Broadcast technology supply valued at $11bn

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Crumpton says broadcasters are increasingly adopting the ‘ingest once - use many’ philosophy.

The global media and broadcast technology supply industry is valued at US $11.6 billion, according to a report published by the IABM, the association that represents media and broadcast technology suppliers worldwide.

Demand for multi-platform delivery of content - (IPTV, mobile TV, internet TV), multi-channel broadcasting, HDTV and the digital transition - has resulted in a booming year for broadcast and media technology companies. Suppliers are participating in a market growing at 11% per annum and forecast to be worth $17.5bn by 2010. Additionally, the availability of increasingly powerful home computers and the uptake of broadband have driven the production of user-generated content which is creating a new generation of video savvy consumers.

"Broadcasters are demanding tools that allow them to integrate previously separate new media departments into their core operation" says Roger Crumpton, chief executive of IABM. "Increasingly, we are seeing an ‘ingest once - use many' philosophy adopted by broadcasters. HD quality content is acquired, processed and re-purposed in parallel workflows to meet the requirements of diverse delivery platforms."

Convergence in technologies means that IT companies and telcos are now also chasing the same slice of the pie and the broadcast and media technology supply industry is undergoing a significant period of change. The market is growing fast but the structure of the supply chain is changing dramatically. M&A activity has seen the creation of major new ‘super suppliers', as well as the consolidation of some smaller and medium-size players. The industry has become more open to investors with a series of IPOs and is increasingly attractive to IT companies such as Apple, Microsoft, HP and Cisco.

"With more than 1,400 companies, the industry is unusual as the top eight suppliers account for only 45% of the global market, suggesting that the small niche players fulfil a need for innovation - and are aptly placed to attract investment," says Crumpton.

And attracting investment they are, this substantial industry is returning value to investors and catching the eye of private equity backers. 2005/6 witnessed a flurry of M&A activity: Harris acquired Leitch (September 2005), Avid purchased Pinnacle (August 2005), Thomson expanded further buying Thales Broadcast & Multimedia and Canopus (December 2005), and Cisco purchased Scientific Atlanta in February 2006. More than 58 companies in the industry are publicly traded.

"With more use of low-cost, commoditised, off-the-shelf equipment and software to make radio and TV content, increasing value will instead come from the know-how which broadcast technology suppliers have, and increasingly, their customers do not. Inexperienced buyers look towards the supply industry to help them understand and create increasingly complex systems. This is evidenced by the dramatic growth in system integration and outsourced service provision. The ‘services' part of this market is worth over $1bn and is growing at more than 20% per annum," adds Crumpton.

The large number of small players in the industry illustrates the traditional ease of new entrants to break into the market. Anyone with an innovative idea and sufficient capital to develop it can launch a product, and many former broadcast engineers or industry employees have done just that.

However, the barriers to entry are rising as isolated products and software applications give way to more integrated systems sales, requiring manufacturers to offer a wider range of products - or have appropriate partnerships in place.

"2006 marks the start of a period of rapid ‘growing up' as the industry matures and adapts to the changing media sector and new competition. Already, manufacturers are shifting from developing hardware-based products to a software focus. The next key phase of development will be a shift towards providing knowledge and expertise, and away from reliance on simply selling products," adds Crumpton.

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