NAB 2011: Optimism Is Back, But Questions Remain

More media and entertainment companies look at outsourcing operations and technologies to keep focus on content, distribution
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Complete NAB 2011 Coverage

There were more sales, more new products and more than 90,000 people jostling to see the newest tech demos at the 2011 National Association of Broadcasters Show in Las Vegas last week, where vendors were once again announcing major deals and TV station executives were opening their wallets.

But behind the rebounding sales climate, there was a kind of nervous excitement, even unease, about the future of broadcast technology.

While there was lots of interest in traditional broadcast technology, particularly for HD upgrades or infrastructural improvements that stations had deferred during the recession, some of the hottest technologies, like cloudbased services, are from outside the broadcast industry and are designed to change the way broadcasters, programmers, multichannel operators and producers do business.

Alain Andreoli, Grass Valley president and CEO, highlighted that issue at the show’s first press conference, where he announced a slew of new deals and somberly talked about the company’s plans to overhaul its business operations as the “industry revamps itself,” putting more emphasis on providing software and solutions.

And Andreoli wasn’t alone. Several major hardware vendors, including Sony, talked about their efforts to expand the software and services they offer, as companies from outside the traditional broadcast technology space like Microsoft and Verizon were aggressively pitching products that would allow media and entertainment companies to essentially outsource many of the operations and technologies they have traditionally done in-house.

A large majority of broadcasters “still believe that technology is so critical to their future that they want to own it and maintain it in-house,” Andreoli noted. But there is also “a growing segment of our customers, a minority group today, who believe that content creation and distribution is their core business and they want to concentrate on that,” without having to invest in more engineers and high-priced infrastructure, he added.

This interest in handing over a variety of basic tasks—from archiving and graphics to multiplatform delivery—to outside companies is being driven to a large degree by sluggish growth in traditional media, which has squeezed margins, and by the high cost and difficulties of satisfying consumer demand for more content on more platforms.

While digital revenue is growing fast, it remains small, and costs are soaring. Companies trying to expand digital distribution frequently have to develop different versions of their apps for dozens of smartphones, gaming consoles, tablets and other consumer devices. With more than 80 tablets announced at the Consumer Electronics Show in January, the problem is only likely to get worse over the next year.

“The cost, complexity and capacity to do digital distribution is beyond what most people can afford,” David Rips, president of Verizon Digital Media Services, a newly formed business unit within Verizon’s Global Wholesale division, told B&C. “Because of the complexity, their costs right now are usually higher than their revenue, and the economics don’t work.”

To address that problem, Verizon is launching an ambitious plan to become a kind of “digital distribution utility” for the media and entertainment industry that would provide all the services, software, technology, infrastructure and network capacity needed for digital distribution of premium video content.

Also during the NAB, Microsoft announced partnerships for its Windows Azure cloud platform with a number of tech companies so that they can provide media and entertainment companies with a simplified, less costly digital infrastructure in the cloud.

The long list of these partners includes a number of companies that have long worked in the television industry: Digital Rapids, Origin Digital, Harris Broadcast Communications, Aspera, Signiant and Cognizant.

Interestingly, many of the other more traditional broadcast technologies that were hot items during the show also revolved around multiplatform delivery and the need to change the way stations and companies operate.

This was evident even with cameras, where station groups were looking for products that allow them to put more people in the field to produce more video for more newscasts and more platforms without spending more money.

To meet that demand, a number of companies were pitching lower-cost products to deliver video back from the field over cellular networks, and major camera manufacturers continued to launch new, less costly HD camcorders, with Sony alone adding three models to its product line.

Whether stations and networks will want to move beyond acquiring equipment that can reduce operating costs to the more fundamental step of outsourcing key operations to companies like Verizon or Microsoft remains to be seen, however.

“If you think, as we do, that those capabilities [the infrastructure for multiplatform delivery] are extremely important to the future of your business, then you want to develop those capabilities yourself,” noted Glen Oakley, executive VP of media technology, production and operations at Discovery Communications.

Still a number of major media companies are considering the idea. Microsoft executives have said that the company’s cloud-based solution has been used by such media companies as Tribune. And Verizon has announced that Turner, Hearst Corp. and the Associated Press are testing its service.

An even larger number signed up to participate in a charter test program but didn’t want their names released. “We have four of the five largest broadcasters,” Verizon’s Rips said. “We have a major movie studio. We have two of largest magazine publishers.

We’ve have one of largest online portals. There are a lot of them, and they are big companies. The response has exceeded our expectations by a lot.”

E-mail comments to gpwin@oregoncoast.com

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