IABM Digest - April 2020 by IABM

REGIONAL FOCUS: North America & Latin America 2020

IABMBUSINESS INTELLIGENCE Q U A R T E R LY D I G E S T 1 s t APRIL 202 0

You can find more information regarding IABM Business Intelligence at www.theiabm.org/business-intelligence

THE QUARTERLY DIGEST CONTENTS Executive Summary Global Business Environment

Insight and Analysis, Lorenzo Zanni and

members with a varied range

Principal Analyst, Riikka Koponen. We

of business information about

publish the latest news and research

the broadcast and media

findings across a variety of topics,

industry and the wider global

including:

economy in a ‘digestible’ way.

n Current Global Business Environment

Exchange Rate Movements

9 10 11

Audio over IP (AoIP) – Transition in progress 11 Broadcasters’ staff cuts continue – the BBC under pressure

Supply Trends

Media Technology Special: Cloud

What is Cloud?

Cloud in Broadcast & Media

Cloud Deployments

Regional Focus: North America

Business Environment

The Broadcast & Media Industry

Overview Media Technology Demand Drivers

24 24

Transition to ATSC 3.0

New Viewing Experiences (UHD & VR)

OTT and Multi-Platform Delivery

Regional Focus: Latin America

Business Environment

The Broadcast & Media Industry

Media Technology Demand Drivers Transition to HD and UHD OTT and Multi-Platform Delivery

PAGE 2

The purpose of this report is to

n The Media Business

enable member companies to

n Regional Focus on a Regional Market

keep up with the latest

As we would normally have been

developments in our industry

approaching NAB Show Las Vegas at this

by presenting otherwise

time of year, this edition of the BI Digest will

scattered information in an

include a Regional Focus on North America

orderly and relevant manner.

and Latin America.

The current, global outbreak of the new coronavirus (COVID-19) is causing exceptionally high uncertainty in the global economy, resulting in unpredictable fluctuations in stock markets worldwide as well as high volatility in global energy prices. At the same time, many industries are suffering from delays in production and component supplies, particularly from China. Hence, the figures and statistics presented in this report are subject to significant changes due to the rapidly changing conditions in different countries hit by the new coronavirus.

Transition to Digital and HD Broadcasting

Overview

The analysis is undertaken by our Head of

Digest provides IABM

Media Business Highlights

Report Contents and Structure

Overview

The Media Business

The IABM Business Intelligence (BI) Quarterly

After strong growth peaking at close to 4% in 2017 and at 3.8% in early 2018, global economic growth slowed notably to 2.4% in 2019

Digest authors

30 30

Lorenzo Zanni

Riikka Koponen

IABM, Head of Insight and Analysis

IABM Principal Analyst

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

EXECUTIVE SUMMARY Global Business Environment n After strong growth peaking at close to 4% in 2017 and at

n Due to the complexity of the IP networking market and the

3.8% in early 2018, global economic growth slowed notably

abundance of different standards, many end-users have

to 2.4% in 2019

chosen a hybrid approach to IP deployments

n The current situation reflects a confluence of factors

n This has incentivized technology vendors to invest heavily in

affecting major economies: economic activity in Europe

R&D and to launch new solutions that support different

remains modest as a result of weakness in trade and

standards – to improve interoperability between different

manufacturing, while China’s growth rate is expected to fall

protocols

below 6% this year for the first time since 1990, according to the World Bank

n The year of 2019 was tough for an increasing number of broadcasters and media companies struggling with

n In January 2020, the World Bank estimated that global

consumers’ changing viewing habits and competition from

economic growth would amount to a modest 2.5% this year

new media players

– slightly up from 2.4% in 2019 – thanks to a gradual

In January 2020, BBC News announced that it will cut about

recovery of global trade and investment

450 jobs from BBC News – BBC Two’s Newsnight, BBC

n However, the outbreak of the new Coronavirus (COVID-19) may have a severe negative impact on global economic

Radio 5 Live and the World Service – as a part of the BBC’s cost savings target of £80 million by 2022

growth in 2020 n In 2019, the price of Brent crude oil – the international benchmark – averaged US$64 per barrel (bbl), being

Supply Trends n The transition to new revenue models continues as software

US$7 bbl lower than in 2018

revenues surpass hardware for the very first time n Investment in the industry continues to be at record high levels, while pressure from both prices and costs has eased

WTI & Brent Crude Oil Prices (2017 - 2019)

n The IABM Confidence Ratio is rising for most industry

100

segments; the ratio stands at 12, significantly up from 8.6 in

Price (US$ per barrel)

H1 2019 60

n From a geographical perspective, hardware suppliers and

respondents from North America seem to be more

confident about the future of the sector

17 18 r-18 -18 -18 t-18 -18 -19 r-19 -19 -19 t-19 -19 c c c- bb g n n g Oc De Fe Ap Ju Au Oc De De Fe Ap Ju Au WTI (Global)

n In terms of the whole content chain, IABM continues to see increasing confidence – and investment – particularly in Monetize and Consume, as the focus of industry

WTI (Global)

stakeholders is firmly on Source: Federal Reserve Economic Data

direct-to-consumer business models.

Highlights: Audio over IP – Transition in progress & Broadcasters’ staff cuts continue – the BBC under pressure n Over the past few years, audio over IP (AoIP) has become the top technology priority for audio technology buyers as evidenced by our latest Buying Trends survey

When it comes to strategic drivers of media technology demand, the move to directto-consumer models, workflow automation, virtualization and IP continue to be the most important

n According to our data, most audio technology vendors see the transition to audio over IP (AoIP) as an inevitable trend, even though so far adoption of AoIP has been relatively slow due to technical, financial and cultural reasons

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

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EXECUTIVE SUMMARY Cloud n According to IABM data, cloud adoption broadcast and WTIin (Global) media is increasing rapidly, as shown by the chart below:

n In 2019, the price of Brent crude oil – the international benchmark – averaged US$64 per barrel (bbl), being US$7 bbl lower than in 2018. This was mainly due to increases in the US’ petroleum production, which put downward

Cloud Adoption 50%

pressure on crude oil prices n In October 2019, the Fed cut interest rates for the third time

47%

45%

in the course of the year, reversing nearly all of 2018’s rate

40%

increases. Such a stimulus reflects significant uncertainty

35%

prevailing in the US economy

30%

n With 121 million TV households in the US, North America

25%

constitutes one of the largest markets for broadcast and

19%

20%

media technology products and services

15% 10%

n The until-now solid business model of cable and satellite

0% We are already doing it today

Very likely

Somewhat likely

Unlikely

Not at all likely

networks is being increasingly disrupted by competition from OTT operators such as Netflix and Amazon – and recently-launched streaming services like Disney+ and Apple TV+ n The number of American homes without Pay-TV is predicted

Source: IABM

to increase from 21.9 million in 2019 to 34.9 million in 2023 as a result of further cord-cutting

n 47% of respondents of our latest Buying Trends survey said that they have already deployed some sort of cloud technology, being significantly up from the 37% reported at

n North American companies are increasingly investing in emerging technologies such as the cloud, AI and IP to achieve greater efficiencies and agility

NAB Show 2019 n Manage and Publish are the most popular for likely deployment of cloud, with 43% and 37% respectively, while

Regional Focus on Latin America n In 2019, the IMF set Latin America’s GDP growth forecast at

Consume and Monetize are at the bottom with only 18% of

0.6% – the lowest rate since 2016. This year, economic

end-users likely to deploy cloud technology

activity in Latin America (LATAM) is expected to rise to 2.3%

In terms of deployment models, respondents continue to

n Particularly weak economic growth in the region in 2019

2018 2019* 2020* 2021* preference 2022* prefer hybrid cloud deployments (33%) with their

stemmed from heightened trade tensions between China

U for private and public clouds equating to 25% and 23%

and the US, the slowdown of the global economy as well as

respectively

elevated domestic policy uncertainties in the largest Latin American economies

Regional Focus on North America n Economic growth in the US was 2.3% in 2019, down from 2.9% in 2018, reflecting uncertainty among US businesses and consumers created by the trade dispute with China, according to the World Bank n During 2018 and 2019, the US administration raised tariffs Ron goods worth over US$300 billion, affecting imports,

mostly from China

n Brazil, Colombia and Mexico combined account for 60% of Latin America’s GDP and thus economic development in these countries largely determines the pace of economic expansion in the whole region n Many countries in LATAM lack the infrastructure and resources required to develop their broadcast and media industry For big countries like Brazil, the satellite sector is still

n In January 2020, China and the US signed a preliminary deal (i.e. ‘Phase one’), but as the negotiations concerning the most contentious issues are on-going, the possibility of an

relevant, and future prospects look bright for satellite operators thanks to the introduction of new technologies like Ka-band services and LEO

escalating trade war remains elevated

Euro area

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The UK

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

GLOBAL BUSINESS ENVIRONMENT IABM â&#x20AC;&#x201C; 1st April 2020

GLOBAL BUSINESS ENVIRONMENT WTI (Global)

Please note that this chapter was written right before the outbreak of the new coronavirus in Europe and the US. As a result, many forecasts, figures and statistics have changed over the past two weeks. However, the Business Environment chapter provides you with a benchmark where global business dynamics had developed to pre-COVID-19. This information may help you to identify opportunities when the recovery starts.

Source: Shutterstock

Overview Annual real GDP growth in major economies (2016-2022*) 8% Real GDP Growth (%)

The global economic outlook remained subdued over the past quarter due to an economic downturn in Europe and prolonged trade disputes between China and the US. After strong growth peaking at close to 4% in 2017 and at 3.8% in early 2018, global economic growth slowed notably to 2.4% in 2019. The current situation reflects a confluence of factors affecting major economies: economic activity in Europe remains modest as a result of weakness in trade and manufacturing, while China’s growth rate is expected to fall below 6% this year for the first time since 1990, according to the World Bank.

6% 4% 2% 0% 2016

2017 US

2018

2019*

Euro Area

2020*

2021*

China

2022* Japan

In January 2020, the World Bank estimated that global economic growth would amount to a modest 2.5% this year – slightly up from

Source: World Bank

2.4% in 2019 – thanks to a gradual recovery of global trade and investment. However, amid Europe’s signals of recession,

The largest economies in the Euro area are witnessing weakened

advanced economies are expected to slow as a group to 1.4% in

growth; in Germany, car production remains particularly weak

2020 from 1.6% in 2019. In January 2020, the IMF – having a

depressing other manufacturing segments, while the UK officially

slightly more positive outlook on the world economy than the

left the European Union on January 31st 2020. According to official

World Bank – revised its global growth estimate for 2020 to 3.3%,

statistics, the 28 countries in the EU grew only 0.1% during the last

down by 0.1 percentage points from its October forecast. The

three months of 2019 compared with the previous quarter. The R eurozone – including 19 EU members using the euro – recorded

downward revision was primarily due to lower-than-expected growth in India. As of March 2020, the COVID-19 outbreak had

similar, minimal growth over the same period. As a whole,

spread from China to nearly all other continents causing elevated

Europe’s growth declined from 2.3% in 2018 to 1.4% in 2019,

uncertainty in the global economy. It is already having a dramatic

according to the IMF. In 2020, the region’s growth should pick up to

impact on most economies, making it very likely that earlier

1,8%,1 provided that the situation in the region’s largest economies

growth predictions for 2020 and beyond may take a severe hit.

– Germany, the UK, France and Italy – develops positively.

In 2021, the IMF expects the world economy to grow by 3.4%,

Economic growth in the US was 2.3% in 2019, down from 2.9% in

reflecting early signs of stabilization after the potential, final trade

2018, reflecting uncertainty among U.S businesses and consumers

Italy

Spain

Euro area

The UK

agreement between the US and China to be signed in the course

2019* 2020* created by the trade dispute with China, according to the World

of 2020.

Bank. However, these figures contrast with the Dow Jones Index –

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I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

reaching record highs in 2019 – as well as the unemployment

GDP growth is expected to decline to 1.8% in 2020 and to an

rate, which fell to a 50-year low (3.5%) in 2019. Hence, the labor

average of 1.7% in 2021-22.

market is expected to remain robust bolstering consumption In 2019, the price of Brent crude oil – the international

also in 2020. Consumption – accounting for more than two-thirds of all economic activity in the US – continued to show resilience, while trade uncertainty and fears of a slowdown in manufacturing pushed private business investment down. In October 2019, the Federal Reserve (i.e. the Fed) cut the benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%. The rate determines what banks charge each other for overnight lending. The cut reflected the central bank’s concerns about a further slowdown of the global economy.

benchmark – averaged US$64 per barrel (bbl), being US$7 bbl lower than in 2018. This was mainly due to increases in the US’ petroleum production, which put downward pressure on global crude oil prices. According to several industry experts, the US’ production increases likely limited the effect on oil prices from the attack on key energy installations in Saudi Arabia in September 2019, production cut announcements from OPEC and the US’ sanctions on Venezuela and Iran (limiting crude oil exports from these countries). Accordingly, throughout 2019, global crude oil prices traded within a relatively narrow price range compared with recent years; West Texas Intermediate (WTI) crude oil was between US$49-71, while Brent crude oil

WTI & Brent Crude Oil Prices (2017 - 2019)

was $56-80 per barrel. The US Energy Information

100

Administration (EIA) estimates that crude oil prices will

Price (US$ per barrel)

continue to decline in 2020. Brent spot prices are projected to 60

average US$61 per barrel in 2020 – slightly down from the US$64 per barrel in 2019 – due to rising global oil inventories,

which continue to accumulate as a result of strong oil

production in the US, Canada and Brazil, lower demand for oil 0I

17 18 r-18 -18 -18 t-18 -18 -19 r-19 -19 -19 t-19 -19 c c c- bb g n n g Oc De Fe Ap Ju Au Oc De De Fe Ap Ju Au

globally and weak compliance by some OPEC+ countries (e.g. Russia). WTI prices, in turn, will average US$5.50 per barrel less than Brent prices in 2020, according to data from the EIA.

WTI (Global)

Even though crude oil prices temporarily increased in January 2020 following the US military operations in Iraq and Iran,

Source: Federal Reserve Economic Data

At the beginning of 2018, President Trump announced that the

industry experts project global oversupply to keep the benchmark price at a lower level until 2021. Overall, energy

US government would impose tariffs on imported steel (25%)

prices – including also natural gas and coal – are expected to

and aluminum (10%). Since then, the US administration has

decline in 2020, reflecting strong inventory injections and a

raised tariffs on goods worth about US$360bn, affecting

decline in the US’ natural gas demand, according to the EIA’s

imports mostly from China. As a response, China has imposed

estimates. In February 2020, representatives of OPEC and its

counter-tariffs on about US$100bn worth of US products. In

allies (e.g. Russia) set up an urgent assembly after global crude

January 2020, China and the US signed a preliminary deal (i.e.

oil prices had fallen 20% since their peak in January – hitting

‘Phase one’), but as negotiations concerning the most

their lowest levels in a year. According to Bloomberg, China’s

discordant issues are still on-going, the possibility of an

20% drop in its daily crude oil consumption accounted for the

escalating trade war remains elevated. Under the first phase

UK and Italy’s oil need combined. The sudden drop was

deal signed in January, China has pledged to increase its

estimated to be caused by the outbreak of the new coronavirus

imports of US products by $200bn above 2017 levels and

in China coupled with the extended Lunar New Year holiday,

promised to strengthen intellectual property rights. In turn, the

travel restrictions and prolonged shutdowns of factories, offices

US agreed to halve some of the latest tariffs it imposed on

and shops. As a result, China – the world’s biggest importer of

China in 2019. However, in January 2020, the World Bank

crude oil consuming about 14 million barrels per day – has

estimated that even the easing of trade tensions between the

decreased its oil purchases since the virus outbreak. Moreover,

two countries is unlikely to lead to any rapid improvement in

the virus has had an impact on major international airlines’

the global economy.

demand for jet fuel after they have suspended flights to China.

In the US, the prevailing uncertainty will likely have a negative

China alone accounted for one-third of global growth in 2018.

impact on companies’ investment activity; the country’s real

However, the fact that China’s economy – which is the second

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

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GLOBAL BUSINESS ENVIRONMENT largest in the world after the US – is expected to slow moderately during 2019 and 2020 will have a direct impact on

Real GDP growth in Euro area and selected European countries (Y-oY%, 2018-2020*)

Chinese authorities, the country’s GDP grew 6.0% in the third quarter of 2019 – its weakest rate in almost three decades. In addition to a prolonged trade war with the US hurting Chinese exports, China is battling against continuously weakening domestic spending. The World Bank expects China’s growth rate to fall below 6% this year for the first time since 1990 because of

Real GDP Growth (%)

the APAC region and thus the global economy. According to

3 2.5 2.1

1.7

1.5

1.5 1.1

1.3

1.9

1.8

1.5

1.3 1.0

1.5

1.4

1.2

0.2

trade disputes with the US – and the recent outbreak of the new coronavirus.

Germany

France 2018

Japan is the world’s third largest economy and also a significant

Italy 2019*

Spain

Euro area

The UK

2020*

Source: Federal Reserve Economic Data

contributor to growth in the APAC region. According to World Bank data, real GDP growth for Japan in 2018 was 0.8% in 2018

largest economy in the Euro area – continues to suffer from

and was expected to have remained stable at 0.8% in 2019.

weak industrial production and subdued foreign demand as well

However, in the first quarter of 2019, Japan’s economy grew

as soft private consumption. In 2019, Germany’s GDP growth

unexpectedly at an annualized rate of 2.1%, largely thanks to a

amounted to 0.6%, being the slowest rate since 2013.

positive net export balance. According to Barclays, the main

According to Eurostat, the country’s industrial output in

question about Japan’s economy in 2019 was the impact of

November 2019 was down by 4% compared to the previous year.

raising consumption tax from the current 8% to 10% in October

The slowdown – particularly in Germany’s auto industry – has

2019, because a similar rise from 5% to 8% in 2014 pushed the

already had a negative influence on its neighboring countries,

economy into a recession. Late in 2019, the IMF reduced the

which produce parts or finished products for German brands.

country’s growth forecast to 0.5% in 2020, expressing its concerns over weakened domestic demand.

When it comes to the British economy, the IMF has announced its baseline projection of 1.2% and 1.4% growth for the UK in

According to Indian government data, India experienced real GDP growth of 7.5% in 2018, but the growth dipped to an 11-year low of 5% in 2019 due mainly due to poor performance of the manufacturing and construction sectors. However, the World Bank expects growth to pick up to 6.9% in 2020-21, and 7.2% in

2019-2020 and most economists expect little or no change in the growth of the UK economy in 2020, even though the UK officially left the EU on January 31st 2020. As the UK’s future trading relationship with the EU remains unknown, business investment and consumer spending are forecast to remain relatively weak.

2022. The new government, headed by prime minister Narendra Modi who was re-elected in May 2019, will have to continue

In 2019, the IMF set Latin America’s GDP growth forecast at

implementation of structural and financial sector reforms with

0.6% – the lowest rate since 2016. This year, economic activity

efforts to reduce public debit in order to secure the Indian

in the region is expected to rise to 2.3%, according to the IMF.

economy’s growth prospects.

Particularly weak economic growth in the region in 2019

The Euro area has been in an economic downturn since mid2018 and growth continued to slow substantially in the second half of 2019 due to weakness in the industrial sector as well as increased uncertainty in the global economy. Industrial

stemmed from heightened trade tensions between China and the US, the slowdown of the global economy as well as elevated domestic policy uncertainties in the largest Latin American economies.

production has been on a downward trend since 2018, especially

When it comes to economic growth in the Middle East and North

in the chemical and automotive sectors. According to the

Africa (MENA), the World Bank expects growth in the region to

European Central Bank (ECB), growth in the Euro area is set to

slow to 0.6% this year compared with 1.2% in 2018 – despite

decline from 1.8% in 2018 to 1.1% in 2019 and 1.2% in 2020. In

the partial recovery in energy prices as well as increased

the last quarter of 2019, GDP growth fell to 0.1% in the Euro

infrastructure investment such as the UAE Expo 2020. Due to

area – down from 0.3% in July-September – as the

lower oil prices since April 2019 and a larger-than expected

manufacturing sector dropped further below its longer-term

contraction in Iran, the World Bank revised down the growth

average level. In general, growth rates have been marked down

forecast for 2019 by 0.8 percentage points in October 2019

for many economies in the region, of which Germany – the

compared to April 2019.

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1.4

0.8

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

France

Italy

Spain

2019*

Euro area

The UK

2020*

Exchange Rate Movements

The three major drivers of turbulence in foreign exchange markets

Monthly US Dollar Index (2018-2019) 135 130

Index Value

We report the latest swings in major economies’ exchange rates and provide an outlook for their possible movements over the coming months. Exchange rates are highly unpredictable, but it still is useful to plan and attempt a forecast based on current macroeconomic trends.

125 120

have been:

115

n US fiscal/ trade policy

110

18 18 18 18 18 18 18 18 18 18 18 18 19 19 19 19 19 19 19 19 19 19 19 19 n- b- r- r- y- n- l- g- p- t- v- c- n- b- r- r- y- n- l- g- p- t- v- cJa Fe Ma Ap Ma Ju Ju Au Se Oc No De Ja Fe Ma Ap Ma Ju Ju Au Se Oc No De

n Trade tensions between the US and China n The Brexit ‘effect’ Marking the new era of tighter monetary policy following a decade

Source: Board of Governors of the US Federal Reserve System

of stimulus after the financial crisis in 2008, the Fed stopped its

should have lowered the value of the dollar, because these cuts

Quantitative Easing (QE) program – a mixture of low interest rates

are generally considered to signal the central bank’s pessimism

and expansionary stimulus program – and raised interest rates four

over the outlook for the US economy. However, this time, the Fed

times in 2018. In general, the hike in interest rates reflects

announced that its moves are based on ‘economic weakness in

confidence in increased growth for the US economy. However, by the

other nations that could spill over into the US’. As a result,

end of October 2019, the Fed had already cut interest rates three

investors sold other currencies and bought more dollars, which

times in the course of the year, reversing nearly all of 2018’s rate

kept the dollar strong against the currencies of the US’ major

increases. These cuts aim at lowering mortgage rates and other

trading partners such as the EU, Canada and Mexico. Hence, the

consumer borrowing costs, which should translate into an increase

Fed’s measures – taken due to the global economic uncertainty –

in domestic demand. The stimulus measures in 2019 by the Fed

seemed to have had an inverse effect on the US currency.

highlight significant uncertainty prevailing in the US economy, which

According to UCLA Anderson Forecast, tariffs coupled with the

is expected to continue in 2020 due to on-going trade negotiations

strong US dollar increased US imports from Thailand, Vietnam

with China as well as slowing global growth. President Trump –

and Cambodia, which actually helped Chinese businesses in

preparing for the 2020 election – has criticized the Fed for

2019, because products from these countries contain lots of

insufficient stimulus and has said that the Fed should cut rates to

parts originally imported from China.

zero or below to bolster stock prices and the general economic

In 2020, economists expect the dollar to decline as global growth

climate.

concerns should ease after the US and China signed an initial

The US dollar index remained stable – and high – in 2019; in

trade agreement in January. Moreover, the Fed’s potential

December, on the last trading day of the year, the index recorded its

further interest rate cuts this year should weaken the dollar, as

smallest-ever annual move, being up by only 0.24% for the year. In

the rewards for holding the currency will significantly diminish if

2018, the same figure was up by 4.4%. The US dollar value has been

interest rates in the US fall. Particularly, the US dollar is

climbing since the Trump Administration began imposing tariffs on

expected to weaken against the euro.

Chinese imports in 2018, and in September 2019, the US dollar index

In January 2020, the euro – the 2nd most popular reserve

reached a nearly 15-year high. A strong currency has made US

currency in the world after the US dollar – rallied as the US

exports harder to sell, when US products cost most foreign buyers

dollar weakened to a six-month low. The strengthening of the

significantly more than they did before the trade dispute. The

euro also owed to the ‘Phase one’ trade deal signed between

stronger dollar may also have a negative impact on large American

China and the US in January, reflecting slight optimism about

manufacturers based in the US, because it makes products from

global growth prospects for 2020.

overseas cheaper and US goods more expensive in international markets. This is particularly a concern for giant technology hardware companies like Apple, which rely on international markets.

The British pound fell on the first trading day after the UK officially left the EU on January 31st 2020, signaling investors’ concerns over the outcome of trade negotiations with the EU. As

However, the stability of the US dollar index in 2019 signals that the

of the beginning of February 2020, the pound was down by 1.4%

tariffs had little direct effect on currency markets. Instead, the

against the US dollar (US$1.3011) and also dropped against the

outperformance of the US economy and relatively high interest rates

euro. In 2020, the development of the British pound will thus be

– despite the Fed’s three rate cuts in 2019 – attracted investors, who

bound to the progress in the trade negotiations that should be

shifted funds into the US. Theoretically, the Fed’s interest rate cuts

finalized by the end of this year.

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

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THE MEDIA BUSINESS IABM – 1st April 2020

P A G E 10

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

THE MEDIA BUSINESS Media Technology and Business Highlights AoIP monitoring and processing solutions for the TV market –

Audio over IP (AoIP) – Transition in progress

told NewsCheck Media in November 2019 that they have seen AoIP equipment being mostly adopted in small parts of TV

Like the whole broadcast and media technology market, the audio market is currently going through a transition to IP driven by the need for increased efficiency through automation and virtualization. Moreover, as skillsets change at customer organizations, audio technology suppliers are rolling out solutions designed for multi-platforms supporting next-generation audio formats (i.e. immersive audio). Over the past few years, audio over IP (AoIP) has become the top technology priority for audio technology buyers as evidenced by our latest Buying Trends survey.

broadcast facilities instead of any comprehensive systems. There are several broadcasters who are doing “islands of IP” and this process is primarily driven by video IP conversions, where audio over IP comes as a side product, according to John Schur, President of TV Solutions Group for audio conglomerate Telos Alliance. While audio-only IP installations are still generally rare, some end-users – reluctant to divest their legacy infrastructure – prefer to stick to HD-SDI solutions for video but want to replace their aging audio equipment with AoIP technology to experience IP networks, which has less impact on their existing infrastructure. Due to the complexity of the IP networking market and the abundance of different standards, many end-users have

According to our data, most audio technology vendors see the

chosen a hybrid approach to IP deployments. This has

transition to audio over IP (AoIP) as an inevitable trend, even

incentivized technology vendors to invest heavily in R&D and

though so far adoption of AoIP has been relatively slow. Despite

to launch new solutions that support different standards and

clear cost benefits and lower overheads associated with the

improve interoperability between different protocols – even

adoption of AoIP – like moving from point-to-point cabling

though these hybrid products are more expensive. Our data

installations to a networked infrastructure – many end-users

suggest that today a hybrid approach seems to be the more

still hesitate to deploy the new technology due to technical,

preferred solution for upgrades of current facilities, while in

financial and cultural reasons. On the technical side, a wide

brand new “greenfield” projects a complete transition to AoIP

range of proprietary standards has meant that end-users have

is more likely.

become wary of adopting any single standard and instead have chosen a hybrid approach to avoid getting locked into any vendor. In terms of financial hindrances related to the adoption of AoIP, many audio technology users have been reluctant to divest legacy infrastructure. Some have also postponed the adoption due to the lack of required skills and resources. To facilitate interoperability for AoIP – crucial for its wider adoption – the Audio Engineering Society published an open transport solution for IP networks, the AES67 standard, in 2013. While different manufacturer-driven audio networking

Source: Calrec

protocols like Dante, WheatNet-IP and Liveware had been used for years, the inclusion of the AES67 standard in the SMPTE ST 2110 suite of standards started to accelerate the adoption of

At IBC 2018, Calrec launched ImPulse core, a solution

AoIP in the industry – because AES67 enables communication

designed to help end-users to bridge existing and new

between products relying on different protocols for IP

products – to upgrade existing consoles. According to David

networks.

Letson, Vice President of Sales at Calrec, these kinds of

According to Don Bird, Vice President at Lawo North America,

take away the old core, put in the new one and they have an

who spoke to TV Technology in 2019, AES67 is now a basic

IP-based system”, Letson explained.

solutions are necessary to facilitate the transition to AoIP. “We

requirement in almost every customer project, including upgrades of existing facilities as well as new facilities, as most

According to Philip Myers, CTO at Lawo, the AoIP market can

IP audio networks are AES67-compatible. Some manufacturers

be divided into three clear customer segments:

see the market situation differently: Telos – an early supplier of

1) new greenfield sites,

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P A G E 11

THE MEDIA BUSINESS 2) high-end sports production trucks and

In February 2019, Sweden’s SVT provided the host

3) remote production fly packs, which serve as commentary

production coverage of the FIS Alpine World Ski

units for broadcasters’ REMI (remote integration) productions.

Championships by deploying an IP-based Lawo

In terms of new greenfield sites, Lawo has for example

audio remote production setup, including 32 Lawo

delivered its Virtual Studio Manager control software and IP

A mic8 AoIP nodes for microphone contribution

audio consoles to CBC/Radio Canada’s brand new broadcast

and a 72-fader Lawo mc296 audio production

center in Montreal. Such projects are often driven by IP video

console in Stockholm (hundreds of kilometers

conversions.

away from the sport venue). Lawo’s Virtual Studio

The other two customer segments relate to other key drivers of AoIP identified in IABM studies: immersive audio production

Manager System was used to control all audio and video, while a team of Lawo’s professionals

and remote production. Broadcasters are increasingly

provided consultancy for SVT’s remote production

deploying IP routing for high-end sports production trucks (i.e.

team on site. Adde Granberg, CTO at SVT said: “In

‘super trucks’), which are designed to support large-scale HD

our office in Stockholm, we have the same

and UHD productions, requiring mono, stereo, Dolby 5.1 and

equipment as you would find in an OB truck so the

Atmos audio, because the new IP audio consoles are more

goal was to figure out how to use that so that we

compact and smaller in size. Some customers might not need

wouldn’t need to rent trucks as we don’t have our

a physical control surface at all, when audio functions are

own trucks.”

virtualized, or production automation systems are used to

In REMI (remote integration) productions like live

control the audio.

events, traditional live consoles and distribution

In the US, the transition to the new ATSC 3.0 transmission

methods are increasingly being replaced with a

standard – delivering immersive audio – should also boost the

wide range of remote production systems, which

adoption of AoIP in the coming years, as consumer devices

can significantly reduce costs and allow scaling of

supporting the immersive and interactive features of next

operations thanks to centralized mix engines and

generation audio are projected to become available in the

minimal operator interaction, John Schur, President of TV Solutions Group, the Telos

market in 2020.

Alliance, noted. For example, Wheatstone introduced its new WheatNet-IP audio network product, SwitchBlade at 2019 NAB Show. The new AoIP-based solution enables end-users to send and receive router commands and automation control between two locations (e.g. sports venues) and switch audio locally from network operation centers worldwide. Moreover, the solution can be used to transfer music files from a cloud-based automation system over the internet or between two facilities. In the coming years, the adoption of AoIP will likely be driven by the upcoming Networked Media Open The FIS Alpine World Championships TV compound in Åre. Source: SVG Europe live-production.tv

In terms of remote production, a great benefit of IP audio

Specification (NMOS), which – when finalized – will make AES67 much easier to set up and use. According to industry experts, the key benefit of

networking is that an IP console can be located for example at

NMOS is its ability to make two devices

the home studio in London, which can mix live sounds from an

automatically discover and communicate with each

event in Birmingham. When IP-connected microphones and

other across an IP network. This would make AoIP

preamps are used in the field, they can be directly controlled by

easier, when separate IP addresses will no longer

a console system instead of sending more staff and equipment

have to be manually entered for every multicast

to do the work on site. Moreover, with IP end-users can share

audio stream, which is the current limitation of

resources in a facility with multiple buildings and studios.

AES67.

P A G E 12

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Broadcasters’ staff cuts continue – the BBC under pressure The year of 2019 was tough for an increasing number of broadcasters and media companies struggling with

Estimated staff reductions at major broadcasters br in recent years

consumers’ changing viewing habits and competition from new media players. Significant reductions in headcount among a

RTE – 3% SBC – 3% TVB – 2% Verizon Media – 2% CNN – 1% NBCUniversal – 1% STV – 1% CBC – 0%

Disne 52% Disney Cana Canal Plus 7% Al Jazeera Ja – 7% The BBC B – 6% DR – 5% BeIN Sports – 4% Radio France – 4% Vice Media – 3%

wide range of end-users not only reflect declining ad revenues, but also the need for new skillsets required in the new market situation favouring flexible, scalable and cost-efficient distribution strategies. One of the biggest layoff procedures in the industry for years relates to the aftermath of Disney’s acquisition of 21st Century Fox in 2018, which initiated layoffs of at least 4,000 jobs, according to industry experts’ estimates.

Total: 7,674

The staff cuts affecting both Fox and Disney’s employees started with the layoff of Fox executives in 2019, soon followed by ad-sales employees at Fox Network Group and National Geographic, according to the Wrap. Later in 2019, the layoffs expanded to Fox’s TV and film divisions.

Source: IABM

Media laid off 150 people to focus on creating new platforms for premium content, according to CNN. Since December 2018, when Verizon announced its long-term buyout program, there had been rumours that the company would cut 7% of its staff, affecting an estimated 800 people. By mid-2019, Verizon Media was supposed to reach cuts of about 10,400 people in its Yahoo and AOL divisions due to the poor performance of Verizon’s digital advertising business (competing with Google and Facebook). This year, the trend has continued; in January 2020, BBC News announced that it will close about 450 jobs from BBC News – BBC Two’s Newsnight, BBC Radio 5 Live and the World Service – as a part of the BBC’s cost savings target of £80 million by 2022. The annual budget of BBC News after the cost savings should equate to about £480 million. As of January 2020, BBC

Source: Walt Disney Television Animation News

News employed about 6,000 people, of which 1,700 employees were working outside the UK. According to Fran Unsworth, the

In May 2019, CNN announced that it had started corporate restructuring efforts leading to buyouts of over 100 employees. The restructuring process relates to AT&T’s – the new owner of CNN – push to manage billions in debt. According to Deadline, the buyouts were primarily targeted to employees who were close or had already reached retirement age, and thus they were covered with a scheme providing one month of pay for every year of service.

Head of BBC News, these cost savings should help the organization to prepare for the next decade. “We are spending too much of our resources on traditional linear broadcasting and not enough on digital”, she said. The specific job roles that will disappear will be announced early in the summer this year, the company reported. As a result, BBC staff went on a strike after the announcement, particularly criticizing the management’s way of communicating about the layoffs – many

In August 2019, Vice Media reported that it would cut 250 staff

employees heard about the staff cuts from the media before

members to improve profitability. Then in September 2019,

receiving a notice internally.

NBCUniversal laid off 70 employees as a part of its consolidation process related to its network operations. Later in October, NBC News announced that it had laid off a dozen employees from the broadcaster’s video and tech operations. In November and December 2019, Verizon and the Canadian

In fact, the BBC had already announced in 2016 that it aimed at saving £800 million, of which £80 million would be from News operations. This should largely be achieved by adopting a ‘story-led’ newsroom model – in which planned stories are rolled out across a bigger number of programs and outlets – to

Broadcasting Corporation (CBC) announced staff cuts.

avoid duplications from numerous programs putting resources

Whereas the CBC’s cuts were relatively modest – 35 jobs

into the same news stories, according to the BBC. In practice,

across the national news service due to ‘redundancy’ – Verizon

the centralization of the planning and commissioning of stories

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P A G E 13

THE MEDIA BUSINESS will likely translate into a reduction in the overall number of

Johnson expressed that the licence fee needs ‘looking at’ and

stories covered and films produced. Some fear that the new

that the government would consider changing the existing law,

‘story-led’ model would weaken the independence of certain

which interprets the failure to pay the licence fee as a criminal

news programs.

offence. In February 2020, the broadcaster announced that the cost of its annual licence fee will increase by £3 from the current £154.5 to £157.5 on April 1st 2020. The fee covers the BBC’s nine national TV channels, 10 national radio channels, local radio, BBC iPlayer and the BBC Sounds app. The current public funding agreement between the broadcaster and the UK government will be valid until 2022, after which the parties must make further decisions about the licence fee level and the role of public funding. Late in October 2019, Ofcom wrote in its second annual report on the BBC that it had already ‘voiced a number of concerns on behalf of audiences’, meaning that the BBC should take significant further steps to engage young people and that the broadcaster should improve the way it represents the whole of UK society. Ofcom admitted that the BBC has taken some steps to address these concerns by launching the BBC Sounds app and by making changes to the BBC iPlayer, while its spend on original content has also increased slightly. However, in the Source: The Independent

Like many European public service broadcasters, the BBC has

annual report, Ofcom criticized the BBC for the absence of a ‘clearly articulated and transparent plan’ to address the issues

witnessed a steady decline in viewer numbers, particularly

related to the engagement of younger audiences, the need for

younger audiences, who are less willing to pay the licence fee,

new original UK programs and the representation of all layers

which accounts for an estimated 75% of the BBC’s revenue.

of the UK society. In the annual report, Ofcom also set a

According to data from the Financial Times, the BBC is facing

timeline for the expected plan – the BBC should publish one by

the most severe financial constraints and political pressures in

the end of March 2020. “If we do not see transparent signs of

four decades, after the current government led by Prime

progress, we will step in and place additional condition on the

Minister Boris Johnson took office and started questioning the

BBC”, Ofcom concluded.

BBC’s public funding model. In December 2019, Prime Minister

Source: Shutterstock

P A G E 14

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Source: Shutterstock

Italy 2019*

Spain

Euro area

The UK

2020*

Supply Trends Our latest Supply Trends Report shows that the supply side of the industry continues to be in flux, with changing business models and buyers’ purchasing behavior influencing the global sentiment and the investment climate of media technology.

In general, suppliers are seeing the on-going transformation

The transition to new revenue models continues as software

of the broadcast and media industry in a relatively bright

In terms of the whole content chain, IABM continues to see increasing confidence – and investment – particularly in Monetize and Consume, as the focus of industry stakeholders is firmly on direct-to-consumer business models.

revenues surpass hardware for the very first time, while

light, and several vendors seem to have found new markets in

industry-wide trends like workflow automation and

terms of geography. We report some of the suppliers’

virtualization accelerate. The transition to IP has gradually

comments below:

started to mature, evidenced by the fact that the share of

“The major shift to software-based production environments is a welcome environment.”

revenue derived from IP has increased – signaling a more established positioning of the technology in the industry. Investment in the industry continues to be at record high levels, while the pressure from both prices and costs has eased – at least temporarily. Even though the industry is still going through a wide range of changes, the sector remains very optimistic; the IABM Confidence Ratio is rising for most

“In some markets we see strong increase, while others are static, but in general the business is more up than steady.” “ OTT is gaining momentum month after month. The question for telcos and content publishers is not whether or not they will go OTT but when.”

industry segments. In our latest survey, the ratio stood at 12,

When looking at the shift in revenues in more detail, the

significantly up from 8.6 in H1 2019.

industry has continued to move away from hardware towards

From a geographical perspective, hardware suppliers and respondents from North America seem to be more confident about the future of the sector, which is relatively surprising given the big number of on-going changes in the industry. In terms of decision-makers, it is important to note that respondents like CEOs and sales and marketing staff are significantly more confident about the future of industry compared to engineering staff, who have a quite negative outlook.

software and service-based revenues; our data shows that software revenues have grown significantly on the back of increased demand from buyers, while hardware revenues have been declining since H2 of 2017. This change is driven by a wide range of trends, of which most notably is the move to cloud. Service revenues have been oscillating in the range of 15-30% in the period 2016-2019. When looking at profits, the picture is quite similar with software revenues driving most of the profits – for the first time in our industry.

Revenues – Breakdown Confidence in the industry 50%

55 50

40%

45 40 35

30%

30 25

20%

20 15

Negative

Very Negative

Hardware revenues

H2-2019

Neutral

H1-2019

Quite positive

H2-2018

Very positive

H1-2018

H2-2017

H1-2016

H1-2017

H2-2016

10%

Software revenues

Service revenues

Source: IABM

I A B M B U S I N E S S I N T E L L I G E N C E Q U A R T E R LY D I G E S T – A P R I L 2 0 2 0

Source: IABM

P A G E 15

THE MEDIA BUSINESS In terms of revenue and demand outlook from a content

When it comes to strategic drivers of media technology demand, the move to direct-to-consumer models,

chain perspective, our data shows that Monetize and

workflow automation, virtualization and IP continue to

Consume continue to be the fastest growing segments for

be the most important. Being in line with the search for

suppliers in the industry along with Manage. This is due

operational efficiency and the increased adoption of

to the fact that more investment is being made in these

cloud-based technology, workflow automation and

content chain blocks to get digital experiences and

virtualization have significantly grown in importance

business models right, as the sector moves to direct-to-

over the past years. This is pushing media technology

consumer models. Other segments like Create, Produce

suppliers to move to software-based revenues, as

and Manage are directly benefiting from the rapid rise in

discussed above.

content investment globally.

The transition from SDI to IP remains very important

Overall, investment in the media technology sector

as well, even though it has slightly lost momentum,

continues to grow, likely driven by the move to software-

according to our data. Moreover, our results show that

based revenues. R&D and trade show investment – as a

there has been a significant drop in remote production in

percentage of sales and marketing budget – increased in

2019 compared to 2018. This is consistent with the

2019. The major R&D focuses of suppliers remain

decline in hardware revenues evidenced earlier and

cloud/virtualization and IP technology. However, most

signals that the transition to IP has matured. Other

respondents predict that R&D investment will decline in

demand drivers have remained relatively static, except

2020, followed by budgets allocated for trade shows, as

the upgrade to next-generation terrestrial standards,

suppliers continue to strive for increased operational

whose importance significantly grew in the course of

efficiency.

2019 – thanks to the accelerating deployment of

IABM members can access the full report in the IABM

ATSC 3.0 in the US.

website.

TopDemand Demand Drivers Drivers ––Historical Analysis Top Historical Analysis Multi-Platform

Workflow Automation

Virtualisation

SDI to IP Transition

Remote Production

Immersive Formats (UHD VR etc)

40% 20% 0%

40% 20% 0% H2-2019

H1-2019

H2-2018

H1-2018

H2-2019

H1-2019

H2-2018

H1-2018

H2-2019

H1-2019

H2-2018

H1-2018

Source: IABM

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Media Technology Special: Cloud What is Cloud? Cloud Cloud technology can be defined as a type of computing enabling users to access a variety of IT-based services via the Internet. Cloud-based technology is often classified on the basis of infrastructure ownership (Public, Private and Hybrid Cloud): n Public Cloud: In this model, cloud service providers (e.g. AWS, MS Azure, Google Cloud) own the underlying infrastructure and are responsible for the maintenance and security of the cloud environment – the customer/organization has no physical control of these. Public cloud deployments guarantee more flexibility / scalability at the expense of less control for customization to suit industry-specific needs. They are generally considered more suited to applications that have intermittent and unpredictable usage – dynamic or “bursty” workloads. The economies of scale enjoyed by public cloud providers allow them to achieve high technology

Source: Shutterstock

Cloud in Broadcast & Media State of Adoption According to IABM data, cloud adoption in broadcast and media is increasing rapidly, as shown by the chart below:

utilization rates that would not be achievable by single media organizations

Cloud Adoption

n Private Cloud: In this model, the infrastructure is owned by the

50%

media organization although its daily management can be carried

45%

out by an external provider. If this is not the case, all management,

40%

maintenance and updating of data centers also need to be

35%

managed by the organization. The private cloud may reside ‘on-

30%

premise’ or ‘off-premise’ depending on the organization’s

25%

preferences – the hosted data is generally protected by a firewall.

20%

Private cloud deployments are less flexible/scalable compared to

15%

public cloud deployments but guarantee the user greater control to

10%

suit its industry-specific needs. Private cloud deployments are

more suited to applications that have regular and predictable

usage – although it is difficult to establish at which usage point a private cloud can be more cost effective than a public cloud

47%

25% 19%

5% 3% We are already doing it today

Very likely

Somewhat likely

Unlikely

n Hybrid Cloud: In this model, a media organization uses both

Not at all likely

Source: IABM

private and public cloud for different applications There is also a further classification of cloud technology based on

47% of respondents in our latest Buying Trends survey said that

the type of service offered (IaaS, PaaS and SaaS):

they have already deployed some sort of cloud technology, being

n Infrastructure as a Service (IaaS): Provision of computing

significantly up from the 37% reported at NAB Show 2019. Our data

infrastructure and resources, such as servers, storage and

consistently shows that cloud adoption has been generally higher

networking

in Europe compared to North America.

n Platform as a Service (PaaS): Provision of a cloud computing

Manage and Publish are the most popular for likely deployment

environment where users can develop, deliver and manage

of cloud, at 43% and 37% respectively. These figures have grown

applications

significantly over the past 12 months; in the previous edition of

n Software as a Service (SaaS): Provision of cloud-based software,

this report both Manage and Publish figures stood at 29%. Also,

where users access applications on a remote cloud network

Produce – ranking as the third most likely supply chain block for

accessed through the web or an API

cloud-based technology deployments – grew from 27% to 34% over

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P A G E 17

THE MEDIA BUSINESS the past year. In our latest survey, Store (30%) and Support (28%) are

n In Monetize, the adoption of cloud can significantly increase

respectively in the fourth and fifth place. Interestingly, Consume and

monetization opportunities. For example, the development of

Monetize are at the bottom with only 18% of end-users likely to

AI/ML offerings – enabling more accurate monetization – has

deploy cloud technology. In terms of deployment models, respondents continue to prefer hybrid cloud deployments (33%) with the preference for private and public clouds equating to 25% and 23% respectively.

represented a differentiator for cloud service providers as the media and broadcast sector increasingly adopts this technology. According to our data, most end-users plan to deploy AI/ML using cloud service providers’ functionalities; therefore, this is an important area of future development.

Cloud Deployments The following is a list of possible cloud applications in the content

n In Consume, the most interesting cloud deployments relate to consumer-facing interfaces. While broadcasters and media companies continue to adopt cloud services for VOD, OTT and TV

chain:

everywhere services, content owners and infrastructure providers

n In Create, cloud capabilities integrated into camera

are increasingly interested in Cloud TV, which provides a new path

manufacturers’ offerings enable news and broadcasters to

to the market – at global scale. Simultaneously, telecom

improve the time to market of their content. In news and sports,

operators (telcos) are increasingly investing in 100% cloud-based

the cloud (and smartphones) has enabled broadcasters to

services to compete with broadcast and media companies.

crowdsource content from audiences – an increasingly important

n In Connect, the cloud can significantly accelerate a secure

model as the relevance of user-generated content and social

transfer of large media files from a local facility to the cloud as

media engagement rises. For example, Sony has recently

well as in hybrid and multi-cloud environments. Media

developed a mobile app called XDCAM Pocket, which promises to

organizations are increasingly adopting a hybrid cloud workflow

turn a phone into a cloud-ready XDCAM camcorder. As a result,

that uses a combination of public and private cloud as well as on-

users can stream content shot with smartphones back to the

premise storage and compute resources. Also, cloud providers

base via mobile networks.

are increasingly turning to the broadcast and media industry by

n In Produce, the cloud has the potential to really disrupt current workflows from video production to post-production. At IBC

offering solutions that are specifically designed for transferring large video files in hybrid and multi cloud environments.

2019, the Walt Disney Studios’ StudioLAB, Avid and Microsoft

n In Store, the cloud enables the use of more flexible and efficient

announced a 5-year collaboration agreement to innovate and

hybrid storage infrastructures as well as elasticity to handle

deliver cloud-based solutions for production and post-

fluctuations in media companies’ capacity needs. With media

production. Disney expects the project to bring benefits related

assets continually growing bigger, cloud storage is transitioning

to remote editing, content archiving, production continuity and

to a hybrid deployment model, shifting as much as possible of

collaboration.

variable capacity to the cloud. Moreover, the adoption of cloud-

n In Manage, cloud technology is the key driver of efficiency. For

based architectures has enabled collaborative workflows in a

example, workflow orchestration can drive efficiencies in other

completely new manner – a team can be disparately located and

functions through business rules that flexibly align costs with

still work on the same file.

demand. The deployment of cloud-based media asset management systems enables users to centralize assets to

n In Support, cloud computing enables instant delivery, virtualized workflows and top end security. Cloud-based monitoring and

achieve better utilization of resources, better collaboration (and

platform management services are also increasingly popular

productivity) and better speed to market. In fact, eliminating the

among media companies. As end-users continue to transition to

need to move files from one repository to another is a driver of

multi- and hybrid cloud environments, they are increasingly

speed to market. n In Publish, the adoption of cloud enables end-users to deliver

needing new types of support services due to the sheer complexity of multi-cloud management, including use cases such as

content to hundreds of distribution platforms across traditional

orchestration, monitoring and billing. Accordingly, end-users are

broadcast, OTT platforms and mobile devices. Cloud playout also

looking into providers that offer tools to manage, monitor and

allows broadcasters to rollout new channels quickly on an OPEX

orchestrate workflows in different cloud environments without

basis rather than investing in hardware. For example, in

having to use different portals that are specific to cloud vendors.

December 2019, AWS and FOX Corporation announced that they

For a much more detailed analysis of cloud deployments, IABM

had signed a multi-year strategic collaboration agreement to

members can view our Media Tech Trends report on Cloud.

create the first single cloud platform, which can deliver both traditional broadcast and direct-to-consumer streaming services.

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REGIONAL FOCUS:

NORTH AMERICA IABM â&#x20AC;&#x201C; 1st April 2020

REGIONAL FOCUS

NORTH AMERICA Business Environment Economic growth in the US was 2.3% in 2019, down from 2.9% in 2018, reflecting uncertainty among U.S businesses and consumers created by the trade dispute with China, according to the World Bank. However, these figures contrast with the Dow Jones Index – reaching record highs in 2019 – as well as the unemployment rate, which fell to a 50-year low (3.5%) in 2019. Hence, the labor market is expected to remain robust bolstering consumption in 2020.

In the US, the prevailing uncertainty will likely have a negative 2017

2018

2019*

2020*

2021*

2022*

impact on companies’ investment activity; the country’s real U

GDP growth is expected to decline to 1.8% in 2020 and to an average of 1.7% in 2021-22. Moreover, the World Bank expects China’s growth rate to fall below 6% this year for the first time since 1990 because of trade disputes with the US – and the recent outbreak of the new coronavirus. In 2019, the price of Brent crude oil – the international benchmark – averaged US$64 per barrel (bbl), being US$7 bbl lower than in 2018. This was mainly due to increases in the US’ petroleum production, which put downward pressure on global R crude oil prices. According to several industry experts, the US’

Annual real GDP growth in major economies (2016-2022*)

production increases likely limited the effect on oil prices of the

Real GDP Growth (%)

attack on key energy installations in Saudi Arabia in September

2019, production cut announcements from the OPEC and the

from these countries).

US’ sanctions 1 on Venezuela and Iran (limiting crude oil exports 2.9% 2.2%

1.6%

2.3% 1.8%

1.7%

According to the U.S. Bureau of Labor Statistics, the Italylow 3.5% Spainin September Euro area The UK unemployment rate fellFrance to a 50-year

0% 2016

2017 US

2018 Euro Area

2019*

2020*

2021*

China

2022* Japan

2019. This was clearly down from the annual average of 3.9% 2019* 2020* in 2018. In December 2019 alone, total employment rose by 145,000 people driven by the retail trade and health care sectors.

Source: World Bank

Monthly US Dollar Index (2018-2019)

In contrast with the optimistic sentiment of 2017, the years of 135

uncertainty. At the beginning of 2018, President Trump

130

announced that the US government would impose tariffs on imported steel (25%) and aluminum (10%). Since then, the US administration has raised tariffs on about US$360bn of goods, affecting imports mostly from China. As a response, China has N imposed counter-tariffs on about US$100bn worth of US products. In January 2020, China and the US signed a preliminary deal (i.e. ‘Phase one’), but as the negotiations

Index Value

2018 and 2019 were characterized by increased political

125 120 115 110

concerning the most contentious issues are still on-going, the possibility of an escalating trade war remains elevated. Under

Source: Board of Governors of the US Federal Reserve System

the first phase deal signed in January, China has pledged to increase its imports of US products by $200bn above 2017 levels

By the end of October 2019, the Fed had already cut interest

and promised to strengthen intellectual property rights. In turn,

rates three times in the course of the year, reversing nearly all

the US agreed to halve some of the latest tariffs it imposed on

of 2018’s rate increases. These cuts aim at lowering mortgage

China in 2019. However, in January 2020, the World Bank

rates and other consumer borrowing costs, which should

estimated that even the easing of trade tensions between the

translate into an increase in domestic demand. The stimulus

two countries is unlikely to lead to any rapid improvement in

measures in 2019 by the Fed highlight significant uncertainty

the global economy.

prevailing in the US economy, which is expected to continue in

P A G E 20

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2020 due to on-going trade negotiations with China as well as

US products cost most foreign buyers significantly more than

slowing global growth. President Trump – preparing for the

they did before the trade dispute.

2020 election – has criticized the Fed for insufficient stimulus and has said that the Fed should cut rates to zero or below to bolster stock prices and the general economic climate.

In Canada, economic growth slowed down from 1.9% in 2018 to 1.5% in 2019, according to the IMF. However, the unemployment rate of 5.5% in 2019 was a multi-decade low, and on a

The US dollar index remained stable – and high – in 2019; in

year-on-year basis, employment grew by 456,000 people

December, on the last trading day of the year, the index

(equaling 2.4%). Canada’s economy is export based – its

recorded its smallest-ever annual move, being up by only

exports account for 45% of its total GDP. Late in 2019, the Bank

0.24% for the year. In 2018, the index was up by 4.4%. The US

of Canada released a scenario in which the Canadian economy

dollar value has been climbing since the Trump Administration

would shrink by 4.5% by 2021, if a global slowdown became

began imposing tariffs on Chinese imports in 2018, and in

more pronounced. However, the bank still kept its 2020 GDP

September 2019, the US dollar index reached a nearly 15-year

growth forecast at 1.8% owing to the new US-Mexico-Canada

high. A strong currency has made US exports harder to sell, as

Agreement (USMCA) replacing the former NAFTA.

Source: Shutterstock

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NORTH AMERICA The Broadcast & Media Industry Overview

30%

40% 35%

25%

30% Million (HHs)

Compared to Europe, where broadcasting mostly started as a state monopoly, and with public service broadcasters (PSBs) still playing a major role in many European countries, North America’s broadcast and media sector has favored private offerings of radio and television services. Initially, the broadcasting industry was financed only through advertising, but it later developed into a complex ecosystem of different networks, Pay-TV operators, affiliates – and most recently over-the-top (OTT) players.

Number of cord-cutters in the US (2019-2022*)

20%

25% 20%

15%

10%

10% 5%

5% 0%

2019

2020

2021*

Number Number of of cord-cutters cord-cutters

2022*

2023*

Share Share of of households households

In Canada, the Canadian Broadcasting Corporation (CBC) – a Source: eMarketer

public broadcaster – was the first network to be established in 2022* 2022*

the country, but from the 1960s onwards the broadcasting

households in the US in 2019, but this figure is likely to drop to

industry started to diversify thanks to private networks entering

79.4 million by 2021, data from eMarketer shows. In the third

the market, and CBC’s market share was diminished.

quarter of 2019 alone, major US Pay-TV providers –

With 121 million TV households in the US, North America is

representing nearly 93% of the market – lost about 1.74 million

home to a number of very large broadcast and media

subscribers, clearly up from 0.96 million cord-cutters in Q3 of

organizations, and hence it constitutes one of the largest

2018, according to data from Leichtman Research Group.

markets for broadcast and media technology products and

New research from GlobalData published in November 2019

services. The size asymmetry between end-users and

showed that Pay-TV revenues are dropping in line with cord

suppliers in this region has often caused pressure on

cutting; in the US, revenues are projected to drop from

broadcast and media technology product prices.

US$94.4 billion in 2019 to US$84 billion by 2024. Canada is

The traditional broadcast landscape in North America is

expected to face a somewhat similar situation as the US, but

structured around the relationship between media networks

the decline of Pay-TV is much slower and nearly flat; the

and distributors:

number of Pay-TV subscribers will decline from 11.18 million

n Media networks are broadcast and cable/premium

Research. Nevertheless, it is important to note that despite

in 2017 to 11.17 million by 2023, according to Digital TV programmers that derive money from advertising and distribution fees charged to third-party distributors. Media

its continual decline, the cable and satellite Pay-TV business is still large in North America.

networks can be divided into: – Broadcast networks such as CBS and ABC carried by local stations, which are owned by or affiliated with them as well as by Pay-TV operators. – Cable/premium networks generally carried by Pay-TV operators over cable, satellite and IPTV. n Distributors are free-to-air terrestrial stations, station operators and Pay-TV operators carrying a mix of original content and programming from external media networks. They derive money from advertising and fees charged to subscribers. According to eMarketer, the number of American Pay-TV homes that no longer have access to a traditional Pay-TV service (i.e. cord-cutters) is expected to increase from 21.9 million in 2019 to 34.9 million in 2023. In total, there were 86.5 million Pay-TV

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As the competition around original content intensifies, TV networks and broadcasters are adopting a holistic method of monetizing their inventory. Instead of working in silos, traditional media companies are increasingly combining different monetization methods such as ad-funded, subscription or transaction, which allows them to have more transparency and a better understanding of their whole inventory and how it works across different delivery systems. This also means that TV networks’ core business is converging, as they are overlapping on more fronts than ever before. After purchasing DirecTV for US$48.5bn in 2015, at the end of 2016, AT&T launched its own direct-to-consumer skinny bundle offering, DirecTV Now. In June 2019 – after several quarters with accelerating subscriber losses – DirecTV Now was rebranded to AT&T TV Now and the service’s monthly subscription rose further to US$65 covering about 45 channels

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(including HBO). In December 2019, AT&T announced that it

In September 2018, Comcast – America’s biggest provider

planned to roll out a new streaming service called AT&T TV in

of cable and broadband services – won the bidding war with

the first quarter of 2020. AT&T – which has owned Warner

Disney over Sky in a deal worth US$40 billion. As Disney had

Media (formerly Time Warner) since 2018 – is also expanding

just acquired 21st Century Fox, which in turn owns 39% of Sky,

its positioning in the OTT space through WarnerMedia’s new

Comcast wanted to secure the remaining 61% for itself,

streaming service, HBO Max, which will launch in May 2020.

attracted by Sky’s major sports rights deals and partnerships

Verizon, which has witnessed a decline in Pay-TV subscriptions

with BT Sport, Spotify and Netflix. Comcast – which was

and a surge in its broadband subscriptions, is also revamping

estimated to have spent US$15.4 billion on originals in 2019 –

the way it sells its TV and broadband internet service. Instead

announced in January 2020 that it is going to make ‘rate

of offering ‘bundles’ that combine TV, broadband and phone

adjustments’, as its cable customers continue to switch their

service, the company recently introduced a new ‘Mix and

bundle cable/internet packages to streaming channels.

Match’ plan with individual broadband service combined with

Therefore, Comcast – the owner of NBCUniversal – has decided to launch its own streaming service, Peacock, in July

Pay-TV programming. In November 2019, Disney launched its own subscriptionbased streaming service, Disney+, in the US, Canada, Australia,

2020. Peacock will be available either as a free ad-supported service or as Peacock Premium priced US$10 per month.

New Zealand and the Netherlands. By the end of March 2020,

In 2019, Netflix was estimated to have invested about US$15

the service will also be available in the UK, Germany, France,

billion in original content, up by 25% from the previous year.

Italy and Spain. Disney+ costs US$7 per month or US$70 per

According to BMO Capital Markets, Netflix’s content spending

year, being clearly below the monthly subscription of Netflix

will reach US$17.3bn in 2020. Facing serious competition from

(US$12.99). Viewers’ interest in the new service has been huge;

Disney+, Apple TV+ as well as WarnerMedia and

a few weeks after the launch, Disney+ had already surpassed

Comcast/NBCUniversal starting later this year, Netflix

22 million mobile downloads, according to Apptopia. To augment its in-house technology capabilities, Disney

announced in the last quarter of 2019 that it will raise US$2 billion in debt to fund new investments in content.

acquired streaming technology provider BAMTech at the end

Even though Amazon has not spent as much on original

of 2017. The following year, Disney launched an ESPN-branded

content as Netflix, its market cap is six times bigger than that

sports streaming service. Later in 2018, Disney and 21st

of its main rival. According to internal documents obtained by

Century Fox shareholders approved a US$71.3bn deal, in

Reuters, Amazon Prime had over 100 million subscribers

which Disney purchased Fox assets and got control over Fox’s

worldwide, of which about half were in the US. Recently,

entertainment properties and a 39% stake in Sky, India’s Star

Amazon Prime has grown rapidly in the Indian market, where

and Hulu. The mega deal accentuated the increasing

its total local investment to date equates to US$6.5 billion,

importance of scale in the US media industry.

according to Jeff Bezos, CEO at Amazon.

Source: Shutterstock

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NORTH AMERICA 2017

Media Technology Demand Drivers

2018

2019*

2020*

2021*

2022*

China

Japan

antennas, RF components, and any required structural

We examine specific trends driving broadcast and media technology spending in North America. The trends we discuss are:

In Canada, the CRTC set the initial deadline for the

n Transition to Digital and HD Broadcasting

transition of full-power TV stations to the end of August

engineering work on TV transmission towers.

n Transition to ATSC 3.0

2011. A deadline is yet to be set for low-power TV stations.

n New Viewing Experiences (UHD and VR)

The remaining analog over-the-air television signals

n OTT and Multi-Platform Delivery

across Canada are scheduled for shut down by 2022.

n 5G

In North America, the transition to HDTV has been a

The transitions to digital and HD broadcasting are mature trends in

major driver of broadcast and media technology spending;

this region and do not represent significant spending drivers for

it drove a wave of spending on digital equipment in the

vendors. The transitions to new viewing experiences, multi-plat-

2000s, while tests of high-definition television had already

form delivery, ATSC 3.0 and 5G are instead now the principal spurs.

been carried out in the 1990s. In the US, the number of HD channels grew significantly between 2005 and 2012,

Transition to Digital and HD Broadcasting

but after that spending on digital equipment waned as

In North America, the transition to digital broadcasting has almost reached maturity and therefore does not represent a significant driver of broadcast and media technology spending.

broadcasters started to focus on new technologies like multi-platform content delivery. Today, HD equipment has been adopted by 90% of TV households in the US and all major TV networks offer HD programming through about 200 HD channels. However, 4K/UHD TVs are rapidly

In the US, the Federal Communications Commission (FCC) started

replacing HDTVs in the US â&#x20AC;&#x201C; as of December 2019, about

running tests of digital transmission in 2008. The requirement was

34% of American households already had a 4K/UHD TV

set for full-power TV stations to shut down their analog

set, according to IHS Markit.

transmissions by June 2009. Low-power TV stations were given an extended deadline of September 2015 and continued to broadcast

Transition Schedule

in analog. However, the FCC suspended this required the repacking of TV spectrum, and meant that some stations may have had to

Construction Permit Filing Window Construction Permitting Planning & Construction Testing Period Phase Completion Date

April 13, 2017: FCC Released Incentive Auction Closing and Channel Reassignment Public Notice

deadline due to the Incentive Auction, which FCC

July 12, 2017 September 4, 2018

go off air or change channels. On completion of the auction in 2017, the FCC announced a new date of July 13, 2021 for low-power TV stations to shut off analog transmissions. After the competition of the spectrum

Phase 1

November 30, 2018

Phase 2

April 12, 2019

Phase 3

June 21, 2019

Phase 4

August 2, 2019

auction in March 2017, the FCC issued the new channel allocation table for US

Phase 5

broadcasters. Each phase also has a date by

Phase 6

which each station must stop operating on

Phase 7

September 6, 2019 October 18, 2019 January 17, 2020

their pre-auction channels. The process of repacking the spectrum impacts nearly 1,000

Phase 8

TV stations in the US and should be finished

Phase 9

by July 3rd 2020, according to the FCC. The

Phase 10

work during the repack process consists of

4/13/17

March 13, 2020 May 1, 2020 July 3, 2020 4/13/18

4/13/19

upgrading transmission infrastructure such as digital TV transmitters, broadcast

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Source: The FCC

Transition to ATSC 3.0

New Viewing Experiences (UHD & VR)

ATSC 3.0 is the next-generation terrestrial standard system that will provide broadcasters with additional spectrum efficiency. It provides broadcasters increased flexibility and new market opportunities through enhanced transmission and reception functionality, delivery of 4K UHD TV, immersive audio, and interactive services using a mix of Internet and broadcast connections.

According to IHS Markit, about 34% of North American homes had 4K/UHD TV sets as of October 2019. This percentage is expected to reach 64% in the next four years. These figures are in line with our latest Buying Trends survey, which showed that over one third of end-users have already launched UHD offerings, followed by another third planning to do so in 1 to 3 years’ time.

The arrival of ATSC 3.0 will allow terrestrial

by terrestrial broadcasters – now switching to the new ATSC

In North America, the adoption of 4K/UHD is driven primarily

broadcasters to deliver a greater number of HD

3.0 standard – and Pay-TV operators, who continue to

channels, because the new standard provides more

differentiate and diversify their offerings. For example, in

efficient terrestrial transmission. The new standard will

South Korea, the adoption of ATSC 3.0 notably facilitated

also help Pay-TV operators – battling with cord cutting –

4K/UHD adoption among terrestrial broadcasters.

to increase the number of HD channels and thus attract new subscribers. Accordingly, the rollout of ATSC 3.0 by broadcasters in the US is expected to drive spending, particularly with regard to transmission-related equipment.

Somewhat surprisingly, in 2019, the trade dispute between China and the US also fueled demand for 4K/UHD TV sets in the US. According to IHS Markit, domestic shipments of 4K/UHD TVs in the US surged in 2019, because American distributors were stockpiling their inventories ahead of

The timeline of implementing the ATSC 3.0 standard

proposed tariff increases on TV sets manufactured in China.

in the US is characterized by the fact that the switch is

Globally, sales and shipments of 4K UHD TVs now exceed

not mandatory; stations may choose to broadcast in the

more than half of all TV shipments worldwide.

new format on a voluntary basis. In the US, various TV stations have been testing ATSC 3.0-standardized broadcasts since 2014. In 2017, the National Association of Broadcasters got the first license to start

Over the past five years, a clear majority of UHD deployments have focused on live sports. Industry experts anticipate that the 2020 Olympic Games could act as a catalyst for UHD production. Already at the 2018 Winter Games in

broadcasting ATSC 3.0 at full scale.

PyeongChang, several broadcasters like NBC, Japan’s NHK

In March 2017, the two largest broadcast station

and Olympic Broadcasting Services (OBS) covered selected

owners, Sinclair and Nexstar, formed an ATSC 3.0

content in 4K HDR. Recently, Olympic Broadcasting Services

consortium – the Pearl TV consortium – to coordinate

(OBS) – preparing for the 2020 Summer Games in Tokyo –

the launch of ATSC 3.0. Later in 2017, seven

announced that it is partnering with Alibaba Cloud to create

broadcasters – E.W. Scripps Company, Fox Television

a cloud-based sports broadcasting platform, the OBS Cloud,

Stations, Meredith Local Media Group, Nextstar Media

to support the first-ever live coverage of the Olympic Games

Group, Tegna, Telemundo Station Group and Univision –

in UHD/HDR, enriched with sports highlights packages,

across 10 stations in Phoenix launched a ‘model

behind-the-scenes clips and VR effects.

market’ to demonstrate the viability of the next generation ATSC 3.0 ecosystem. Since then, major broadcasters including NBC, Fox, Nextstar Media Group and Tegna have announced that they will switch to ATSC 3.0 in 2020. In general, the interest in the new standard remains high as the rollout of ATSC

New media players like Netflix and Amazon have also played an important part in boosting the adoption of 4K/UHD. Over the past few years, Netflix and Amazon have only accepted original content shot in 4K/UHD. This has increased demand for 4K production equipment.

3.0 has now begun in the US and it is expected to boost

So far, VR is mostly being used in sports where it could

4K/UHD adoption, gradually superseding HDTV in

represent an alternative, or surrogate, to watching a game in

the region.

the stadium. While broadcasters have experimented with VR for several years, the technology still presents end-users with the challenges of having the right tools to deliver VR

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NORTH AMERICA graphics – and its high costs. This is in line with our latest

recent years; the region grew only 7% in 2019. As a result,

Buying Trends survey data; only 14% of end-users said that

Netflix is now seeking growth from new markets like Brazil,

they are already using VR technology, while another 14% said

Mexico and India – like its key rival, Amazon. Late last year,

they are very likely to do so. VR technology needs to find a

Netflix published figures on its global subscriber growth,

clear business model backing it as most deployments rely on

which showed that the Asia-Pacific region is the company’s

free broadcast to viewers through apps.

fastest-growing market, with 14 million subscribers.

OTT and Multi-Platform Delivery

NBCUniversal, Fox, Time Warner and Disney – had the

Prior to the launch of Disney+, Hulu – owned by

OTT and new media offerings continued to grow in North America in 2019, further strengthening the region’s role as the global OTT industry leader. North America’s developed broadcast market with a solid broadband infrastructure has provided an excellent seedbed for OTT services; according to eMarketer’s estimate, there were 182.5 million people in the US viewing content through subscription-based OTT services in 2019, representing over 55% of the country’s population. The US alone is estimated to account for 90% of the North American SVOD market. Fueled by the recent launches of new SVOD platforms like Disney+ and Apple TV+, the SVOD market in the region is forecast to grow at an annual rate of 9% through 2023, according to GlobalData. Today, the OTT landscape in North America is dominated by Netflix, Amazon and Hulu. According to data from Digital TV Research, Netflix had 62 million subscribers in the US in 2019, translating into a market share of 34%. Amazon was estimated to have 54 million subscribers (29% market share)

third largest market share in the US in 2019 in terms of subscriber base. Recently, industry experts estimated that Hulu with its Live TV was the biggest US virtual MVPD in terms of subscriber base. As an on-demand video service available in the US and Japan (not in Canada), Hulu focuses mostly on streaming newer TV shows and its own original content. In October 2019, Hulu added the feature to watch content offline. Launched in 2014, Pluto TV is another interesting live TV streaming service – and a competitor of Hulu+ Live TV. Acquired by Viacom in March 2019, Pluto TV offers free content mainly curated from available online sources. As of November 2019, Pluto TV had over 20 million active users, which made it the largest free TV streaming service in the US. The service has over 170 content partners providing content through 240 channels. For Viacom, Pluto TV is a key platform to boost its advertising revenue. For example, in September 2019, Viacom reported that 3,500 brands advertised on Pluto TV. As 5G starts to deploy globally, streaming of live sporting

in its home market in 2019, followed by Hulu with 26 million

events will represent a large share of 5G telco-OTT bundling

subscribers (14%). Industry experts expect the recently

revenues in the coming years. According to Ovum, live sports

launched Disney+ to be the biggest winner in the North

streaming will account for over 50% of bundling revenue by

American OTT market in the coming years. At the end of

2024, which is significantly up from the 20% figure in 2019. In

November 2019 – only few weeks after its launch – Disney+

terms of revenue, this will mean that 5G network bundles

had an estimated 24 million subscribers in the US, boosting

will surge from US$6 million in 2019 to US$4.9 billion by

cancellations among Netflix customers, according to

2024. Live sports will make up the majority of these

Cowen & Co.

revenues, followed by SVOD.

In January 2020, Netflix reported its earnings for Q4 2019, the first quarter in which it faced direct competition from Apple TV+ and Disney+. While Netflix’s quarterly revenue of US$5.47 billion met investors’ expectations, its domestic subscriber additions (550,000) fell significantly below the expected 589,000. Earlier in 2019, Netflix reported a loss of 126,000 domestic subscribers during the second quarter. In fact, North America has been its slowest-growing market in

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5G In the US, private industry is leading 5G development and American telcos competing against each other have been the first in the world to offer 5G services commercially. So far, the US government has supported the private sector with its 5G deployments by making spectrum available for 5G use and streamlining processes related to the siting of 5G equipment such as small cells. By comparison, in China the central government is the key promoter of 5G infrastructure.

in early 2020. In this process, the company would be deploying 5G through three key 5G pillars: mobile 5G, fixed 5G and edge computing. Like Verizon, AT&T’s 5G network relies on high-band spectrum, making the network more suitable for a limited area with relatively small coverage like urban areas or individual sites (e.g. sports stadiums). In December 2019, T-Mobile announced the launch of its nationwide 5G network, which made it the first US carrier to offer 5G service across the US. T-Mobile’s 5G network relies on low-band wireless spectrum, which means that

In the US, private telcos started 5G deployment in 2018. For

T-Mobile has built its network broadly covering as many

example, Verizon launched fixed 5G services in four cities in

people as possible, but at the cost of speed. This is a

October 2018. As of December 2019, Verizon’s 5G network

different strategy from T-Mobile’s competitors Verizon

was already available in 30 cities.

and AT&T, which are deploying 5G in much smaller areas

In December 2018, AT&T launched mobile 5G services using a 5G hot spot in 12 cities. Since then, the company has expanded its mobile 5G network to seven more cities. At the end of 2019, AT&T said that it had made 5G access available in 30 states in the US. The company also announced that it will deploy a standards-based nationwide mobile 5G network

allowing higher speeds. In February 2020, T-Mobile’s acquisition of Sprint was approved by the US legal authorities. According to several industry experts, Sprint will help T-Mobile to increase its nationwide 5G network speed and data processing capacity, because Sprint holds large amounts of mid-band spectrum.

Source: Shutterstock

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LATIN AMERICA IABM – 1st April 2020

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LATIN AMERICA Business Environment Latin America generally refers to all the territory that is south of the United States, including Mexico, Central and South America, and the Caribbean islands, where the Portuguese and Spanish languages are predominant. Historically, the largest driver of GDP growth in Latin America has been the expansion of the labor force, resulting from a demographic boom and women’s increased participation in working life. However, over the past decade, the region has struggled with a slowdown of economic growth, caused by weak macroeconomic policies, political uncertainty and a volatile business environment. In 2019, the IMF set the region’s GDP growth forecast at 0.6% – the lowest rate since 2016. This year, economic activity in Latin America is expected to rise to 2.3%, according to the IMF. Particularly weak economic growth Source: Shutterstock

in the region in 2019 stemmed from heightened trade tensions between China and the US, the slowdown of the global economy as well as elevated domestic policy uncertainties in

Other major economies in the region include Argentina, Chile,

the largest Latin American economies. Given the fact that only

Colombia and Peru. Argentina is gradually recovering from

three economies – Brazil, Colombia and Mexico – combined

recession and the country’s GDP growth in 2019 was estimated

account for 60% of Latin America’s GDP, economic

to be -1.3% by the IMF. Economic growth in Chile has remained

development in these countries largely determines the

robust: the IMF forecast for 2019 was 3.2% and in 2020 the

pace of economic expansion in the whole region.

fund anticipates growth to accelerate to 3.4%.

In terms of individual countries, Brazil is the largest economy

In Venezuela, the economic crisis continued to worsen in 2019;

in Latin America and its population of nearly 215 million forms

the country’s real GDP is estimated to have fallen by 35% over

the biggest consumer market in the region. Since 2015, Brazil

the past 12 months, according to data from the IMF. This

has suffered from highly depressed economic activity, which

means that the Venezuelan economy has cumulatively declined

has stagnated the pace of poverty and inequality reduction. In

by over 60% since 2013. The prevailing hyperinflation and the

2019, the IMF’s growth estimate for Brazil stood at 0.8% due

humanitarian crisis have resulted in massive outward

to international headwinds and the fact that the country’s

migration. According to the latest estimates, the total number

recovery from a severe recession is still on-going.

of migrants from Venezuela surpassed 5 million by the end of 2019. The country’s situation has already had significant

In 2019, the IMF revised Mexico’s economic growth forecast

spillovers to other countries in the region.

down to 0.9% as the result of elevated political and policy uncertainty delaying investments and tightening credit

Latin American exports are largely dominated by natural

conditions. This year, these conditions are expected to

resources such as petroleum, copper and iron ore. The decline

normalize accelerating the country’s economic growth to 1.9%.

in oil prices over recent years has impacted nations such as

Mexico – which is the second largest economy in Latin America

Brazil, Mexico and Venezuela – the largest oil exporters in

– is highly dependent on its largest trading partner, the US,

Latin America.

which accounts for 80% of Mexican exports. In October 2019, the IMF expressed its concerns over Mexico’s optimistic budget targets in the context of lower growth prospects. In November 2018, during the G20 Summit in Argentina, the US, Canada and Mexico signed a pact that replaced the NAFTA agreement with the USMCA (US-Mexico-Canada Agreement).

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LATIN AMERICA The Broadcast & Media Industry Overview Latin America is an emerging broadcast and media technology market, with big economies such as Brazil, Mexico, Colombia and Argentina leading development. Many countries in this region lack the infrastructure and resources required to develop the broadcast and media industry, and further challenges are presented by the unattractive business and political environment. In 2018, the top drivers of investment were the FIFA Soccer World Cup, the presidential elections in several countries of the region, the development of Digital Terrestrial Television (DTT) and the analog switch-off (ASO). Most broadcasters in the region are already generating content in 4K and they are increasingly deploying technologies that enable better interaction with viewers. Recently, competition in the Latin American OTT market has increased with several operators launching SVOD services. Local content has been under the spotlight for OTT providers to attract viewers, as integrated media companies like AT&T Direct TV and América Móvil have a huge presence in the region with extensive libraries of original local content. Economic issues in Latin America have recently increased and the Pay-TV sector remains flat. This is due to low purchasing power, a high level of income inequality, relatively poor fixed-broadband infrastructure and easy access to illegal or free high-quality alternatives. According to Business Bureau S.A., a local media consultancy and market research firm, in 2018, there were about 90.3 million Pay-TV subscribers in Latin America, of which over

half resided in Brazil (25 million) and Mexico (22.4 million). Pay-TV penetration in the region stood at 51% of all TV households in Latin America in 2018, with Argentina and Venezuela ranking first and second at 74% and 71%, respectively. In terms of transmission infrastructure, in 2018, cable TV connections accounted for 54% of all TV subscribers, followed by direct-to-home (DTH) satellite connections (46%), according to Business Bureau S.A. Content delivery in Latin America is subject to several challenges: dispersed populations living in remote areas are difficult to reach via terrestrial TV services like cable and DTT connections, while TV operators also need to be able to minimize their service downtime in areas that frequently face extreme climate conditions, which can disturb terrestrial infrastructure. Hence, nearly half of the region’s TV households rely on DTH satellite TV delivery and its expansion continues in the region. Currently, internet service providers and mobile network operators employ satellites to provide broadband services. This makes the satellites the ‘middle-mile’ solution, whereas in some regions, they also provide the full solution for the broadband connection. The main satellite operators and service providers of broadband via satellite in the region include: ABS, Eutelsat, Hughes, Hispasat, Intelsat, SES, Telesat and Viasat, according to Satellite Markets & Research. When it comes to the key stakeholders in the Latin American Pay-TV market, Sky dominates the market in Mexico, followed by DISH. In Brazil, NET has the leading position, closely followed by Sky. In Argentina, Cablevision and DirecTV lead the market, whereas America Movil, Movistar and DirecTV are particularly strong in Peru, Chile and Venezuela.

Market shares of Pay-TV operators in Mexico (2018)

Market shares of Pay-TV operators in Brazil (2018)

Sky DISH Megacable Cablemas IZZI Telecom Others

NET Sky Claro TV Vivo OiTV Others

Market shares of Pay-TV operators in Colombia (2018) America erica Movil UNEE ecTV DirecTV vistar Movistar STVV Net ers Others

Market shares of Pay-TV operators in Argentina (2018) Cablevision DirecTV Telecentro Supercanal C.C.C. Others

Source: Business Bureau S.A., IABM

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Market shares of Pay-TV operators in Venezuela (2018) Market shares of Pay-TV operators in Peru (2018)

DirecTV Intercable CANTV Movistar Net Uno Others

Movistar DirecTV America Movil Cable Vision Best Cable Others

Market shares of Pay-TV operators in Chile (2018) VTR Movistar star DirecTV TV America ca Movil Entel Otherss

Source: Business Bureau S.A., IABM

Media Technology Demand Drivers The transition to digital broadcasting in Latin America has not been a homogeneous process. The switchover requires coordination between different parties to ensure the smooth transition between analog switch-off and digital switch-over, whilst maintaining efficiency and minimizing issues. This can make it difficult to implement the transition effectively and achieve tight deadlines, especially when each country is dealing with its own individual economic and political challenges. The challenges that the region have been facing are the lack of government support and the inability to manage economic and political issues. However, the transition from analog to digital broadcasting has been appealing for many governments in Latin America, and several countries are in the midst of the transition process. Argentina and Colombia had set the deadline for the analog switch-off to 2019, but as of writing this report in January 2020, there was no information available about the final completion of the transition process in these countries. Chile, Peru and Paraguay expect to complete their digital transitions by the end of 2020. For the rest of Latin American countries, the deadlines are quite difficult to predict. Chile has announced that it is unlikely to meet the April 2020 deadline for its analog switch-off, even

though the country has made significant progress in working with TV channels to accelerate the transition process. Paraguay’s analog switch-off will start in 2021, according to the country’s telecommunications regulator, Conatel. Governments have a massive impact on the transition to digital broadcasting in Latin America and not all the countries have enough resources to provide loans or offer television sets to households, which continues to affect the speed of the transition process in some countries.

Transition to HDTV and UHD The transition to digital broadcasting has been a major growth driver of high definition television (HDTV) in Latin America. Compared to Europe and North America, the transition to HD is still far from reaching maturity in the region. Today, HD remains a differentiator primarily offered by Pay-TV operators to maintain a competitive advantage over other market players, and hence most HD channels are still offered by them. In recent years, the increase in the number of digital TV subscribers as well as the development of satellite broadcasting have boosted the growth of HD channels in

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REGIONAL FOCUS

LATIN AMERICA Latin America, with satellite providers entering to compensate

In Latin America the largest operators are driving the

for low growth in maturing markets such as North America

transition to UHD, as they see it as a real differentiator in the

and Europe. Households in Latin America are using mobile broadband systems to access the internet, and these systems are not ideal for IPTV or OTT Pay-TV at the moment, largely due to high bandwidth charges. Thus, it is more profitable to deliver linear television by satellite than by 4G wireless systems. Due to this, DTH and other satellite services are growing at a modest pace, and the poor overall development of telecom/broadband infrastructure in the largest markets like Brazil helps in giving stability to business in the satellite sector. When it comes to HD penetration, an estimated 54% of Latin American homes with a television had an HD screen in 2016, and the share is forecast to reach 76% by 2022, according to Dataxis. HD penetration rate by country, measured as the share of households with an HDTV set out of total Pay-TV households, grew from 73.4% in 2016 to 99.9% in 2017 in

future. According to Embratel Star One, one of the largest satellite operators in the region, there is a move to combine DTH and IP, while the demand for UHD is not strong yet. Compared to global markets, the distribution of households with UHD/4K TVs in Latin America (10%) is still far behind North America (30%) and Western Europe (20%). According to Strategy Analytics’ estimate, about 25% of households in Latin America will have UHD TVs by 2020, which is slightly above the global average of 23%. Even though the number of households with 4K UHD TVs is increasing, consumers need to be prepared for the fact that they may not necessarily have access to 4K content, but rather content with upscaled Full HD. This is largely due to the fact that many home networks will not be ready to stream or download huge amounts of data. The growing availability of 4K-enabled connected consumer

Brazil. Interestingly, the second largest Pay-TV market by

hardware is reinforcing the role of OTT, which is already

subscriber base, Mexico, is still far behind the other key

benefiting from traditional broadcasters’ slow pace on UHD

Pay-TV markets with its relatively low HD penetration rate of

adoption, who have to contend with 4K equipment upgrades

42.9% in 2017. This is partly explained by the fact that Mexican

and new workflows. As a result, some broadcasters have

households can enjoy free FTA TV in digital and HD throughout

started to see internet streaming, rather than linear TV, as a

the country, and households can access up to 30 HD channels

more viable way to deliver UHD/4K content to audiences. By

currently for free. Overall, HD penetration has grown

eliminating consumers’ need to upgrade set-top-boxes (STBs),

significantly in all top Pay-TV markets in the region over the

internet streaming allows traditional broadcasters to reduce

past few years. This indicates strengthened demand for and

consumer prices and attract younger audiences particularly.

interest in HD content on the consumer side, which has translated into a rapid growth of the installed base of HDTVs. In terms of the number of HD channels, Brazil and Mexico have the largest number of HD channels, followed by Argentina, Colombia, Chile, Peru and Venezuela. As the number of DTH households grows, many Pay-TV operators continue to add HD channels. The transition to UHD is still at a very early stage in Latin

Similarly to other global markets, live sports is a key driver of UHD adoption in Latin America. For instance, Brazil’s largest media company Globo collaborated with Japan’s national broadcaster NHK during the Rio de Janeiro 2016 Summer Games and used UHD 8K for live transmission of the opening and closing ceremonies for the very first time. In April 2018, DirecTV Latin America launched a 4K UHD channel in Argentina, Chile, Colombia, Ecuador, Peru and Uruguay. In

America, as most broadcasters are focusing on upgrading

2018, DirecTV – in association with ESPN – broadcast some

their infrastructures to HD. Even though the Rio de Janeiro

matches of La Liga, Premier League and UEFA Champions

2016 Summer Games accelerated adoption and increased the

League, and in June 2018 it covered the FIFA World Cup in

number of UHD-related initiatives by broadcasters, the

Russia for the first time in 4K UHD.

transition to UHD as a whole remains slow and market growth relatively modest in Latin America. The recent economic crisis in the region, decline in consumers’ disposable income and social instability in certain countries such as Mexico and Brazil have further delayed UHD/4K initiatives.

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OTT and Multi-Platform Delivery The OTT market in Latin America is growing, even though low broadband penetration and poor broadband speeds are hindering its development. The number of fixed-line broadband subscriptions is still low, and a minority of these subscriptions provide connections faster than 4 Mbps, which is the minimum requirement to stream HD video. Hence, much of the internet access happens via mobile phone. Underdeveloped payment infrastructure is also hindering the growth of the OTT market – many Latin Americans do not have a bank account or a credit card, which is perceived to be a major barrier to premium OTT take-up.

The key OTT players in Latin America include Netflix, Amazon Prime, Blim, Movistar Play, Claro Video and HBO Go; combined, they are estimated to account for 91% of the region’s paying SVOD subscribers by 2023. Netflix, which is currently the market leader in the Latin American OTT market, launched its service in the region in 2011 in an agreement with regional broadcasters such as Grupo Televisa and TV Azteca. Both foreign and local content is available on the platform, with Brazil and Mexico being the largest markets in the region. According to Frost and Sullivan, Brazil was Netflix’s fourth-biggest market after the US, Canada and the UK with 3.5 million subscribers in 2017. Since then, the OTT giant has continued rapid growth

Recent market dynamics indicate that the relative importance

in the country; in September 2019, Netflix announced that

of OTT will grow substantially in the region, even though

it surpassed the mark of 10 million subscribers in Brazil,

Pay-TV penetration is significantly higher than that of OTT. In

having a larger subscriber base than any Pay-TV operator

Latin America, penetration of OTT services is driven by

in the country.

technological development and quality of broadband services,

Major broadcasters like Globo and Televisa have woken up

especially mobile broadband. Data from Digital TV Research

to the growing threat of OTT offerings and have launched

shows that SVOD subscriptions in Latin America are forecast

their own streaming apps for connected TVs and devices.

to increase from 27 million in 2018 to 51 million in 2024. It is

For example, in 2016 Televisa launched its own OTT

estimated that nearly a third of the region’s TV households

service, Blim, which focuses on original local content,

will pay for an SVOD package by 2024, significantly up from

and announced that the company will withdraw its content

13% by the end of 2017.

from Netflix, when the collaboration agreement ends

In terms of revenue, SVOD will remain the largest OTT revenue

between the two companies. Movistar Play, Claro Video

source, rising to US$4.4 billion by 2023. As shown in the chart

and HBO, in turn, are attracting more subscribers, who

below, the top five countries in Latin America will generate

can access these platforms for free as part of their mobile

over US$6 billion in revenues by 2023, which accounts for

subscriptions or as part of their Pay-TV subscription.

83% of the regional total.

OTT revenues by country in Latin America (US$ million) 2500 2000 1500 1000 500 0 Brazil

Mexico

Argentina 2017

2018

Colombia 2019

Chile

Others

2023

Source: Digital TV Research

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REGIONAL FOCUS : North Ameri ca & Latin Am

IABM BUSINESS INTELLIGENCE QUARTERLY DIGEST –

erica 2020

IABM BUSINESS INTELLIGENCE QU

1 APRIL 2020

A R T E R LY

DIGEST

1 s t AP RI L 20 20

The information contained in this Regional Update is derived from our newly published Regional reports, which are available on the IABM website. The latest Regional reports focus on North America and Latin America.

Access to this report is limited to IABM members.

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