2017: The year ahead

Six seasoned broadcast professionals offer their predictions for the year ahead
Advanced Media, Broadcast, Dubai, Film, IABM, IHSE USA, Imagine Communications, Middle East, Production, PwC, Snell advanced media, Sony Professional Solutions, TV, UAE, Vizrt, Analysis, Broadcast Business

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The coming year looks set to be tough for broadcasters in terms of advertising revenues, but the production industry is likely to fare better. Digital Studio asked six seasoned broadcast professionals for their predictions for the year ahead.

THE EXPERTS
Naresh Subherwal, managing director, Middle East, SAM
Kaveh Farnam, CEO, Advanced Media
Dan E. Holland, marketing manager, IHSE USA
Peter Kyriakos, head of marketing, Sony Professional Solutions (MEA)
Hassan Ghoul, regional director, MENA, IABM
Paul Wallis, sales director, MEA, Imagine Communications
Jayant Bhargava, PwC

What are your initial feelings about 2017 in terms of the MENA region’s broadcast industry?

Subherwal: 2016 has been a tough year across the MENA region for several reasons. The oil crisis has sent shock waves through the region, there has been political conflict and budgets have been pulled back as customers remain cautious about technology investment. Naturally, this has led to slow progress for the broadcast industry, with a lot of projects not happening. I expect the early part of 2017 to remain challenging across the region, but I’m optimistic about the second half of the year and expect to see projects get up and running again.

Farnam: I think we are not facing any big changes in the broadcast industry in MENA in 2017. The major issue is the world’s technical trend, the way in which the industry follows the IP and cloud technology backbone and infrastructure in the MENA region is practically not ready yet for new workflow changes.

Kyriakos: The MENA region is currently impacted by a variety of ever-changing variables such as unstable political and economic conditions which directly affect the appetite to invest in our industry. When it comes to the MENA region’s broadcast industry, it has seen growth during the past decade and the processes in place have evolved to incorporate the latest technologies such as 4K.

Ghoul: The general feeling is that the transition to multi-platform delivery will continue to disrupt the traditional broadcast landscape and it will increase the importance of IT technology within the broadcast infrastructure.

Wallis: The transition to IP is gathering pace and there is a wider acceptance of this technology. In 2016 we delivered a number of proof of concept implementations in the region, and we are seeing these turning into real world practical systems in 2017.

One of the key factors is that, with our fellow vendors in the AIMS alliance, we have now demonstrated clearly that broadcasters can choose best of breed solutions which will release some of the pent-up demand for better, software-defined architectures.

Finally, we see the cloud as now being a real, practical option. Interoperability and virtualisation mean that we can genuinely offer cloud-native solutions, a real boost to productivity as well as a reduction in life-cycle costs.

Most will agree that 2016 was quite tough. Do you expect 2017 to be better or worse?

Holland: Although many economic projects show a reasonable growth trend for the region there still remains some uncertainty on how well the economies will rebound. IHSE remains committed to its MEA customers and does see potential for a slight increase in growth over 2016 sales.

Davies: The budget cuts that affected many broadcasters in 2016 happened very suddenly, so it was difficult for them to manage this situation in a coordinated manner. Consequently, a lot of things that should not have been cut were cut, and there have been some consequences for that. It’s a little too early to say with any degree of certainty what will happen in 2017, but I think that even if the overall budget situation does not improve, broadcasters have had a year to adapt to a low budget environment, so they should at least be able to handle the situation better.

Wallis: In truth, I suspect there will be little in terms of real growth in 2017. Oil prices are recovering, which will do a lot to kick-start the economy in the region, which is very good news.

But the socio-political issues remain, with conflict and unrest in many countries, and shifts in culture in others.

Overall, those broadcasters and content companies that are bold will invest in new technologies, which will give them the edge both in terms of cost and in terms of responsiveness to consumers. That agility will enable them to strengthen their own businesses in these changing times.

Kyriakos: 2017 will be an interesting year to say the least. The question isn’t whether or not there will be business because their definitely will be, but instead it’s about the challenges we will face in conducting regular business. Some challenges in the region in 2016 were instability in some Middle Eastern markets and reduced purchasing power of neighbouring countries, which led to a contraction in the market. However, we are confident that 2017 will present new opportunities amongst new challenges.

Farnam: Overall, 2016 was better than our expectations. The other sectors of business like acquisition, production and especially digital cinema had a growth which somehow compensated for the sales drop out in the broadcast sector. I’m very optimistic. AMT’s wide range of products with new solutions and ideas, alongside our big distribution channel will open new markets for us.

Subherwal: Whilst 2016 has been challenging for the MENA region, SAM has seen significant growth and enjoyed a much better year than 2015. We have made a considerable investment in the region, especially in the team we now have on the ground.

Ghoul: The expectation is that 2017 will see a slight improvement in the regional broadcast spending which is driven by a better economic environment and a drive by the main broadcast organisations to keep up with the demand of their viewers for better content and up-to-date delivery platforms.

What will be the key challenges for broadcasters and broadcast technology suppliers in 2017?

Farnam: I do believe we will continue to increase our sales in general media and production far more than 2016. A shortage in camera and sensor production in 2016 because of Japan’s earthquake and a few other technical issues with our major camera suppliers were a big part of the difficulties we had in 2016. Hopefully we will not face these issues in 2017. RED’s new product range and a better and complete product line-up from Sony will bring a bigger sales opportunity for us in the coming year.

Davies: The demands from customers are driving a rapid change in technology, and broadcasters are still competing fiercely for both market-share and advertising revenue so doing nothing is not an option. The key for broadcasters will be to identify the right projects and technologies to invest in that gives them the greatest financial benefits in the longer term.

Ghoul: As linear TV viewing is declining, the key challenge for the regional broadcasters is to ensure that they give priority, in the development and allocation of their limited resources, to the projects that will enhance the way they engage with their viewers and address their changing viewing habits. For the broadcast technology suppliers, their challenge would be to adapt their offering to the broadcasters’ priorities and to differentiate their solutions in an environment where new suppliers are vying for a share of the market.

Kyriakos: We live in a dynamic environment and our customer’s requirements are always changing. With an explosion in terms of content types and platforms available, it is becoming increasingly important for broadcasters to innovate. Viewers no longer solely want a passive experience; they want to watch their favourite programs on their mobile devices, engage with content on a tablet or talk about their experiences on social media. Consumers are slowly shifting towards a different behavioural paradigm, hence to stay relevant broadcasters have to rethink how they set up and integrate their workflows and create content that can effectively be used in different formats.

Subherwal: Broadly speaking, customer budgets are being constrained due to the oil crisis and a downturn in advertising. The evolution of the media landscape, emergence of new technologies and on-going shifts towards IP and 4K is also creating challenging conditions for those operating within the industry. Broadcasters are hesitant about making an investment in new technology until they have a better idea of the future, which is inevitably creating challenges around the completion of projects. For them, 2017 will be about reaching a point where they feel confident in making decisions about technology investments and evolving their strategies for IP and 4K. For broadcast technology suppliers, the challenge will vary depending on what space they operate in. Some will do well, whilst others will certainly struggle if their products are not aligned to the market needs.

Wallis: The key challenge in the MENA region will be the same challenge that is facing the industry worldwide. It is that we are seeing a complete transformation in the technical platform on which we all depend, from bespoke broadcast hardware connected by SDI to sophisticated software running on COTS hardware and connected using IP.

Designing, implementing and operating these software-defined platforms demands a new set of engineering skills, without losing sight of the old knowledge to guarantee the core quality issues around pictures and sound. We need a new breed of engineer in the industry, and we need to invest in education and training to encourage them.

Will the whole MENA region face a similar struggle or will some areas perform better than others?

Ghoul: The market conditions within the majority of the countries in the MENA region are quite interrelated. However the region’s broadcasters differ with regards to the current state of their infrastructure. This means that different broadcasters will have different priorities and will therefore take separate routes to transition their operations.

Kyriakos: Some areas will definitely perform better than others and it is safe to say that some areas may even perform better than usual because of recent economic changes. Although the majority of the Middle East markets have been impacted by fluctuating oil prices but there has been a focus on diversification. Some countries, the UAE being a prime example, have diversified and focused on developing other industries. The UAE has established its position as the regional hub for international events, tourism, and media, and has also seen momentous advancement in broadcasting and film production.

Wallis: The demand for content continues to grow, with the MENA region a real hotspot for TV everywhere. Production companies are increasingly creating local content which is as popular in the region as international programming from the USA and the UK. Broadcasters and service providers are looking to deliver better online quality in smaller bandwidths, using slicker, more automated workflows. The year may start slowly, but the medium-term prospects are strong.

Holland: In the Middle East & Africa regions, the growth of on-demand TV and live sports coverage has grown significantly over the last few years and KVM requirements for broadcast and post production studios remains positive for IHSE. Some countries, particularly Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates continue to have budgets for KVM equipment in broadcast related projects but economic stagnation has forced many production and TV studios to streamline their overall studio requirements.

Other countries throughout MENA have been hit hard economically and the budgets for Broadcast requirement have reduced dramatically. IHSE remains optimistic for the MENA regions and will continue our mission to build brand recognition.

Subherwal: The region is very diversified, so we expect to see performance differ from one area to another. In the UAE and Qatar for instance, customers will be looking at evolving their strategies for 4K and IP, whilst this isn’t the case for Egypt and Lebanon. Social, political and economic factors are also impacting parts of the region more than others.

Wallis: I think those countries which traditionally have a strong media industry will continue to dominate. We are already seeing the prospect of major projects in countries like the United Arab Emirates, Jordan and Egypt. Qatar is rapidly building its infrastructure towards the FIFA World Cup in 2022.

Is there any room for optimism? If so, where?

Bhargava: Overall, if you look at everything together, I am very optimistic because the growth will come from new business models, young demographics and it will have a different impact on the different sectors of media.

Davies: Historically, some areas in the region have always outperformed others in terms of spending, so vendors are quite used to handling this. Given that there has been little improvement in the price of oil over the past year, the countries with oil-based economies are expected to face similar constraints to last year, but, like we saw in 2016, key projects that have strategic importance will continue to receive funding regardless.

We must also remember that not all countries in the region are negatively affected by the price of oil, but as consumers they benefit from a lower oil-price. For these countries, it’s business as usual, so we cannot adopt a one-size-fits-all approach to the whole MENA region. Some of the projects that were expected to happen in 2016 were not actually cancelled, but were instead postponed, so there is a likelihood that we will see the benefit of those in 2017.

Subherwal: From SAM’s perspective we certainly believe in the growth potential of the MENA region, which is reflected in our investment levels. It’s a large market with a young population, where media remains important. Sports and live entertainment are particularly significant for the region, and there is an increasing demand for local content; these are key ingredients for growth. The media industry is not about to disappear and I am confident that projects across the region will ramp up again as customers reinvest during 2017.

Ghoul: For the broadcasters, the good news is that the new software based technologies will run on cost-effective general-purpose COTS equipment, and will allow them to transition to a more agile infrastructure capable of delivering both linear and non-linear channels.

From the suppliers’ point of view, it is important to note that, in the MENA region, long-standing industry transitions are still significant spending drivers.

Any other points you think are important to mention?

Davies: Broadcasters in the region will have to exercise great care when choosing what to invest in. I think they will follow the advertising revenue, so the upward trend of new media will continue.

Market overview

When discussing the broadcast and production industry in 2017 it is important to make a clear distinction between the two, according to Jayant Bhargava, who leads the media practice for the Middle East at research firm PwC. Indeed, while two broadcast and production are intertwined, they looks set to experience different levels of success in 2017, Bhargava says.

“While the broadcasting industry in general has been loss making the production industry may not be. The broadcast industry across the Middle East generates about advertising revenues of about $1.5 to 1.6 billion revenues, and about the same for Pay TV, while the money spent on content is more. So the losses incurred by the broadcasters provides for a more positive outlook for the production industry.

“From a pure television advertising point of view, 2017 will be a challenging year. If you look at the big categories of advertising such as retail, fashion or consumer electronics, they are down by 15-20% in terms of revenues. So I think it will be a challenging year for television from a broadcasting perspective,” he says.

Conversely, the production industry “will do extremely well” owing to investment from a variety of sources including venture capital that is funding production for OTT platforms such as Netflix in the region.
“Netflix is now here and is commissioning productions, and you have players like the IPTV providers looking to come in with their own original productions. You have Pay-TV providers such as OSN and beIN investing in content.”

Broadcasters that are affected by declining advertising revenues are likely to seek savings by making structural changes according to Bhargava.

Reasons for optimism

While many companies in the Middle East are feeling the pinch amid low oil prices, some global manufacturers of broadcast and related products see good opportunities for growth in the region.

Dan Holland, marketing manager, IHSE USA, says that the Middle East offers some “intriguing possibilities” for 2017. “The region is home to a growing population of a younger generation digital media users which is driving the need for larger and more effective broadcast studios but economic slowdown and pockets of political unrest create some uncertainty in growth potential. Gulf nations such as Qatar, UAE and Kuwait look to have a much higher demand for broadcast and digital media although spending and project requirements have recently slowed,” Holland says.

“Over the last two years IHSE has increased the companies branding strategies to focus on the needs of professional KVM extenders and switch products supporting broadcast, post production and outside mobile production vans for live sporting events. IHSE supports its MENA customer base from its office in Dubai, UAE.”

 

 

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