Broadcasters are finally joining the rest of the world in using IT-based open standards equipment in their TV production systems. As has been illustrated by the recent merger announcement of Avid and Pinnacle, which is sending shudders through the editing vendor community, players will increasingly seek to expand their product portfolios to protect their home market, leading to further consolidation.
The broadcast industry is being driven by the underlying trend of the transition from analog production systems to digital IT-based workflows. At present only approximately 15% of European broadcasters operate fully digital workflows, however this is set to change quite dramatically.
Transitioning to digital – the end of the black box
In the early days of the TV broadcast industry there simply were no IT solutions available. Instead, the broadcast industry had to develop its own technology to handle the specific requirements of audio/video content. Black boxes (based mostly on proprietary technology) were successfully and efficiently manufactured by vendors to handle niche tasks inside the production studio and editing suite. But with broadcasters now transmitting in digital, the relative high cost of industry-specific equipment and substantial advancements in IT capabilities, broadcasters realize they can reduce capital expenditure (and increase productivity) by deploying off-the-shelf IT equipment.
20% of customers seeking high-definition compatible solutions
The next technological step for the European broadcast industry is to begin transmitting in high-definition (HD) format. In every sub-sector of the production value chain, products will need to be upgraded to be HD-capable (typically because HD content requires 5-6 times the storage space of regular digital files and very high data throughput rates). While each sub-sector is slightly different, vendors report a general trend throughout the chain for 20% of new business requests to demand that the equipment be HD-capable or upgradeable. HD is becoming the key demand driver in most sub-sectors today, and its importance will only grow.
The Avid and Pinnacle merger is likely to be the first of many such tie-ups. In general, Sony and Thomson dominate the broadcast production environment. Both are extremely focused on growing their market share but competition is hotting up, particularly now with the availability of IT-based substitute equipment. In the editing market Avid (with or without Pinnacle) represents the de facto standard.
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Double digit growth in IT-based sub-sectors
Some of the product groups in the value chain will see a decline in revenues – essentially those areas where analog equipment is being replaced by IT-based solutions. The humble videotape recorder (VTR) for example, which has been the workhorse of the production industry for so long, is now being replaced video servers.
While the analog product market opportunity is shrinking, there are many product groups in the broadcast value chain which Datamonitor expects to experience strong double-digit growth rates through to 2008. These include media asset management, video servers, professional services and the encoder/multiplexer market.
