In Broadcast - March 2018 - 28

28

www.inbroadcast.com | Vol: 8 - Issue 3 | March 2018

InForm

Does Dedicated Broadcast
Equipment Have A Future?
The industry is on point of being eviscerated
by consolidation and M&A, Contributing
Editor Adrian Pennington investigates...

I

s the broadcast equipment industry
cratering? The warnings have been
apparent for years but at some point
over the past few years media and
broadcast crossed the threshold where
commodity technologies perform at
the levels needed for professional
media. This squeezes what consultants
Deloitte have termed the 'special sauce'
out of hardware and into software and
there's no return.
On the one hand this seismic
transition
is
enabling
new
infrastructure options like Cloud and
new business models for vendors like
software-as-a-service, but it comes at
a brutal cost.
Technology that was once the
exclusive preserve of large broadcast
organisations is now available to
the masses at consumer prices. This
influences every aspect of a technology
supply company.
The swallowing of what remained of
fabled brand Quantel (Snell Advanced
Media, previously owned by private
equity firm LDC) by Belden in February
is the latest reminder that the healthy
margins many vendors enjoyed selling
proprietary hardware systems has
been whittled away to nothing.
Belden has grown fat treating cables
and connectivity as a commodity,
generating US$2.4billion revenues
last year. The broadcast market is
way smaller than other verticals such
as cyber security and industry which
Belden, caters to.
"Of all the industries we're in, media
and broadcast is where the economic
capabilities of the vendors are the
least developed, and that creates a lot
of stress for us," admitted Belden CEO
John Stroup to the 2017 Devoncroft
Media Technology Business Summit.
"This is a business that requires a lot of
scale. To operate globally, you need to
generate the amount of revenue that
gives you the scale from an R&D point
of view."
Scale is what those in traditional
kit supply do not have. IHS Markit
reports the broadcast equipment

industry generating US$23.5 billion
in 2017, although the IABM's own
figures (for 2016) double this at U$51
billion. Regardless, this is dwarfed
by revenues in the global IT industry
of about US$3.5 trillion in 2017
according to Gartner. This means that
the broadcast and media technology
market is about 1.5% of the total value
of the IT industry.
Changing Market Boundaries
The boundaries of the market are
changing. While bespoke broadcast
technology is on the decline, new
categories such as Cloud and OTT
services are growing significantly.
The IABM is working to redefine its
industry model to reflect this - expect
an announcement at NAB.
"While the 'traditional' industry
is largely static in terms of size,
today's wider industry is expanding
dramatically, but doing so at a lower
price point," says IABM CEO Peter
White.
HIS Markit highlights two "realities"
shaping the industry's value. First, as
a share of the wider Pro AV market -
which wholly subsumes the broadcast
equipment industry - equipment
revenue is falling. Second, the
composition of broadcast equipment
value is changing. As recently as
two to three years ago, capture and
production equipment, and media
servers, were the market's main stores
of value.
"Through 2022, capture equipment
revenues will flatten, and media
servers will lose considerable value,"
states analyst Merrick Kingston.
"Broadcast services, encompassing

Peter White,
CEO, IABM

The IT technology sector
is massive compared
to Broadcast & Media

51bn

Broadcast & Media Technology
IT
everything from engineering and
design, to fully managed broadcast
media services, will near-exclusively
catalyse the industry's net value
creation over the next five years.
Hardware will retain high nominal
value, but will cease to be a growth
catalyst."
Value creation in the IT and
broadcast
equipment
segments
resembles a parallel evolutionary
process. Value - and revenue - doesn't
reside in the sale of a camera, a
conferencing phone, or a server.
Hardware is simply a conduit for the
sale of software and services.
Hardware Value Sinks
According to IABM data, the
deflationary effect of hardware
commoditisation continues to stifle
traditional
broadcast
technology
suppliers' profitability despite the
sustained level of R&D investment
made in recent years.
"While hardware has intrinsic
and high nominal value, the sale of
production services, teleconferencing
services, and cloud computing underlie
the net creation of new worth," says
Kingston.
SAM's sale fits a wider pattern of
merger & acquisition as companies
seek scale. Belden itself accumulated
Miranda, Softel and Telecast Fibre
Systems as well as Grass Valley under
which SAM products will be sold.
Another
industry
behemoth,
Imagine Communications (owned by
venture capitalists Gores Group) was
formed from the merger of Harris
Broadcast and GatesAir in 2013, Harris
Corporation having earlier spent a
billion dollars swallowing Leitch, Louth

3500bn

and Encoda.
At the end of January, Ericsson
divested itself of its Media Solution
Business which was built in part
through the acquisitions of Tandberg
Television
(2007),
Microsoft
Mediaroom (2013) and Envivio (2015).
What's interesting is the scale. While
the Media Solutions assets are fairly
significant in the media technology
sector, it only accounted for 3%
(US$380 million) of Ericsson's annual
revenue. Nothing like a core business.
"Traditional
businesses
are
going through a transformation to
adapt to their customers' changing
requirements," says White. "What they
need to do is change, offering products
that tackle their customers' issues in
a multi-platform world and moving to
new business models centred on the
flexible provision of software."
Think Out Of The Box
John Ive, who delivers strategic
insight for the IABM, thinks he has put
his finger on the problem. He says that
the old method of designing, releasing
and then fine-tuning a product over
successive product generations is no
longer fit for purpose. All this succeeds
in doing is optimising the status quo.
"Being obsessed with improvement
inhibits thinking 'out of the box',"
Ive argues. "Continuous product
improvement follows a law of
diminishing returns despite escalating
support costs. Once the product has
peaked and market penetration is
high there is a diminishing return on
investment."
Some companies find that by the
time they've achieved the perfect
product, having diligently responded


http://www.inbroadcast.com http://inbroadcast.com/Belden_Acquires_SAM.asp

Table of Contents for the Digital Edition of In Broadcast - March 2018

Contents
In Broadcast - March 2018 - Intro
In Broadcast - March 2018 - Cover1
In Broadcast - March 2018 - Cover2
In Broadcast - March 2018 - Contents
In Broadcast - March 2018 - 4
In Broadcast - March 2018 - 5
In Broadcast - March 2018 - 6
In Broadcast - March 2018 - 7
In Broadcast - March 2018 - 8
In Broadcast - March 2018 - 9
In Broadcast - March 2018 - 10
In Broadcast - March 2018 - 11
In Broadcast - March 2018 - 12
In Broadcast - March 2018 - 13
In Broadcast - March 2018 - 14
In Broadcast - March 2018 - 15
In Broadcast - March 2018 - 16
In Broadcast - March 2018 - 17
In Broadcast - March 2018 - 18
In Broadcast - March 2018 - 19
In Broadcast - March 2018 - 20
In Broadcast - March 2018 - 21
In Broadcast - March 2018 - 22
In Broadcast - March 2018 - 23
In Broadcast - March 2018 - 24
In Broadcast - March 2018 - 25
In Broadcast - March 2018 - 26
In Broadcast - March 2018 - 27
In Broadcast - March 2018 - 28
In Broadcast - March 2018 - 29
In Broadcast - March 2018 - 30
In Broadcast - March 2018 - 31
In Broadcast - March 2018 - 32
In Broadcast - March 2018 - 33
In Broadcast - March 2018 - 34
In Broadcast - March 2018 - 35
In Broadcast - March 2018 - 36
In Broadcast - March 2018 - 37
In Broadcast - March 2018 - 38
In Broadcast - March 2018 - 39
In Broadcast - March 2018 - 40
In Broadcast - March 2018 - 41
In Broadcast - March 2018 - 42
In Broadcast - March 2018 - 43
In Broadcast - March 2018 - 44
In Broadcast - March 2018 - 45
In Broadcast - March 2018 - 46
In Broadcast - March 2018 - 47
In Broadcast - March 2018 - 48
In Broadcast - March 2018 - 49
In Broadcast - March 2018 - 50
In Broadcast - March 2018 - 51
In Broadcast - March 2018 - 52
In Broadcast - March 2018 - 53
In Broadcast - March 2018 - 54
In Broadcast - March 2018 - 55
In Broadcast - March 2018 - 56
In Broadcast - March 2018 - 57
In Broadcast - March 2018 - 58
In Broadcast - March 2018 - 59
In Broadcast - March 2018 - 60
In Broadcast - March 2018 - 61
In Broadcast - March 2018 - 62
In Broadcast - March 2018 - 63
In Broadcast - March 2018 - 64
In Broadcast - March 2018 - 65
In Broadcast - March 2018 - 66
In Broadcast - March 2018 - 67
In Broadcast - March 2018 - 68
In Broadcast - March 2018 - Cover3
In Broadcast - March 2018 - Cover4
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201908
http://europe.nxtbook.com/nxteu/lesommet/CTA-DAY3
http://europe.nxtbook.com/nxteu/lesommet/CTA-DAY2
http://europe.nxtbook.com/nxteu/lesommet/CTA-DAY1
http://europe.nxtbook.com/nxteu/lesommet/CTA-VISITOR
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201906
http://europe.nxtbook.com/nxteu/lesommet/CTA-PREVIEW
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201905
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201904
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOW2019
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201903
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_cabsat2019
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201902
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201901
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_INREVIEW2018
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201812
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201811
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NewYork2018
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201810
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_inshowguide2018
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201809
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201808
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201806
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201805
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201804
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOW2018
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201803
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201802
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_cabsat2018
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201801
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201712
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201711
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201710
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOWNYexpo2017
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201709
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_inshowguide2017
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201708
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201707
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201705
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOW2017
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201704
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_cabsat2017
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201703
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201702
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201701
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_INREVIEW2016
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201612
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201611
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOWNYexpo
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_20110708_DEMO
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201610
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_inshowguide2016
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201609
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201608
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201607
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201606
http://europe.nxtbook.com/nxtbooks/lesommet/inbroadcast_APAC03
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201605
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOW2016
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201604
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201603
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_cabsat2016
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201602
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201601
http://www.nxtbook.com/nxtbooks/lesommet/inbroadcast_APAC02
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201512
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201511
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_CCW15expo
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201510
http://www.nxtbook.com/nxtbooks/lesommet/inbroadcast_APAC01
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201509
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_IBC2015
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201508
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201507
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201506
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_BROADCASTASIA2015
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201505
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201504
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_NABSHOW2015
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201503
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_cabsat2015
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201502
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201501
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201412
http://www.nxtbook.com/nxteu/lesommet/inbroadcast_201411
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201410
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201409
http://europe.nxtbook.com/nxteu/lesommet/inbroadcastIBCPRINTEDGUIDE_201409
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201408
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201407
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201406
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201405
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201404
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201403
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201402
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201401
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201312
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201311
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201310
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201309
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201308
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201307
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201306
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201305
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201304
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201303
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201302
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201301
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201211
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201210
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201209
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201208
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201207
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201206
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201205
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201204
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201203
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_201202
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_20121201
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_20111011
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_20110708
http://europe.nxtbook.com/nxteu/lesommet/inbroadcast_20110506
http://www.nxtbookMEDIA.com