Posts Tagged ‘IBC 2009’

Silverwood Partners’ Take on IBC 2009

Broadcast technology vendor financials, broadcast technology market research | Posted by Joe Zaller
Sep 25 2009

 Specialist investment bank Silverwood Partners today issued a note called “IBC 2009 Perspectives.”

I thought it was an interesting take on the show and on the industry, and it’s worth sharing.

 

September 25, 2009 – IBC 2009 was an active show that reflected the transformative changes taking place in the media technology industry. We would like to share our perspectives from the event.

1. Challenging Environment in Broadcast Technology.   Broadcast customers are losing revenue from their traditional business as advertising dollars are being siphoned off to online alternatives. Concurrently, the broadcast industry is moving toward a lower cost, file-based infrastructure, with high-performance technology available at a fraction of traditional cost. Neither trend is good for the pricing power or the margins of incumbent companies. Some have cut costs to outpace the revenue decline; some have found other revenue streams. Many traditional vendors have enjoyed a stable business environment, with high margins, for years, and some will find it difficult to make the necessary business adjustments.

2.  DTV and HD Shifts Nearing Completion.  The Digital TV transition and the HD transition are substantially complete, and have in each case provided a boost to the broadcast technology industry.  The related capital investment has masked the underlying poor fundamentals of the industry.  As the stimulus from these trends abates, broadcast technology suppliers will be increasingly exposed to the fundamental weakness of demand in the industry.

3.  Revenue Flow vs. Work Flow.   As the influence of the online medium grows and media outlets proliferate, broadcasters are being forced to focus on monetization and revenue generation rather than primarily workflow and program delivery.  Traditional broadcast technology buyers are inexperienced with the technology framework of the online medium.  Such buyers are actively seeking assistance in solving immediate and unfamiliar problems that involve not just the technology infrastructure but also the business model.  Related customer inquiry is driving acquisition interest within the sector.

4.  Abundance of Acquisition Opportunities – Importance of Differentiation.  The recent economic disruption has exacerbated the structural changes in the broadcast industry and has driven many companies to look at strategic alternatives.  For well-capitalized companies this is a favorable time to look at acquiring competitive and complementary technologies. Large companies are evaluating many transaction opportunities and are being highly selective in their acquisition strategies. It is important for prospective sellers to understand the value and differentiation represented by their business or technology, and to directly relate the distinction to a prospective buyer’s specific objectives.  

5.  Unique Opportunity for Smaller Technology Companies.  Historically, decision makers behind key technology purchases at large customers reflexively avoided smaller suppliers and principally sourced key technologies from large, well-known companies.  In the current environment, smaller, innovative companies can be more responsive to the rapidly evolving needs of media technology customers.  With the broadcast business model changing as a result of, and as a response to, fundamental technology shifts there is a unique opportunity to capture a leading position in a rapidly growing market.  

Silverwood is actively involved in a number of transactions for companies that were exhibitors at IBC, and we have an informed and current perspective on transaction structuring, pricing and feasibility.

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Impressions of IBC 2009

broadcast industry technology trends, broadcast technology market research | Posted by Joe Zaller
Sep 17 2009

I am just back from spending a week at the IBC show in Amsterdam.  During the four days I was at the show I had about 50 meetings with vendors, broadcasters, bankers and other industry folks.  Here are my quick impressions.

The story from many vendors was the same — the first half of 2009 was terrible, with sales down between 15-40% depending on the company.  A few went as far to comment on the impact on their profit — e.g. one told me that at 20% drop in revenue resulted in a 50% drop in profit.  However, one or two told me that things had picked up since June.

Although attendance was down just about 7% versus last year, there were big differences in how this impacted the lead counts of individual exhibitors.  Most vendors said that their lead counts were down — a few told me that their leads were down 40% versus previous shows — while others said they were busier than ever.  And of course, I often heard the old refrain “the show is smaller but the quality is high because anyone here is here because they have a project, and the tire kickers stayed at home.”

Many vendors reported that although their sales were way down for the year, that their pipeline had not gone away.  Instead projects were being constantly delayed as broadcasters evaluate their capital budgets.  So many vendors said that they are optimistic that there will be pent up demand when the economy finally turns and that things will improve quickly once a recovery starts.  In the meanwhile however, many vendors have found reduced demand combined with project postponement has made their sales very lumpy, and in most cases extremely difficult to predict.  A few people commented on how difficult it is to forecast demand in the current environment.

There were a few bright spots.  Just about everyone whose business involves saving money and improving efficiency for broadcasters reported that things went well at IBC.  And Ross Video was quoted in the IBC Daily News saying that their sales were up 8% during the first ten months of their financial year (perhaps due to their OverDrive production automation system, which reduces headcount and saves money for broadcasters).  A couple of magazine publishers also reported that orders for display advertising in Q4 had come in higher than expected during IBC.

Following on from the above it seems, as TV Technology twittered today “What do you think was the dominant theme at#ibc09? My pick? “Doing more with less.” Not particularly original, but a sign of the times.”

I agree with TV Tech, but I think there’s more to it than that.

The broadcast industry in the midst of significant structural changes.  We’ve in the middle of the worst recession in memory and technology is changing at a rapid pace.  There are significant implications to the combination of customer budget cuts and new technology.

A while back, I posted an article called  HDTV… just a “pause” on the path to transition to IT-based broadcasting? which said that the transition to HD (much of which had to be done with hardware), put back the move to IT-based broadcasting by about five years.  During the biggest years of the HD transition, many vendors grew very rapidly, including a few that went public.  Today, the transition to HD is well underway, and the focus of the customers is all about efficiency.   So it makes me wonder whether when the recovery does happen, who will reap the biggest benefit — the traditional hardware vendors, or providers of efficient IT-based systems.  I think we will see some new players emerge, while some established players continue to struggle.

This leads to the (not new) observation about the high degree of fragmentation among the broadcast technology vendor community.   What is new is what I think we will see next – vendor consolidation and a pretty active M&A market in the broadcast technology space.

Why? Well for one thing there are just too many vendors in a variety of product categories, and they are seeing their business change.  Many of the small players may be forced to merge or sell over the next few years.

And of course, when you combine the premise that it’s likely to be some of the newer companies (who provide a bridge to the file-based future) that are going to grow fastest for the next few years, with the premise that many of the established hardware-based vendors don’t actually have a file-based solution to offer their customers, it’s likely that we’ll be seeing more M&A activity in the near future.

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