Industry consultants and market analystsagree that efficiency, completing the transition to high-definition and understanding the economics of the business and deploying technology accordingly, are all elements of a successful global strategy for the future.
Finding new and better ways of improving staff productivity and support new and existing distribution channels is key for broadcasters looking to successfully navigate the ever changing competitive landscape and remain relevant in today’s multichannel universe. Several industry consultants and market analysts we spoke to all agree that efficiency, completing the transition to HD (that's right, a large number of broadcasters serving emerging countries are still analog); and understanding the economics of the business and deploying technology accordingly, are all elements of a successful global strategy for the future.
“Broadcast technology buyers are clearly focused on creating efficiencies wherever possible, while at the same time working to generate new revenue streams,” said Ian Bowker, a consultant and principal at Icon Broadcast, in Boston. “Over the last few years we have seen the shift to file based/tapeless workflows making it much easier to repurpose media again and again. It also makes it much easier to make different version for different markets- something that non-traditional broadcasters like MLB Networks and World Wrestling Entertainment have been doing for a number of years. Now the next part of the puzzle is making that content available to as many devices as possible as cheaply as possible.”
The move towards digital, whereby viewers are consuming content when and where they like, is having a seismic effect on broadcasters,” Jeremy Bancroft, a Director at UK-based Media Asset Capital, a media specialist and technology consultancy, said. “No longer are viewers loyal to channels, but to programs or specific consumer brands. Broadcasters that do not offer easy and accessible content discovery and consumption via online platforms will lose out in the demographic shift that is happening right now with the use of smartphones and tablets.”
Whether broadcasters implement their own online video portals, Bancroft said, or rely on third-party aggregators (e.g. Youtube, Vimea, Lovefilm, etc.), is still open to question.
“There are few qualified service provides that can offer the necessary assistance and have sufficient broadcast domain expertise,” he said, “but vendors including Cisco and Huawei have these broadcasters firmly in their sites.”
Transition To HD (not done yet)
Completing the transition to HD continues to be where the largest amount of spending is happening on a global basis, according to Joe Zaller, president of Devoncroft Partners, an industry research firm based in Coronado, CA. “There’s still a lot of standard definition and even analog technology out in the market in emerging countries. The HD transition has a long way to go on a global basis, and that’s an important first step for many.”
Zaller said that whenever he speaks with customers and respondents to his annual “Big Broadcast” surveys, the need for doing more with less and with greater efficiency is paramount. That usually leads to actions like moving to file-based infrastructures, launching new services with integrate playout systems, and using more software tools.
The latest talk among broadcasters and the manufactures that support them is the need to engage viewers on their “second screen” devices.
“People need to understand the business models of a broadcaster,” Zaller said. “Some second-screen guy can do it technologically, but if I have to train my viewers to use this new app, then when the commercials come on, what are those viewers doing? And what do advertisers feel about that? There comes a point where this second screen app ceases to be a “nice to have” and becomes an expense. Then you have to ask yourself, ‘why are we doing this?’ I think it will take at least five years before broadcasters have this figured out.”
Icon Broadcast’s Bowker agrees, stating that the use of second-screen applications is now split between demographics (mostly younger) but the overall viewing audience is beginning to see the attraction and people of all ages are logging online using their various IP-enabled products.
“I believe the use of second-screen usage is mainly split by generation,” Bowker said. “I am a boomer and occasionally will have my iPad at my side while watching the TV and even more rarely use it while watching a program, but I have two daughters in their 20's and both have a device — whether it’s a phone or tablet — in their hand and are typing away while watching a program. They are fully engaged, but not necessarily with something related to the program. Program makers and broadcasters need to engage the audience in a many ways as possible, including advertising opportunities on second-screen and apps linked into social media.”
Bancroft said addressing the second screen is vital for new revenue, but broadcasters need to refine their business models to do so. “Many so far have seen online video portals as being a money pit,” he said. “Others (e.g. TV2 Norway) have turned online into a substantial revenue and earnings generator.”
Looking at trends in technology, Zaller said he thinks that the move to IT-centric technology is helping everyone, broadcasters and manufacturers alike, but it’s a transition fraught with challenges.
“Most traditionally hardware–based companies are making the move to software-centric technology, but only because it is less expensive to manufacturer and there can be recurring revenue generated from software licenses,” he said. “Clearly, it’s already happening in some equipment categories and more will migrate in the future. With the economy slowly recovering, hardware margins are down, so vendors are trying to make it up with software and services. For broadcasters, the flexibility that IT technology brings is very attractive. The challenge for vendors is that turning a hardware company into a software company is not easy. It’s a cultural transformation that is tricky to navigate and not everyone will be successful.”
Movement of media over standard networks is now very much a reality and, according to Bowker, even movement of media from the source location back for editing before playback is all done via IP. He uses the London Olympics as a good example of seamless, collaborative workgroups that do not have to necessarily be co-located.
“A few years a go it seemed that every bit of broadcast gear had to have an IP connection, weather it was to control that gear or move media through it,” Bowker said. “The network transports are becoming much faster and cheaper and a number of clients are editing in one location and moving the media to a central playout location over dark fiber. They are also starting to outsource resources.”
However, Media Asset Capital’s Bancroft said the use of general purpose IT technology will only succeed if broadcast domain experts such as vendors and systems integrators support it. “Virtualization can provide substantial benefits in a large scale broadcast/IT installation. However, few vendors support virtualization of the server platforms.”
How secure is over-the-air broadcasting’s future?
So, is there a place for “traditional” broadcasting in this newfangled future of IP connected devices? These industry veterans think so. There will always be a place for traditional broadcasting, it just might not be delivered over the air in the long run.
“The killer application for television is still the experience of watching a TV and the storytelling it provides,” Zaller said. “Broadband is not available everywhere in the world, so that eliminates a large segment of the viewing public. Are business models going to change over time? Yes. However, it’s a business model question, not a technology one. There are billions of dollars in established broadcast models that will not be disrupted anytime soon. Maybe there’s more Telco-type services in the future, but the entrenched broadcast industry is not going to go away without a fight.”
“I suppose the first question is, what is a ‘traditional broadcaster?”’ Bowker said. “I believe with the availability of media through so many platforms today, traditional broadcasters have to find a way of adding value or they will be out of business. We are already seeing consolidation of resources like PBS moving playback of all the NY stations to Syracuse and Florida following suit as a way of cutting costs in the big scheme. However, there are still a large number of people who either can not afford or know how to operate devices other than their TV to get programming. I do not think traditional broadcasters will go away, but they will have to adjust their business models to keep operating costs down and look at how they can generate revenue from media being viewed on other platforms. I do think we could see a reduction /consolidation of some channels, and more channels being available on broadband-only services.”
“Traditional broadcasting will always have a place,” Bancroft said. “People still turn to trusted suppliers for certain content such as news and live events. However, live sport is already starting to find a legitimate home on the Internet, and the costs of terrestrial transmission far exceed those of satellite in a large-scale deployment, although currently on line distribution is more expensive for larger audiences.”
Future flexible purchasing plans
So, as broadcasters continue to embrace file-based workflows, manufacturers of broadcast technology are recognizing new opportunity in software licensing and software-as-a-service (SaaS) models. Many see a day when broadcast customers will have the choice to buy or rent technology as needed, using cloud-based services to scale up production capacity without having to incur the expense of owning the equipment when you don't need it.
“I think that that this notion of flexibility in equipment purchases is very variable, based on application,” Zaller said. “Many broadcasters outsource their playout operations and live remote production activities. People want to move that from CapEx to OpEx-centric model. They don't really want to own technology if they don't have to. They want to scale up and down whenever required, but they don’t want to have a lot of boxes laying dormant when they are not in use. The concept of software as a service and cloud-based services are becoming more and more acceptable to broadcasters who don't want to spend the money unnecessarily. This is especially true in today’s multiplatform world, where broadcasters need to experiment with new channels and interactive services that might be shut down in a year or two.”
The other important question is: can vendors survive this type of model? That, according to these analysts, remains to be seen.
“I can see that for core infrastructure products, broadcasters will buy,” Bowker said, “but for specialized equipment of things that have a perceived short life, customers will pay per use, as software and cloud solutions start becoming more of a commodity.”
Of course the other, perhaps most important, aspect of a traditional linear broadcaster’s future that has to be addressed, is remaining relevant in a multichannel world and finding incremental revenue streams to avoid extinction. This revenue might come from newer technologies like Mobile DTV in the U.S., and multiplatform delivery (TV, Internet, cell phones) around the world.
“Moving to a multiplatform delivery remains the most important things people want to do,” Zaller said, “but if you look at spending, that’s not where the money is currently going. The economics of the business have changed drastically if you are a broadcaster. They've gone from a high fixed, no variable cost, to a fixed- plus variable- investment that may or may not result in new revenue. When someone orders a video on their iPad, the broadcaster does not see any of that money. For traditional broadcasters, there’s still a lot of work to be done to get it right.”
Be careful what you wish for
So, what these guys all see is a significant shift from CapEx to OpEx strategies when purchasing equipment. The new requirement to serve viewers whenever and wherever they are, is resulting in broadcasters perhaps not buying as many products anymore, but instead “getting married” to vendors that have the expertise to help them make the transition.
Yet, manufacturers need to be careful what they wish for. Reduced reliance on hardware can mean less devices being sold, and also in customers recognizing that they might get a better deal looking beyond just the traditional broadcast equipment vendors.
“The biggest threat of all to hardware-centric broadcast vendors as these new broadband services are deployed, is that broadcasters or content distributors are choosing off-the-shelf IT servers (from Dell and HP, not Grass Valley or Harris) and network switches (from Cisco, not Snell or Evertz) from manufacturers that are not traditional broadcast industry suppliers," Zaller said.