed” suppliers.  A follow-on question was whether there was variation in purchasing preference based on the size of the broadcaster.

My original post on this topic showed that there is a strong preference for buyers to evaluate multiple vendors and select a best of breed solution. You can read this post here: Do broadcast technology buyers prefer to purchase from a single supplier or from “best-of-breed”?

Here’s the chart from this post, which shows that the majority of buyers, regardless of their type, prefer to  evaluate multiple vendors and purchase best-of-breed solutions.

 Q: When purchasing broadcast technology products, do you prefer to buy from a single “one-stop-shop” or select “best-of-breed” solutions from multiple vendors?

Best of breed preferred purchase method

 

The above chart looks at the total market on a global basis, and does not break out the responses for each customer type geographically. 

 I thought it would be interesting to do this for broadcasters, and the results are shown in the chart below, which compares the response of the overall global sample (called “everyone” here), with the responses of all broadcasters and then regional broadcasters — there is some regional variation.

 

Broadcasters -- Best of breed preferred purchase method

The chart above shows that broadcasters have a strong preference to purchase “best-of-breed” solutions, but there are some variations.  Broadcasters in the Americas show a higher preference towards a single supplier versus the average of all broadcasters, while Asian broadcasters show a higher preference towards best-of-breed versus the average.

The next question takes it one level further, and asks whether these preferences hold true for broadcasters of all sizes — i.e. how do broadcasters of different sizes prefer to purchase broadcast technology products and services?  To find out I did another cut of the broadcaster data from the chart above.  In this case I did not look at geography, but at the size of the broadcaster.

The results are shown in the table below:

Broadcasters By Size -- Best of breed preferred purchase method

 

As you can see, the results are fairly consistent, and once again there is an overwhelming preference is to evaluate multiple vendors and choose best of breed solutions. 

You’ll note that there is an extra bar on this chart — the one for US Network Broadcasters.  As an interesting point of comparison,  I have also included these results since I happened to have collected this data during the research.  US networks are some of the industry’s largest customers and they are usually in the largest cities (such as New York) where many vendors have sales offices.  US broadcast networks show the strongest preference towards buying from a single supplier when compared other broadcasters — more than double other large (1000+ employee) broadcasters.

If you’re a broadcast technology vendor, is this consistent with your experience?  Please let me know.

%d bloggers like this: