Consolidation Leaves Mark On Operations BusinessMega-deals for local TV stations mean make-or-break profit or loss for many technology vendors 8/05/2013 12:01:00 AM Eastern
The $8 Billion in deals for TV stations announced so far this year are
starting to have a major impact on the broadcast technology business. Over time, these big-ticket transactions
promise to increase demand
for some technologies and vendors
while creating challenges for others.
|Why This Matters
Technology will play a crucial, deciding role as TV station groups look to justify their shopping sprees.
In fact, tech vendors have also
been bulking up their operations,
recognizing that maintaining signigicant
scale will protect them as
the station landscape shifts.
"Consolidation of the stations will continue
to produce more deals and consolidation
among vendors," says Jonathan
Hodson-Walker, managing partner
at the investment bank Silverwood
Hodson-Walker and others also
expect the larger station groups
to try to standardize their operations
around certain vendors and
reduce integration costs by limiting the number
of suppliers they utilize, which will generally
help the larger players.
That view was confirmed by data from the
International Association of Broadcast Manufacturers
showing larger companies are now
growing at 6% a year, compared to 4% for
the smaller players, reversing a long-standing
"That was not the case until last year,"
says IABM director general Peter White.
One big acquirer, Sinclair, has long pushed to
centralize operations as a way to control costs,
and the most recent round of deals is likely to
accelerate that trend.
This will include a greater push to centralize
graphics, master control, and sales and traffic
operations, factors that a number of groups
have begun consolidating in recent years. But
this push will now also expand into newer areas
such as automation, and encourage the adoption
of cloud-based services and other newer
IP technologies, vendors say. "Operations will
get more automated not only at the station level
but at the hub," says Brian Cabeceiras senior
VP, North American sales at Harris Broadcast.
HD Comes to Town
Although hi-def video seems like old news,
an IABM survey earlier this year found that
HD upgrades were the third-highest priority
among buyers, particularly in smaller markets,
where many of the recent station sales
to Sinclair, Nexstar and others have occurred.
To boost revenue to justify the deals, these
groups are likely to put more emphasis on
technologies for low-cost HD upgrades, such
as channel-in-a-box solutions, says Ed Casaccia,
VP, product marketing for Grass Valley.
Lower-cost ways of launching or improving
news operations will also be top of mind.
IABM surveys in the last two years have
put technologies for multiplatform content
delivery at the top of the shopping lists for
broadcasters, followed by technologies for
As larger station groups look for ways to
boost digital revenue, that demand will only
increase. "We know that broadcasters are
leaving money on the table, because they
can't easily repurpose content for multiplatform
delivery, says W. Sean Ford, VP of worldwide
marketing and CMO at Avid.
multiplatform distribution offers a particularly appealing way to increase the
value of acquired stations, Ford and others argue.
recent consumer survey conducted by Avid and Ovum found, for example, that
effective multiplatform strategy can drive on-air viewing, which could in turn boost
ratings and sales. That survey found that 14% of consumers try out new shows on
websites, tablets or smartphones and that 30% of consumers then return to live
TV viewing once they become fans.
push to better monetize content on multiple platforms will also put more
emphasis on metadata, media asset management systems and streamlining workflows,
Price Sensitive Giants
station groups are also likely to continue to push down prices for broadcast
equipment, says Joshua Stinehour, managing director at Silverwood Partners,
which has produced several major reports on consolidation in the broadcast
customers will have greater leverage," he says. As the deals are completed, the
station groups may decide to standardize on one vendor. In some cases that will
mean the "vendors will be competing for greater opportunities" but at the same
time it raises the risk that they will lose existing clients.
groups will also be able to play different vendors who already supply equipment
to their stations off each other and push down prices, Stinehour believes.
IABM data would seem to confirm this: It shows that equipment sales are rising
fairly slowly while the number of units has increased.
shows that they are either paying less or buying less costly product," says
to boost revenue by adding more news programming will further increase demand
for smaller, lighter, less expensive cameras and less expensive ways to send
video back to stations, such as cellular bonding backpacks that transmit video
over 4G and 3G cellular networks.
cost solutions will be in particularly high demand in many of the smaller
markets where many of the recent deals have occurred.
the drop in equipment costs also reflects a general industry trend toward
infrastructures based on low cost IT equipment, software and IP technologies,
White and others says.
will likely make the consulting services offered by vendors more lucrative and
push station groups to hire more people with IT and IP backgrounds.
this will impact integrators remains to be seen. Silverwood Partners'
Hodson-Walker says that larger station groups might find it less expensive to
develop their own in-house talent for major upgrades.
may be less of a place for middlemen," he says.
the very least, these integrators will have to learn new skills for facilities
more heavily based on software and IT-centric upgrades.
growing prominence of IT technologies and better networks to move content
around is also likely to boost the demand for cloud technologies that can be
used to centralize operations and share content at these larger station groups.
the progress towards an IT file-based architecture, you are quickly moving away
from a world where we need to have all the facilities on premise," says Craig
Dwyer, senior director, Global Center of Excellence, at Avid. "You see
organizations thinking about how they are resourcing newsrooms so they can get
more people in the field."
technologies also allow companies to be more efficient in their use of capital,
which would be particularly appealing to the acquiring groups that will be
carrying a heavier debt load.
can have a very elastic infrastructure where you can scale up to a few hundred
new users for a major sporting event and then scale down when the event or show
is over," Dwyer says.
cloud technologies could also be used to centralize a number of newer functions
that are currently done at a local level, such as automation, adds Cabeceiras
at Harris Broadcast.
think in the next year or two we will see automation be a fully virtualized in-the-cloud
technology," he says.
[mergers and acquisitions] in broadcast have been associated with
centralization of operations," adds Grass Valley's Casaccia.
push toward centralization and cloud-based solutions could also increase demand
for larger overarching solutions and fewer vendors.
these station groups get bigger and bigger they will want to deal with fewer
and fewer vendors and standardizing some of their best practices across the
group," says Boromy Ung, director of strategic marketing at Miranda
Technologies. "If you're a station group buying stations, you want to accelerate
your position with viewers and cut operational expenses by consolidating and
possibly centralizing operations. Those are the kinds of solutions we have been
working on for years so we feel pretty good about the impact of consolation on
merger mania in the station business is likely to encourage greater
standardization of vendors and reduce the number of suppliers a station uses,
vendors and industry analysts caution that the broadcast industry will remain
fairly fragmented with a wide array of approaches.
notes that some of the acquiring groups have a tradition of standardizing
around a few vendors while others give their local stations greater control
over the technology they select. "Right now, there are acquiring companies of
both camps," he says.
White also stresses that their research shows an "interesting counter argument
to standardization. Our user surveys continue to show a strong preference for
best of breed solutions rather than one end-to-end solution from one supplier.
They want the best technology and they want vendors to find ways to get them to
solutions that can easily be integrated with products from other vendors is
important both to broadcasters-who are unlikely to throw out perfectly good equipment
to instead rapidly standardize around one vendor-and technology providers.
adds that Harris Broadcast has been very active on standards committees along
with aggressively embracing standards such as BXF and MFX that are used to
integrate different systems. "It is in our own interest not to have to do one-off
integrations of all these devices to get things to work," he says.