In the last quarter of 2016, IABM’s quarterly Industry Index report showed a 1.4 percent average increase in sales — the first good news from the supply side of the industry in over a year of stagnant or negative growth numbers.
In the December 2016 IABM Industry Trends Survey, responses showed that confidence in the broadcast and media technology supply industry also increased; the IABM Confidence Ratio for the year ahead was stronger at 9.7 compared to a three-year low of 4.2 in H1 2016 (see Figure 1). Anecdotal feedback showed that respondents also expect significant business growth in 2017 compared to 2016.
But while the supply side of the industry was in pain until the latter part of last year, end-users — the broadcasters and media organizations that purchase the technology — were confident and clear on the technologies they needed to continue to develop their businesses, illustrated in chart from IABM’s September 2016 End-User Survey (see Figure 2).
With audiences’ rapidly changing viewing habits, it’s not surprising that multiplatform delivery is the number one priority for end-users, with OTT continuing to gain ground rapidly in 2016. Nonetheless, long-established broadcasters continued to report positive results despite the transition to OTT and multiplatform delivery, which is forcing them to begin overhauling their media technology infrastructures.
According to IABM research, most broadcasters (73 percent) enjoy a profit margin greater than 10 percent, while 47 percent of them have a profit margin greater than 20 percent. The slim profit margins reported by OTT media companies such as Netflix, which reported a 4 percent profit margin for 2016, highlights that the economics of streaming are significantly different from traditional broadcast. The infographic in Fig. 3 illustrates the distribution of profit margins in the IABM End-User Index sample.
Broadcasters who plan to bet heavily on OTT may burn some cash in the process unless they find an effective way to monetize online video. The only way to achieve this is with, of course, great content, coupled with agile, service-based technologies to deliver it economically wherever, whenever and on whatever device each viewer requires.
This — alongside the removal of the IP roadblock thanks in no small measure to the efforts of a number of organizations to bring the industry together behind a common IP roadmap — has provided both the challenge and opportunity to technology suppliers. The challenge has been to transform their operations away from the traditional hardware model, while staying in business; the opportunity is the result of staying in business!
And that’s why confidence is now up and sales improving, as highlighted by recent earnings calls’ comments.
During Q4 2016 earnings call, John Stroup, Belden CEO, said: “We were excited to win a significant new IP project at one of the major networks, and I think that’s evidence that our customers are beginning to get more comfortable making commitments on IP technology. So, I think that we’re quite bullish on our broadcast business moving into 2017.”
During a Harmonic Q3 2016 earnings call, CEO Patrick Harshman said:
“Several transformational new growth opportunities are beginning to gain momentum… While still very early days here, in recent months, we have secured several notable early cloud wins. These early cloud wins are opening the door to a new recurring revenue business model.”
2017 looks set to be a better year than 2016, not only for the expected increase in adoption of emerging technologies; but also because demand for transmission-related infrastructure is expected to rise as a result of the start of the spectrum repack process in the United States and the adoption of ATSC 3.0., the new transmission standard for Next Gen TV. As a result, you can expect to see a whole lot more smiles on the faces of the vendors on the show floor at this year’s NAB Show!