IABM observes reduced margins in the market but perceives some optimism

The competitive pressures of new media increase efficiency and cross-platform delivery.

The International Association of Broadcast Manufacturers (IABM) just published the latest Buying Trends Report for its members. The report analyzes the financial performance of media companies for the six months to December 2018 and a qualitative analysis based on data from the NAB 2019 Pre-Show Buying Trends Survey.

The growth of the Revenue has improved from 5.3% to 9.3%, while profit growth remains negative (-2.4%), slightly higher than the -2.6% recorded in the first half of 2018. Traditional advertising and subscription-based business models remain under competitive pressure from new media and its wide range of direct-to-consumer (DTC) offerings. While profits are declining across all types of businesses, the advertising model is under more pressure than pay TV.

Confidence remains strong, as the 78% of respondents (5 points less than in the last report) they affirm that they are positive about the business environment despite the enormous changes affecting the industry; 25% say their companies continue to derive more than 80% of their revenue from traditional broadcast operations, although most expect this to reduce in the coming years.

Efficiency remains the most important driver of product purchasing, followed by interoperability and agility. The change in priorities has translated into a change in technology spending that gives Opex priority over Capex. The survey results show that technology users are focusing on solutions that make them more efficient, agile and interoperable. To do this, they are spending more money on generic IT technology and are increasingly investing in internal development to meet their specific needs.

The shift in technology spending is driving end users to adopt a variety of emerging technologies to streamline their supply chains for the multi-platform world. Although the artificial intelligence and the cloud adoption are already strong, promising technologies like AI remain emerging trends, according to the data. However, on-chain adoption is at a very early stage, with an adoption rate of only 3%. VR spending remains subdued and is unlikely to increase significantly over the next six months.

The cross-platform content delivery remains the top priority for technology users, followed by 4K/UHD. The rise of 4K/UHD to the second highest priority is consistent with the overall upward trend in 4K/UHD adoption and spending in the market and increasing investment in premium content by new media operators.

Lorenzo Zanni, Director of Insight and Analysis at IABM, believes that “these results show that the demand side of the industry continues to undergo radical change, with changes in revenue models influencing media technology investment trends.”

"While technology investment has shifted toward new priorities, technology has never been more key to driving business success in the multi-platform world. The continued adoption of new technologies by buyers requires vendors to adopt new business models focused on flexible software delivery. With the shift, the future is bright as more is invested in content," he adds.