EBU Technical Review

No. 311 (July 2007)

The market for production equipment

The entire broadcasting industry is undergoing dramatic changes because of digital technology. From the perspective of broadcasters, new digital delivery mechanisms permit broadcasters to offer enhanced services (on-demand services, services to mobile or hand-held devices, HDTV, etc.), whilst simultaneously encouraging vigorous competition from new entrants. Although much of the debate about the future of broadcasting focuses on the impact of new delivery systems, many broadcasters recognise that production of content is their primary role.

Fortunately, new technologies also promise more efficient production of content, either allowing the same amount of content to be produced by less people or much more content to be produced by the same number of people. The drawback is that these new technologies also demand new working methods, as well as substantial investments. How should broadcasters react to these threats (or opportunities)? How much should they invest in risky ventures? When should they invest to maximise the benefits of the emerging technologies?

Strangely, the uncertainties faced by broadcasters are trivial in comparison with the threats facing those supplying production technologies to the broadcasters. Gone are the halcyon days when a handful of manufacturers dominated the business of producing specialised equipment for broadcasters. In those days, high margins compensated for the small volume of equipment – and advances in technology trickled down from the broadcast professional market to the industrial market and, eventually, to the high-volume consumer market. As the disparity between the equipment used by broadcasters and the equipment used by consumers gets narrower every year, broadcasters are becoming reluctant to pay a large price premium – and increasingly opt for equipment designed for consumers.

Magnetic tape has effectively disappeared from audio production facilities – and, in the near future, it is likely to disappear from many video production facilities. Broadcasters are delighted to see that storage technologies developed for IT applications have become a commodity with rapidly falling prices (each year bringing a 50% reduction in the cost per GByte). Of course, vendors of broadcast production equipment are also hoping to benefit from these new technologies – but they are simultaneously threatened by vendors of IT systems. Many broadcasters would like to remain faithful to their traditional suppliers (who really do understand their specialised requirements) rather than surrendering themselves to the vagaries of “best-efforts” IT-based solutions. Although experience over the past few years gives real cause for concern about the practical performance of IT-based systems, it is surely only a matter of time before IT-based systems deliver what they promise.

The complexity of IT-based production systems means that complete systems are dependent on hardware and software supplied by several separate companies. This has encouraged the emergence of "systems integrators” whose primary job is to deliver a complete working system. The downside is that, all too often, broadcasters have insufficient technical knowledge of their facilities – with adverse consequences for operations, maintenance and future updates.

Another dramatic example of rapid change concerns Grade 1 monitors: such monitors have long been essential production tools for broadcasters, but suddenly they are no longer available. The problem is that cathode ray tubes (CRTs) have effectively vanished from the consumer market. Although broadcasters have historically paid very high prices for Grade 1 monitors, their production has been dependent on factories making CRTs for the consumer market. In the absence of high-volume production of CRTs, it is no longer economic to produce Grade 1 CRTs. Regrettably, current flat-panel displays cannot satisfy the very demanding requirements of Grade 1 monitors. Significant enhancements in the performance of flat-panel displays should be possible, but this will require the manufacturers to make substantial investment in R&D. On the other hand, as many broadcasters are wanting to spend less on equipment, it is quite likely that most Grade 1 CRTs will be replaced by flat-panel displays that could be described as, at best, “Grade 1.5”. If broadcasters buy only a relatively small number of Grade 1 flat-panel displays, manufacturers would not be able to recoup their investment in developing these new products. In such circumstances, who would make the Grade 1 monitors needed by broadcasters?

A recent report published by IABM entitled “The broadcast and media technology business” noted that the top eight manufacturers currently have 45% of the total revenues. However, it also observed that 1400 suppliers took exhibition space at IBC or NAB, thus demonstrating the highly fragmented nature of this industry. Is the market for specialised broadcasting equipment big enough to support so many competing vendors? How will the market structure change in the next 5 years? In the past, many suppliers successfully carved out niche markets for their specialised hardware. Will it become more difficult for niche suppliers to survive in the future? Or will the increasing importance of software solutions mean that small “cottage industries” will be able to compete with traditional vendors?

Too many people working in the one sector of the broadcasting industry are unaware of what is happening in the other sectors. Perhaps, this is understandable – if you are worried about your own future, you might not want to be bothered about the problems being faced by your friends and neighbours. On the other hand, the success of your business probably depends on nurturing good relationships with your suppliers and with your customers. My personal view is that the long-term success of a business is unlikely to be achieved by battering its suppliers or its customers into bankruptcy. A symbiotic relationship is surely a better way for all concerned.

Philip Laven
Director
EBU Technical Department

13 July 2007

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