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.