The big tech takeaways from the NAB Show last week in Las Vegas highlight the unsettling fact that massive changes are sweeping through the basic technologies that provide the infrastructure for the $140 billion-per-year TV industry.
This was evident virtually everywhere at NAB, from press conferences, where vendors pitched new infrastructures via cloud-based systems, standardized IT hardware, IP connectivity and software platforms; to B&C’s annual Technology Leadership Award event, where the winners spoke about the need to completely change the engineering culture at their networks.
“We have been talking about change for many years but the changes are finally happening right now,” said John Ive, director of business development and technology at the International Association of Broadcasting Manufacturers. “The industry is realigning itself for the next phase of its operations, which will be more connected and more software-driving.”
Betting on Consolidation Tech
A mighty visible sign of that realignment is consolidation. On the weekend before the start of NAB, Imagine Communications, Ross Video and ChyronHego announced five acquisitions of tech firms, and during the market, other major players such as Grass Valley were talking about how recent acquisitions, mergers or ownership changes would benefit broadcasters.
“We’re seeing a freeing up of the log jam that has been holding back some of the consolidation and we’re going to start seeing a steady stream of announcements,” said Jonathan Hodson-Walker, managing partner at investment banking firm Silverwood Partners.
A research report issued by Silverwood just before NAB noted there have been more than 251 acquisitions or mergers since 2010, with 65 in 2013 and 29 so far this year.
The impact of the deal-making over the last three years is already evident in the kind of technologies being offered to broadcasters. Larger players such as Sony, Harmonic, Grass Valley, Avid and others were heavily promoting software platforms that are designed to act as a foundation for broadcast operations, controlling everything from ingest and content creation to play-out.
“Clients and vendors in this industry remain incredibly siloed, which means inefficient infrastructures,” said Louis Hernandez, Jr. president and CEO of Avid, which was heavily promoting its Avid Everywhere vision of a unified platform of products and services to help broadcasters streamline operations and boost revenue.
Connected to the Cloud
Another major component of this transformation was the heavy emphasis on cloud-based technologies to handle the complexities of trying to quickly launch new channels or to deliver content to hundreds of devices without having to build massive new facilities.
“Traditional technologies can’t address these changes in the media market,” said Clyde Smith, Fox Network Center senior VP of new technology. “The only way to handle it is with virtualized IT-based infrastructure and software….Media processing is inevitably moving into the software realm, increasing our operational flexibility while lowering operating costs.”
The faster, more widely available networks needed for cloud-based infrastructures were also transforming news operations, with a number of companies showing cloud-based production systems, and camera manufacturers such as Canon, JVC, Panasonic and Sony launching new models with Internet connectivity.
“There is tremendous demand for them,” as a way to stream live shots from the camera or to share content between stations, said Carl Hicks, JVC Professional Products director of broadcast sales, western region. Hicks said JVC recently made large sales of their connected cameras to Sinclair, Raycom Media and others.
This connectivity dovetails with the growing popularity of using IP infrastructures to handle video. During NAB, Sony introduced an IP production system and a number of other vendors, including Snell and ChyronHego were demoing new IP-based products.
Technologies taken from the Internet world sit well with lower-cost IT servers and software-based systems that allow infrastructures for encoding and other functions to be upgraded without buying lots of new gear.
“Ericsson predicts that there will be 50 billion connected devices in 2020 and that 15 billion of those will be video enabled,” said Sam Blackman, CEO and cofounder of Elemental, which offers software based encoding systems for companies such as HBO, BBC, Comcast, ABC, Viacom and Warner Bros. “The industry has to evolve to keep up with all those devices and as it does that, software becomes necessary. It will dominate the video infrastructure.”
The transition to IP and software solutions will also be important for 4K, or UltraHD.
Speaking at the session, “Cisco Presents: The Transition from Live to Event TV,” Fernando Bittencourt, CTO and general director of ENG at the Brazilian media giant Globo noted that the broadcaster planned a test 4K during coverage of the World Cup.
But to offer regular 4K broadcasts, he stressed that broadcasters would have to move to new technologies. “You can’t do [4K] with traditional technologies,” he said.
Upgrading networks and finding the right technologies for handling new services will be a challenge, however. For starters, IP networks and infrastructures would have to become more reliable, an issue that was once again in the spotlight right before NAB, when the HBO Go app went down during the premiere of its hit series Game of Thrones.
Charles Stucki, VP and GM of ESBI at Cisco Systems argued that market trends were forcing IP technologies to become more reliable. With video traffic now accounting for as much as half of all mobile traffic, IT and IP technologies “would become more reliable,” he said.
Bittencourt also noted that there needed to be a merger between the broadcast and the IT and IP worlds. Currently, broadcasters work with one set of manufacturers and another in the IT and IP worlds. “We have to create a third world where there is a combination of IT and broadcast that would be specific for broadcast to get the high reliability we are used to,” he said.
MORE REVENUE, BUT LESS PROFIT
The tech transformation evident at the NAB Show is producing a mixed financial picture for broadcast technology vendors.
The International Association of Broadcasting Manufacturers (IABM) predicts that the industry will grow from about $39.5 billion in revenue in 2013 to $45 billion in 2017.
Overall revenue grew by 4.3% but smaller companies saw their sales drop by about 3.1% in the year ended March 2014, while larger companies showed a 5.4% pop in revenue. North American companies increased sales by 8.4%.
Overall, 73% of the vendors were profitable, but the move to less expensive equipment is hurting margins. “Profit growth has been negative since April, 2012,” said Peter White, CEO of IABM. Overall, profits fell 17.3% in the year ending last month.
Further pressure on vendors reflects the widely reported shift to software and services, with services accounting for 50% of revenue, White said. In contrast, IABM surveys show that dedicated spending for traditional broadcast technologies fell from about 62% before NAB 2013 to about 55% this year. “In two or three years, we predict it will be below 50%,” White said.
In terms of demand, technologies for multiplatform delivery once again topped broadcaster shopping lists, followed by file-based workflows and media asset management systems, according to IABM survey data.