In Broadcast - March 2018 - 29

29

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

InForm

Does Dedicated Broadcast
Equipment Have A Future?
compute power and pay per use is a
revelation too attractive to pass up.
Not surprisingly, companies that
primarily rely on software revenues
report significantly more confidence in
the future than those primarily relying
on hardware sales, per IABM.
John Ive,
IABM

to customer feedback, the reality is
that the industry no longer wants the
product at all.
"Alternative,
radically
new
approaches are now preferred," says
Ive. "Freeing development minds from
building entirely on past tradition and
experience is neither comfortable nor
easy but necessary to stay relevant,"
he urges.
There is some evidence to suggest
that vendors with entrepreneurowners face less internal politics
or stock market pressure in getting
product to market despite selling
traditional black box hardware.
Blackmagic Design, Ross Video and
Riedel Communications spring to mind.
Even here, though, lowering prices
for technology (Blackmagic, for
example, offers a free version of
grading software Resolve) means
lower margins and that only makes
sense if the market can be expanded to
compensate.
"For an industry built on high value
capital items and small volumes this
is a real challenge," Ive contends.
"Potentially larger markets are opened
by commoditisation, but they cannot
be addressed with a high value, low
volume business infrastructure."
Another area where broadcast
product design needs to improve
if
vendors
are
to
survive
commoditisation is user interface
design. This speaks to the merging
of IT and AV skill sets within
organisations.
"Professionals
have
prided
themselves in understanding how
to 'drive' specialist-only devices,
[but an] intuitive and attractive user
experience is becoming increasingly
important, especially as time for
training is limited," says Ive. "Rapid
familiarisation and intuitive working
environments are critical to success."
Expensive single function hardware
is no longer attractive, the lure of the
Cloud with instant scalability, limitless

Consolidation Pressures
There are additional pressures on
the tech supply chain stemming from
consolidation on the content creation
and distribution side - Disney's
acquisition of 21st Century Fox's
assets and Comcast's bid for Sky, for
example.
"How do we consolidate around a
customer base that's consolidating
around
us?
Hundred
[media
companies] reducing to 20 puts
pressure on us," Charlie Vogt, who
advises M&A activities for The Gores
Group, asked an IABM event last
autumn. "This consolidation has
created a healthy base of customers,
but put a lot of strain on us - we have
to consolidate on the supplier side
too."
The IABM expects significant M&A
activity to continue. "We now have
several thousand technology suppliers
chasing business from an everdiminishing number of customers
thanks to ongoing M&A activity
between many major players," says
White. "This inevitably puts pressure
on prices and reduces profitability
for vendors. Further consolidation is
inevitable.
"Additionally, traditional suppliers
with an enterprise mentality can find
it hard to develop innovative new
solutions, and they will often look to
buy this innovation in by acquiring
smaller, more agile companies."
There is another major trend
gathering pace in the industry -
towards
collaborative
solutions
developed jointly by vendors and
their end-user customers. All the talk

Charlie Vogt,
Advisor,
The Gores Group

cont'd...

over many years of 'solutions' - which
actually just meant selling a mix of
products in most cases - is finally
becoming a reality, and this will
increasingly be the way forward
With 98% of technology users
demanding interoperable solutions,
the IABM urges vendors to adopt
a more open approach to product
interoperability.
"Although SMPTE ST2110 will address
many on-premise interop problems,
it takes on quite a different character
in the Cloud because it's software
interoperability that's the issue,
and transportability of solutions will
become a major consideration," says
White.
He spies a silver lining for traditional
vendors in rising adoption of emerging
technologies such as cloud, IP and AI
driving more growth "for those that
have invested in them".
Let's take AI, which is one of the
main themes at NAB2018. The primer
driver for AI is the opportunity to
automate routine workflows that are
manually executed.
While vendors are falling over
themselves to add an AI layer to
their core products while promoting
the idea that customers can save
money by applying it, the science and
the technology and therefore most
revenue from AI applications lies
outside the immediate scope of the kit
supply industry.
It will be the Web titans, companies
like Alphabet, Amazon, Microsoft,
Google as well as IT giants such as
Juniper, IBM, Arista, Cisco who own
the data centres and the network
infrastructure, which will reap the
rewards.
Short of all firms investing in
managed services and software -
which raises its own saturation and
competitive differentiation issues
- broadcast kit companies would do
well, at a minimum, to re-evaluate
their core sales model.
Any Silver Lining?
"Selling a widget at a high oneoff price is equivalent to selling a
high-margin, perpetual-use software
license," asserts IHS' Kingston. "Selling
access to a widget - and bundling this
with a convincing product roadmap
and lifecycle that provides opportunity
to sell new licenses and upgrade

services - offers more continuity,
and potential for long-term value
creation."
Figuratively, some elements of the
broadcast industry are indivisible. You
can't cleverly re-package your data
centre and Cloud-computing offerings
to enter, and compete in, the 4K digital
camera market. For products that face
encroachment risk from the web and
IT giants - studio networking; storage,
server, and disaster-recovery design;
scheduling systems; compression and
encoding platforms - the broadcast
industry's saving grace is that the
software behemoths have shown little
interest in this form of adjacent and
vertical market expansion.
"Most media technology users still
prefer best-of-breed solutions, leaving
many doors open for media technology
vendors," says White. "In fact, their
customers are still looking for the
dedication, support and flexibility
provided by smaller specialist
suppliers - large IT companies have
a weaker interest in this as the
broadcast and media sector represents
a small slice of a big pie for them."
If product excellence, support and
interoperability are crucial factors in
determining vendor survival through
this "unprecedented change" as White
terms it, what if the software titans
do enter the broadcast vertical and
spend the requisite time to engage and
understand potential clients?
"The broadcast incumbents have
no facility to match the R&D budgets,
and Cloud expertise," says Kingston.
"Path dependency, the strength of
historical relationships, and fear
of new entrants' business models
- particularly with regard to data
collection and processing - are,
collectively, the broadcast industry's
friend."
The tidal wave of change cannot
be held back. The future of media
as a whole does not belong to largescale, broadcast incumbents. While
these
companies
unquestionably
have a future in the evolving media
ecosystem,
content-and-creative
production is democratising, and
rapidly so.
"As global production shifts toward
smaller agencies, and 'into the hands
of the many', demand for a whole
class of broadcast equipment will fall,"
predicts IHS' Kingston.
This shift in media production
will inevitably challenge equipment
manufacturers
whose
products
start to compete with high-end
consumer electronics products, and
commoditised software.
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