What an incredible NAB this year.
My first NAB was the last time the show was held in Dallas (what year was that? Must be over 20 years ago) and this was the busiest NAB I have ever attended. Not from the point of view of the number of people cramming the aisles, but from the level of activity and business.
There were some interesting new trends and products on show, but the key takeaways from NAB for me were the following:
- Despite industry surveys to the contrary, all the vendors I spoke with are seeing reasonable growth in the technology sector within broadcast. There is a degree of well-founded optimism in the industry again (except at Avid, where doom and gloom prevail).
- 3D was much less evident than in previous years. It is my belief that the technology industry (particularly the set manufacturers) tried to create demand within the production community, and the producers and broadcasters have now found that there is a tricky business case for 3D. Interestingly, Sony were showing a prototype glasses-free 3D set, and whilst the 3D image was effective, it was difficult to watch without feeling dizzy.
- 4k is making more of an impact in sports for acquisition, as it provides the director with options for subsequent pan, zoom and crop for use in highlight packages. However, 4k through the production and distribution chain is a long way off.
- There are still too many vendors chasing too little business. There were 1500+ exhibitor at NAB and this is about 4-500 too many for the industry to comfortably sustain. It’s always great to see small, innovators, but does the world really need another DA? There will be a great deal of consolidation over the next 3 years, and a number of large companies exiting the sector (e.g. Harris?).
- Apple’s absence from the show floor was perhaps no real surprise given their shenanigans over Final Cut 10, and perhaps this sent a message to the industry that they are really not interested in broadcast and professional production. I know from conversations that I have had recently that many CTOs have removed Apple’s Final Cut from their roadmaps.
- Some companies considered as providing equipment at the ‘value end’ of the industry are becoming much more mainstream. Blackmagic Design introduced a 2.5k camera body for under $3000, and it generated a real stir. Not yet a significant threat to Sony, Ikegami, Red, etc, but that’s their direction of travel. Also, For-A have really upped their game and their switcher line is looking much more attractive to broadcasters who would previously have bought Sony or GV.
Big companies, look out below! They are coming to get you.
We have received a comment from Echostar’s PR company, Bob Gold and Associates that our blog “Has Cisco got its sums wrong?” contains some factual errors.
Linda Haugsted of Bob Gold & Associates has asked us to clarify a number of points. It appears that Ms Haugsted has taken issue with our comment that: “[NDS] recently won an $18m lawsuit against Echostar, clearing NDS of allegations of piracy”.
She has requested that we clarify the situation as follows:
- EchoStar did not pay damages (compensation for injury due to the wrongful conduct of another), as stated in the post-judgment press statements of NDS. EchoStar paid litigation costs, not damages, per a Memorandum Order by the Ninth Circuit Court, Aug. 4, 2010.
- NDS was not the ‘sole prevailing party’ in the litigation. On May 15, 2008, a U.S. District Court jury in California found for EchoStar on three of its six claims: two asserting violations of the California Penal Code and one asserting violations of the Federal Communications Act. Those jury findings were not impacted by subsequent appeals. Further, U.S. District Court Judge David Carter found in favor of EchoStar on its claim that NDS engaged in unfair business practices under California State law, awarded EchoStar damages, and entered a permanent injunction preventing NDS from engaging in certain defined acts of piracy against EchoStar going forward both in the State of California as well as through the United States. That ruling was not impacted by the subsequent appeals and the permanent injunction remains in place.
- In light of the jury and District Court Judge’s findings cited above, NDS was not ‘fully vindicated of all allegations of piracy.’ Each of the three statutes that the jury found NDS violated all involved unlawful acts of circumvention or piracy, and the Court’s ruling that NDS violated California’s Unfair Competition Law was based on the jury’s findings of liability for those 3 piracy claims.
We thank Ms Hausted for her clarification, which I guess goes to show that there is not much love lost between Echostar and NDS!
Since writing and posting the article, there has been a BBC Panorama programme broadcast that calls into question NDS’ approach to anti-piracy, and all but accuses the company of being complicit in the hacking of competitive systems and the downfall of UK pay-TV platform, ON Digital.
As one might expect, NDS have been quick to respond to the allegations, and NDS Executive Chairman Abe Peled has published an open letter to BBC Panorama that may be found on the web (http://www.broadbandtvnews.com/2012/03/29/nds-letter-to-bbc-panorama/). In addition, NDS’ lawyers Allen & Overy LLP have been in touch with the BBC requesting ‘redress to our client for the false allegations’.
Whatever the outcome of NDS’ spat with the BBC, it must be considered that NDS could now be classified as ‘troubled’, and it’s reputation has been harmed by, if not its own actions, then certainly how those actions have been interpreted by several different broadcasters and broadcast platforms (e.g. BBC, Canal+, Echostar, ITV).
Cisco has announced its intention to buy NDS as it will provide access to a market (broadcasters and platform operators) in which Cisco is not strong.
One has to ask the question whether the acquisition is wise given the recent bad press for NDS. Mud sticks, and if Cisco were to continue with the acquisition, they may well find themselves wrapped up in acrimonious litigation with the very customers that are trying to attract.
It’s difficult to imagine that Cisco’s investors will be eager to be associated with such a troubled reputation, and we await developments with interest.
My colleague Adrian Scott and I co-chaired a seminar session at the recent BVE conference in London.
Those awfully nice BVE chaps shot video footage of the session and it’s available here: http://bve2012.streamuk.com/?wid=415e62b5
It’s an interesting discussion that challenges the position of broadcasters working well with IT companies and deploying VOD and OTT technologies.
It true debating society style, Adrian and I had to take up opposite sides of the argument. I drew the short straw and had to depend the proposition that UK broadcasters ARE in good shape for the future. Not surprisingly, I did not carry the audience with me at the end, and they voted overwhelmingly that UK broadcasters are NOT in good shape for the future.
Nonetheless, it was an interesting debate and Gavin Tweedy’s input was invaluable.
Note to self, really need a haircut!
Has Cisco got its sums wrong?
It was announced last week that Cisco Systems is to acquire pay TV software and conditional access provider NDS for a massive $5Bn.
Cisco said that the deal will complement and accelerate the delivery of its Videoscape video platform, and broaden Cisco’s opportunities in the service provider market, expanding its reach into emerging markets, such as China and India, where NDS has an established customer footprint.
It’s certainly true that NDS is something of a leviathan within the media industry. It employes 5200 people and last year has revenues just short of $1Bn. Of the estimated 430m digital pay-TV households worldwide, 115m of them, over 25%, have NDS content protection within their set top boxes.
However, despite its impressive size, market penetration and reputation (they recently won an $18m lawsuit against Echostar, clearing NDS of allegations of piracy), the company is barely profitable and is also carrying over $1Bn of debt.
The $5Bn dollar purchase price could be something of a windfall for 49% owner News Corporation. After all, with their recent problems over the phone hacking scandal, and now with UK media industry regulator OFCOM questioning whether News Corporation’s partial ownership of BSkyB meets a “fit and proper persons” test, a windfall of several billion dollars from the sale of NDS will be a welcome distraction for News Corp.
The question though is whether Cisco can extract value from the acquisition. Cisco’s annual revenue run rate is about $45m, and they are highly profitable, with net profitability at around 20%. No doubt they will be looking to get the NDS business unit to the same level of profitability. Their stockholders will expect nothing less.
However, as NDS has the TV encryption sector’s largest market share, sales growth in its traditional pay TV market will be difficult. And as 80% of its staff is in R&D, driving cost out of the business would mean slashing the development budget. This is not generally a good thing for a company where innovation is essential in order to protect its market leadership.
It’s clear that Cisco is trying to focus on television. Cisco has made multiple acquisitions as part of its strategy to build out its Videoscape platform, including last year’s purchase of ingest and transcoding specialist Inlet Technologies for $95m, and bnI Video for $99m.
However, Cisco has so far only been able to establish its Videoscape platform in a handful of customers in the telecoms and broadcast services sectors. And given that there were a number of layoffs in the Cisco team that supported these sectors last year, does the acquisition of NDS look increasingly like a desperate move by a company that is struggling to maintain its direction in TV?
NDS is hardly known for providing open, standardised platforms. In fact its real value to its traditional customer base is its secrecy and the closed nature of its offering. This does not sit well with the type of customers Cisco is trying to attract to Videoscape.
But is the television business large enough to warrant the level of investment that Cisco is clearly making?
Estimates vary, but the annual video infrastructure and equipment market is reported as between $13.2Bn (ACG Research) and $16Bn (Screen Digest) Worldwide. There is a further $9Bn of service revenue within the sector.
Findings from ACG Research’s Q4 2011 report into the Service Provider Video Infrastructure (SPVI) market indicates that the market reached $4 billion for the quarter, and that Cisco is the clear market leader in this sector with an approximately 60 per cent market share. Competitors include Alcatel Lucent and Motorola. So unless this market sector is set to grow exponentially, then it is difficult to see how Cisco can use the acquisition of NDS to boost its sales volumes.
There is certainly growth in Over The Top television services, but any market can only sustain a level of investment proportional to its size. With most advertising supported broadcasters being squeezed on profits, and pay TV providers being pushed to offer additional services to subscribers at no extra cost in order to reduce churn, then this can only be funded by content paid for by the consumer. It’s ‘brave’ to forecast tens of billions of dollars in additional pay per view revenues when we are still in the grip of a global recession.
Is Cisco a victim of its own success?
In Harvard professor Clayton M. Christensen’s book The Innovator’s Dilemma, he points out that when markets expect 20% annual growth, for a company the size of Cisco, that means $9Bn of extra sales. There are not many new market sectors that can provide that level of additional revenues.
Christensen states that outstanding companies can do everything right and still lose their market leadership. He goes on to say that focusing on “disruptive technology” is one way to avoid this fate. Perhaps this is what Cisco had in mind when they started developing Videoscape. However, this was a major departure for a company that focused on selling, essentially, hardware. Certainly there is clever software within Cisco network products, but this is only exposed to those clever network engineers who are happy to type UNIX command line instructions. Videoscape was as much a concept as a technology. And Cisco has thus far failed to communicate this concept effectively.
Maybe by buying a company that has an established reputation with TV companies, and is present in 115m homes, Cisco believes that this will strengthen its Videoscape offering. But if Cisco is hoping to woo the likes of Netflix and Hulu, or be the backbone for services such as Streampix from Comcast, HBOgo, ESPN and Showtime, then it may have to do better than buying a company best known to media companies for satellite TV encryption services.
ⓒ Jeremy Bancroft, Media Asset Capital – March 2012
It was a bright, breezy and cold morning in the Vale of Belvoir today, and I took the opportunity to walk my dog across the fields before starting work. This distraction from the business of the day provided me with rare, and valuable, space to think about one of the issues facing our industry.
Why is it that broadcasters and large IT companies have so much difficulty in understanding each other? After all, much of the infrastructure that broadcasters rely on is IT-based, and there is barely a desktop without a computer, barely a TV executive without an iPhone or Blackberry, and barely a channel that is not available on the web. So why the gulf between the two industries?
Certainly broadcasters have a few specific requirements, such as large amounts of performant storage, high speed networks, and a degree of determinism that allows for no margin for error (every frame, on time, all the time). But surely these requirements are not unique? Defence, banking, medical imaging, nuclear energy, transport; these all have mission critical requirements that are met by IT, so why is it that broadcast seems so hard?
As I continued my walk through the fields of Leicestershire I spied the outline of Lincoln Cathedral, perched on top of a ridge some 30 miles away. Here is a structure that has stood the tests of time. Civil war, the plague, earthquake (yes, Lincoln was badly damaged by an earthquake in 1185), and yet remains one of the most impressive ecclesiastical buildings in Europe, virtually unchanged in the last 500 years. The great Cathedral at Lincoln has been impervious to societal and technological changes (although they do now have electric light, a PA system and the obligatory gift shop). And I wonder if some broadcasters have felt rather like this in the past.
My industry colleague Bruce Devlin of Amberfin, at a conference I chaired a couple of years ago, described broadcasters as having ‘special needs’. This was not meant to be flattering. He went on to explain that many broadcasters consider themselves unique, and want equipment vendors to bend themselves out of shape to develop products and services that match the way each specific broadcaster works. Heaven forbid that they change the way they work in order to take advantage of technology advances, and improvements in workflow.
For those of us who travel the world, working with broadcasters in all four corners of the globe, we are usually struck by the similarities between what broadcasters do, and how they do it, rather than the differences or their supposed uniqueness. But still, heads of engineering and technology insist on having things their way. And this is at the nub of the problem.
IT companies want to use standardised platforms and software to address customer needs. Sure, they will allow you to configure their software, or even have partners develop specific functionality, but if you ask Apple to adapt FCP-X, or Adobe to change Premiere Pro, or Microsoft to modify Exchange Server, you will be met by a very high brick wall.
Similarly, if you ask Dell to develop a new server, or IBM to adopt a new storage platform, the response will be similar. That is not to say that these vendors close their ears to the market, but as an industry we are just too small to have a loud voice. As a salesman from a leading manufacturer of robotic tape storage systems told me a few years ago: “I could earn more selling small libraries to every travel agent on the high street than large libraries to broadcasters”.
The hubris of the UK’s Independent Television, a business with profits of $500m, telling the mighty Apple, with cash reserves of $81bn that it cannot use the iTV brand for its next generation of smart TV sets shows how self-important our industry has become.
So perhaps we need to stop being so precious as an industry. Perhaps broadcasters should acknowledge that they have more in common with each other, PSBs, free to air and subscription platforms alike, than differences that separate them. By working together as an industry, and accepting common solutions, we may better be able to work with the IT suppliers and become more relevant to them. And some of those large infrastructure projects, like DMI / Fabric, might actually start to work!
It will soon be time to pack our bags and head off to Vegas for the annual homage to our industry.
We will of course be present and as always we would like to meet you!
If you are a Broadcaster, Media Company, Supplier or Investor please contact us so we can arrange a meeting, either during the day or in the evening over a beer or cocktail. We are certainly living in interesting times, so lets talk about it and see if we can do some useful work together!
The Directors of MAC
Following our previous posts about how Apple might have mis-judged the market around its introduction of Final Cut X, it appears that they have their listening ears on.
It’s good to see that they are listening to the user community. However, it’s worth noting that most Final Cut Pro users, including myself, are working on MAC G5 platforms. Many of these will not support Apple’s 10.6, or Lion operating system which means that they cannot upgrade to Final Cut-X without buying new hardware. And that, after all, is what Apple wants – hardware sales.
I cannot fault their business logic, and perhaps that’s one of the reasons they have more cash than South America. It still sticks in the throat of lots of small production and post companies who have to shell out and sell their old Power PC-based G5’s on eBay though (you should see how many G5’s are listed on eBay at the moment!).
Has this opened the door for Apple’s competitors? Well I would say that it was already open, but is now swinging wide. Many of the broadcasters I speak with are now very nervous about including Final Cut on their future technology roadmap. And this is a potential blow for Apple in the broadcast market. However, one could argue that they were never really that committed to broadcast. When a large UK broadcaster asked if Apple would make some changes to FCP in return for an order of 200 pieces, they were (allegedly) told that Apple sold more FCP than that through its London Oxford Street store in a week! How many DSLR users are there capturing video who need a way to edit with more sophistication than Windows Movie Maker or iMovie? Answer that question, and I suspect that we will understand why Apple did what it did with Final Cut.
Senior MAC associate Russell Grute, recently penned (or rather typed) an article covering that newest of linear television playout technology, Channel In A Box.
Like myself, Russell comes from an automation and MAM background, so knows a thing or two about this subject.
His article was published in TVB Europe, and can be accessed via this link http://issuu.com/IntentMedia/docs/tvbe_february_2012_digi_edition/19.
Happy reading, and please let us know whether you agree or disagree with his findings.
Is the Tablet becoming the dominant means of accessing the Internet and the content it contains?
This article in Mediapost suggests that it is, a fact which might be a game-changer for broadcasters and media companies…