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The International Association of Broadcasting Manufacturers has warned members that they face extinction without sufficient scale, specialism or willingness to co-operate with one another.
“Those companies supplying traditional hardware product to broadcasters, with no great differentiation or critical mass, are under threat,” said Peter White, IABM director general.
The warning comes during a wave of mergers and acquisitions in the sector since the start of the year which has seen, for example, Belden swallow Grass Valley for $220 million, Quantel purchase Snell to create a company with annual revenues of $140 million, and Vislink snap up Pebble Beach for $23 million.
Some deals are being driven by venture capitalist groups, as in the case of audio console developer Calrec’s $22 million purchase by private equity firm Electra Partners.
Others are clearly designed to give the purchasing company a solid base in IT and IP video processing and transport. In this bracket falls the sale of video encoding specialist Amberfin to French-based asset management player Dalet; and Imagine Communications’ (itself owned by venture capitalist The Gores Group) addition of video encoding player Digital Rapids last week.
The IABM’s research shows profit growth among its 300 members fell alarmingly over the past 24 months by 24 percent. “While there are some star performing outliers, it’s not sustainable for most to be losing that amount of money,” said White. “Something has got to give.”
He called on more firms to joint venture and fight the threat from IT systems developers. “Vendors need to get together to provide a service rather than out and out competition.”
At the same time, analyst IHS projects a media services boom. The global value of video transport services has risen from $7 billion in 2006 to $18.4 billion today rising to $22.6 billion by 2017, it reports. Video processing will be worth $4.3 billion by 2017 up from $2.8 billion last year, and storage is also on the up, rising to $3 billion in three years from $2.1 billion in 2010, according to IHS findings.
By contrast, cameras and editing tools, as well as content management and distribution systems, will decline slightly this year to around $15 billion, it projects.
“It will be very difficult to be a traditional broadcast kit vendor in a few years,” said IHS analyst Tom Morrod. “There will be one or two which survive by consolidation, but lots of small companies used to running on 30 percent margins now face ruin on very thin margins.”
Harris, one of the giants of traditional broadcast, has been forced to split its operations and rebrand in attempt to survive. Under the Gores Group it now fields IP and cloud related products and services as Imagine Communications while reserving traditional radio and TV production and transmission equipment as GatesAir.
Said the CEO of both companies, Charlie Vogt: “Greater collaboration is a necessity if the incumbents are to present a coherent response to emerging threats from new entrants to the market.”
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