Media vendors sacrificing training and interop for revenue and efficiency, IABM warns

Streaming Media

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Media tech vendors cannot continue to do business the same way they always have, the IABM has warned. What’s more they are prioritizing investments in product which generates revenue, flexibility and efficiency at the expense of training and interoperability.

“These are the three core things that your products need to deliver to your customers to be successful,” Chris Evans, head of knowledge and insights at the media technology trade body said at IBC2024. “This is what customers are looking for right now. But the cost of this response is less investment in innovation and future roadmaps, less investment in training and support and less investment in interoperability and transparency.”

Those crucial items had fallen to the bottom of a ranking of investment priorities polled from IABM members.

“This is a really clear trend but does it risk organizations becoming more insular and inwardly focused?” Evans quizzed. “When we've got our back against the wall we’ve proven that that doesn't have to be the case. Many partnerships and collaborations emerged during the Covid crisis that led to really successful business innovations. We continue to hear from the industry and see in our data that training and interoperability are vital catalysts for the next generation of technology to embed itself in the workforce.

“This is a warning sign to the industry not to lose sight of the key areas of mid and long-term success in the face of what are short-term priorities.

The warning came during a state of the industry report by the IABM at the International Broadcasting Convention which found that business confidence had dipped in the wake of macroeconomic headwinds and sector specific challenges, like the Hollywood strikes.

“Business confidence continues to be volatile and has fallen year on year, comparing 2024 with 2023,” Evans noted. “Since April we have seen slight uplifts in business confidence but the picture overall serves to remind us where we are as an industry. Some of the challenges that were in play in 2023 have persisted into this year and continue to negatively influence businesses.”

One of the central issues in play for the industry is the monetization of content. Content, owners and service providers are still navigating business transformation as they streamline existing services whilst pivoting to develop new revenue streams.

The IABM reported a “crisis of confidence” among traditional media pivoting to streaming in early 2023 but since then it tracked results that suggest efforts to stabilize business transformation are beginning to pay off.  These measures include a crackdown on password sharing, price increases and the introduction of ad tiers.

“None of these have been particularly well received by end users, at first but evidently not to such an extent that we've seen mass departures” from SVODs, Evans said.

Turning to FAST channels “another evolution of the DTC offering,” Evans said the slowdown in the growth of SVOD has put an increased emphasis on the development and the launch of FAST channels. As at May 2024 there were a staggering 1943 FAST channels in the U.S, he said.

“That’s pretty substantial growth year on year but a slight caveat is that that growth rate at least in the U.S is slowing. Inevitably, we're going to reach a saturation point. We’re in the [midst of] a land grab for FAST viewership.”

 

Look to YouTube

All the recent attention on competing with pure play streamers like Netflix seems to have taken the broadcast industry’s eye away from an equally if not more potent competitor: YouTube.

 The perception that consumption on smartphones is cannibalizing viewership needs to be reappraised since the Alphabet owned platform now claims the second highest share of viewing in the U.S on the living room screen, per Neilsen figures.

 “We have to look at the proposition that we offer in the living room on the large screen, as well as the small screens and the digital first pieces,” Evans urged the broadcast community. He added that this represents an opportunity for traditional content owners with linear services.

Working with YouTube could provide “another portal or gateway” into broadcaster content “provided that content is versioned in a way that is sticky and appeals to people where they're watching first and then pulls them through to your longer form content.”

Against this backdrop is increasing pressure on broadcasters and media owners to merge and consolidate. The U$D8bn Skydance transaction for Paramount seems concrete but there is speculation of asset divestment by Warner Bros. Discovery, and even a merger of public service broadcasters such as between Channel 4 and the BBC in the UK (denied by the BBC).

 

Cloud and AI interlinked

Cloud services continue to be very important but surprise, surprise the tech sector with fastest year-on-year growth is AI, ML and analytics.

 “What's important is the interlink between AI, ML and Cloud,” Evans said. “This will actually reinforce the importance of Cloud because for many organizations there's just simply not the ability to invest in the compute power to deploy AI and GenAI on-prem. They will have to look to third-party Cloud providers to do that initially.”

Chip manufacturers are releasing new chipsets to capitalize on this demand and the IABM suggested that competition in this space is trending towards reduced price points – but only slowly. Nvidia’s explosive Q2 financials results at the end of August are evidence of this trend.

“Right now, the cost of implementation of compute means that this largely rests on public cloud services and the development of new data centers that can cater to demand for AI and Gen AI.”

 

Hardware rebounds

Media technology equipment manufacturers have talked a lot in recent years about the shift to virtualization and the importance of software defined products but hardware remains a strong, even growing part of the pie.

“For all the benefits of different SaaS pricing models many companies still need the acceleration of FPGA enhanced hardware,” Evans said. IABM figures reveal an uptick in the share of revenue accounted for by hardware.

 “That’s not to say we're going to see a significant bounce back [to hardware]. I see this really as a kind of a recalibration and stabilization of the mix. We certainly won't rebound, to 2021 levels but we will start to see the recent fall off in hardware sales start to level out.”

 

Parallel market

Media tech companies are also finding more customers for their product outside of traditional broadcast media. Indeed, more than half of member company revenues were generated by so-called parallel markets such as corporate, education and houses of worship in 2023, than conventional broadcast.

“These non-traditional organizations are looking broadcast media technologies to enrich creating content and serving an audience.”

Vendors might naturally have looked for customers outside the traditional base last year as the strikes ground Hollywood production to a halt but the trend is here to stay.

“What we will see in 2024 is a stabilization, but I do not think that the parallel markets are going to recede significantly,” Evans said. “They're going to be vital moving forwards to play a part in your overall revenue share. Everyone has their own definition of what a broadcaster is, but I think one of the best kind of statements I've heard to think about potential customers and prospects as content rich organizations.

 “Corporations like fashion houses and banks are already producing content and are in the market for professional media systems to help them organize, manage and monetize it.”