"Broadcasters will increasingly need to look at partnerships with distribution companies and they will also need to look at very flexible infrastructures," says Roger Crumpton

From the perspective of the broadcaster, the adoption of digital technology is leading to a great deal of change. Their whole technical infrastructure is in the process of change. These changes are led by the ongoing transition from standard definition to high definition and the uptake of digital storage. This also involves moving from tape- based working to file based working. These changes are creating much higher levels of technical complexity for the broadcaster and for their partners and suppliers.

The ownership of broadcasting businesses and organisations is also changing. The young people of the 60's, 70's, and 80's grew up with parts of their day being denominated by the linear schedule. That schedule characterises the life of many of those people. That's not the case with younger generations. They have a different approach where their content is spread across conventional TV, portable devices, the Internet and various forms of social networking. This is creating demand for new content and we are increasingly seeing new broadcasters and content businesses being involved in the production, presentation and distribution of that new digital content. This is well illustrated by the diversity of companies now bidding for and winning rights to sports broadcasts like football.

At the same time so called "prime time" audiences are declining. Twenty years ago you would have 17 to 20 million viewers watching a prime time channel on a Saturday night in the UK. Now it can be as low a five million. That means that the advertising revenues associated with that prime time coverage are declining. We are also seeing very marked differences in the profile of audiences watching particular type of television at particular times of day and on particular channels. This characteristic was always present when there were a small number of channels, but now there are potentially tens or hundreds of channels, and the audience profile is very important. Those audiences are increasingly not just watching their television from conventional terrestrial distribution. They're increasingly watching digital broadcast television; they're watching pay TV on cable and satellite, they're watching television on the Internet or they are watching it on a mobile phone or on an MP4 player.

The changing nature of the audience, the changing ownership of broadcast, the falling revenues from advertising, the complexity, the infrastructural change and new delivery platforms are having a big impact for the future.

From a suppliers stand point there is also a great deal of change. The changing nature of the broadcaster's infrastructure is creating increasingly complex requirements for suppliers to satisfy. The technical requirement is more complex and so is the nature of the buyer. Traditionally broadcaster and media technology suppliers sold to the Chief Engineer at the television station. Increasingly they are now selling to the production staff, the engineering staff, the finance staff, and the station management.

At the same time as the requirement is getting more complex, prices of solutions are falling. Research from the IABM shows that, on average, selling prices are falling at about 5 percent per annum. This means that suppliers have to ship more and more product to make the same amount of money. We are also seeing technical convergence from the IT sector and the telecommunications sector where commodity IT and telecoms products are increasingly having the bandwidth and performance which means they are now becoming suited to broadcast applications where in the past they would not. This is bringing down prices, although in many cases those products have to be specially customized to suit the needs of the broadcast and media market. Suppliers are also dealing with a broader range of customer types. Traditionally it was the primary state or commercial broadcasters, but increasingly they are now supplying independent production companies, sports organizations, and even retail businesses and churches.

Suppliers now need to navigate multiple layers of the customers business to have a satisfactory supply relationship. At the same time suppliers have to deal with a growing range of intermediaries. These include IT consultancies and outsource service providers. Those intermediaries may be resellers or distributors, they may be systems integrators or they may be consultants. As the customer's environment gets more complex the technical expertise required to specify and implement a broadcast infrastructure is increasingly transferring from the customer to the intermediary. This means that the supplier now has to interface with a whole host of different intermediaries and whole host of different layers of people at the customer. The supply arrangements are becoming more complex.

The IABM has published a study on the Global Market for Media and Technology. That work was undertaken from the ground up where the supply community provided their sales and unit numbers for three years with information about product types across all the regions of the world and we were able to build up a model of the market place.

The market was divided into 10 segments. The three largest segments were Acquisition and Production; Storage; and Playout and Delivery. The market overall is worth more than USD 12billion in 2007. Two of the segments are growing at more than 20 percent per annum. They are the services segment and the digital asset management, digital rights management and library management segment.

Over the immediate years ahead the market is forecast to grow at 11 percent compound per annum. Until recently the largest market in the world has been the Americas, but as we move forward Europe, Middle East, and Africa is beginning to become the largest single market in the world and, surprisingly, that region is achieving growth levels higher than that being achieved in the Asia -Pacific market.

This growth in sales by suppliers is being driven by a number of factors. There is a widespread re-equipment of broadcasting infrastructures to support high definition and there is also an increasing investment in digital storage.

In 2006 we reached what is called the tipping point where the cost per gigabyte of storage on tape compared to digital media tipped over. Digital media is now much more cost effective than tape and therefore there is no longer a financial barrier to move into digital workflows and digital file storage. This transition to file-based environments not only provides for changes to the technical infrastructure but also involves very dramatic changes to working methods. Those transitions to working methods are a struggle for all broadcasters, as the way things have been done for many years has to be changed to achieve the real benefits of a digital environment. Suppliers are also seeing infrastructure being specified and implemented for new delivery platforms and new forms of distribution, like the Internet.

The increasing complexity is causing a transition to service-based solutions rather than product-based solutions. Many broadcasters are actually looking to service suppliers to provide or manage all or part of their infrastructure rather than doing it themselves. The transition to filed-based environments is also stimulating increasing investments in digital rights management (DRM) software and digital asset management (DAM) as broadcasters try and get to grip with the management of their fast growing digital library.

These changes that both broadcasters and suppliers are facing are disruptive changes. We are seeing an explosion of content, many, many more channels, and many more delivery platforms. That is creating increased competition and falling channel audiences. There is less viewer and listener loyalty where traditionally viewers or listeners may have stayed with one channel, or a favourite channel, they are now much more fickle and regularly move from channel to channel or platform to platform to view or hear the content of their choosing. This trend to platform neutrality means that increasingly viewers are expecting to be able to view their content on whichever platform they choose and no longer necessarily have a substantive commitment to one platform. This migration of viewers, the lower levels of loyalty, and the more avenues open to them is affecting revenue streams. What were traditional guaranteed revenue streams from advertising are now being spread further and wider and are much less reliable than they were previously.

From the consumer standpoint there are more bundled offerings or what is known as "multi-play". This is where consumers are buying perhaps their telephone, their TV and their broadband from a single supplier.

As more broadcasters become digitally enabled you see new patterns of ownership. Instead of the traditional broadcasters having control of the market we now have lots of new entrants in the market. For example many of the major football leagues are now being shown on particular commercial Pay TV platforms and this would not have happened five or ten years ago.

We are also seeing big changes in the advertising market place as channel loyalty falls and revenues get thinner, the advertising options broaden. We are going to see dramatic changes in advertising over the immediate years ahead.

Traditional spend on advertising is not growing and prime time channels are now reaching a much smaller audience than they were previously. In many cases that reach, as we call it, has now halved. In some recent research undertaken in the United States, 70% of advertisers when interviewed said that TV advertising was less effective than it was previously and if they had any additional funds for advertising they would likely spend them on the internet. In fact traditional TV was fourth choice for additional spend where incremental budgets were available. The Internet video advertising spend is forecast to increase to 4.3 billion US dollars in 2011 from half a billion in 2006. Incremental spend on advertising is now moving to new platforms. The popularity of digital video recorders is now also meaning that viewers can skip through advertisements, they no longer have to view them in a linear form.

The attraction of advertising on other mediums for advertisers is that they want premium engagement, they want measurable outcomes, they want to be able to measure click-throughs and that new world is simulating new advertising mediums. Social networking site "Facebook" has just announced that they are going to allow corporations to advertise by user referrals implying that if you have a favourite brand and you think your friend may be interested in that brand then that linkage is of value to an advertiser.

As traditional advertising models become less attractive there is competition between advertisers to produce advertisements of great character, of great memorability, to make advertising as entertaining as the main programming or even more entertaining. We are also seeing view or pay models on video on demand where for example viewers either pay to download a video or get it for free if they agree to watch some adverts.

In summary, for broadcasters, content is the most important thing. Their environment is getting more complex and they need new business models to monetise that content. The technical infrastructure is increasingly less important to them and many of them are considering outsourcing of that infrastructure. What is really vital to them is consumer reach. They have to get the right content to the right consumer. In the future that means new delivery platforms with broadcasters taking a much more platform neutral approach to the way they deliver their content to their viewers.

On the supply side this transition from a signal based infrastructure to a file based infrastructure is a paradigm shift. It requires new skills and people with traditional skills have to transition to new working methods. The customer they are supplying is very different to the customer five or ten years ago. Prices are falling, commodity IT and telecom products are beginning to impact the broadcast environment and the way to reach the market for many suppliers now is through partnerships with other companies rather than directly supplying the broadcaster. Those partnerships may well be with an outsourcing company.

Broadcaster business models now have to change. They are going to be based on consumer innovation. Putting the consumer at the core of their strategy and personalising experiences for consumers by delivering the content they want, at the time they want, on the platform they want. This means that we will see traditional television programmes from organisations such as NBC or Universal Studio being distributed by people like MSN or YouTube.

Broadcasters will increasingly need to look at partnerships with distribution companies and they will also need to look at very flexible infrastructures. They will need to adapt quickly to new business models. The BBC this year has launched something called iPlayer. This is where all of their broadcast content is available for download within seven days of the original production for people who miss the main broadcast. Again this enables people to watch their favourite programme at the time they want on the platform they want and where they want.

So where does this leave us for the future? Digital technology change is profound and it is stimulating the supply side of the business represented by the IABM. However, consumers are setting the agenda for the future. It's a digital agenda, it's a multi-platform agenda and it's a very different one to which broadcasters are familiar with. As a result broadcasters are facing rapid change. They have high levels of complexity, their revenues are changing and the financial pressures are severe. They really do have to innovate with their businesses and focus on the consumer and the content.