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Media technology industry in midst of structural shift

By Joe Zaller, IABM DC

To say this is a dynamic time in the broadcast and media technology market is an understatement. We believe the industry is in the midst of a structural shift, which is re-shaping the media landscape globally.

End-user business models are dramatically different compared to just a few years ago, due in large part to an explosion of digital and online delivery platforms, the shift to file-based workflows, and the promise of commercial-off-the-shelf (COTS) IT hardware managed by software-defined networking technologies in facilities that increasingly look more like an IT data center rather than a traditional broadcast plant.

A comprehensive overview of the forces impacting the media technology industry is provided in the 2015 Global Market Valuation Report (GMVR), published by IABM DC, a joint venture of IABM and Devoncroft Partners.

The 2015 GMVR is based on a data model that encompasses approximately 3000 providers of media technology products and services. This 450-page report provides clear evidence that we are in the midst of an industry-wide shift in technology buying patterns, which began in 2012. We believe that these forces will continue to alter the structure of the industry through the end of our forecast period (2018).

Broadcast industry market sizing

The total market for broadcast and media technology products and services in 2013 was $47.8 billion, growth of 1.1% versus the previous year, following growth of 5.1% and a growth of 1.0% in 2011 and 2012, respectively.

Revenue from hardware and software products in 2013 was $22.2 billion, or 46.4% of the total industry value, up 3.1% versus the previous year, following growth of 5.3% and growth of 1.3% in 2011 and 2012, respectively.

Revenue from services was $25.6 billion, or 53.6% of the total industry value, a decline of 1.1% versus the previous year, following growth of 5.0% and growth of 0.6% in 2011 and 2012, respectively. Services include transmission infrastructure; managed services; systems integration; consultancy; and the rental and hire of facilities, outside broadcast resources, and specialist equipment.

The total size of the broadcast market is shown below, including details of each market segment covered in this report.

Comparison of industry CAGR from 2009-12 versus 2012-14 reveals dramatic change in technology spending patterns. Between 2009 and 2014, the compound annual growth rate (“CAGR”) for the total market was 2.9%.

However, this headline growth figure masks individual contributions from product revenue, service revenue, and the relative impact of the performance from 2009 to 2012 (“2009 – 2012”) versus growth rates from calendar years 2012 to 2014 (“2012 – 2014”).

A review of these relative growth rates of individual sections is informative and is illustrated in the table below.

By separating the aggregate performance of the market from 2009 – 2012 and 2012 – 2014, a clear contrast between these two time periods becomes visible (please note that 2012 is counted in each time frame).

The CAGR from 2009 – 2012 was 4.0% for the market whereas the CAGR from 2012 – 2014 was 1.3%, a difference of more than 300%.

This abrupt shift in industry spending reflects the overall change in the industry that occurred in the 2011-2012 timeframe, and provides evidence of a structural shift in the industry. With the benefit of hindsight, the impact of this shift is very noticeable, as shown by the chart below.

From 2009–2012, when the industry as a whole grew at a CAGR of 4.0%, the total revenue from products grew at a CAGR of 3.6%, and the total revenue from services grew at a CAGR of 6.0%.

From 2012–2014, when the industry as a whole grew at a CAGR of 1.3%, the CAGR of total product revenue was -0.5%; and the CAGR of total service revenue was 2.9%.

Contrasted against the 2009 – 2012 time frame, the 2012 – 2014 figures are stark. Growth in both products and services declined between 2012 and 2014, but services fared better than products.

Given these facts, it is perhaps not surprising that growth in the broadcast market decelerated between 2012 and 2014.

There are a variety of explanations for the change in shift in market spending over the past several years, including the overall economy; consolidation of technology suppliers, service providers, and media companies; and a pause in spending prior to the next industry transition. These factors and their impact on the market are explored in detail throughout the 2015 Global Market valuation Report.

More change to come

The broadcast and media technology industry is hugely diverse and complex, and change will continue at multiple levels. Growth in some product categories has and may continue to decline sharply, while other parts of the market are growing very quickly.

Even in segments where overall revenue appears to be flat compared to previous years, there are often significant changes to the composition of the underlying segment revenue as new products and services are developed and deployed to meet the evolving needs of end-users.

Nevertheless, aggregate industry growth in technology spending has changed in favour of software and services, as end-users increasingly deploy file-based systems and adopt IT/IP-oriented operational paradigms.

We believe this is a dynamic time for the industry, and the macro forces impacting both buyers and suppliers of media technology will drive a huge wave of innovation, as nimble technology suppliers develop new solutions to meet emerging business model challenges of their customers.

Confidence remains high in our industry and new opportunities with new technological developments abound, so the future for suppliers in the broadcast and media technology market will favour the innovative and bold and those capable of changing with the times.

2015 GMVR is now available

Published by IABM DC LLC, a joint venture between IABM and Devoncroft Partners, the 2015 GMVR provides the definitive valuation of the broadcast and media technology supply market. The GMVR is the only report where broadcast industry vendors come together in a collaborative partnership, under a mutually-agreed framework of strict confidentiality, to share their revenue data, future forecasts, and detailed information on what drives their businesses.

The data model underlying the GMVR includes information on nearly 3000 individual technology vendors and service providers. The report and accompanying data tables cover approximately 150 separate product categories, and includes written analysis and regional splits and forecasts to 2018 at the segment and sub-segment levels.

The 450 page written report is based on in-depth interviews with hundreds of industry participants, including technology vendors, and end-users including broadcasters, pay-TV operators, service providers, and OTT platform platforms.

The 2015 IABM DC Global Market Valuation Report is available for immediate delivery. It’s a must-read document for all broadcast industry strategists.

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