This builds on a post earlier this month, excerpting a preliminary view of the 2022 Big Broadcast Survey (BBS) trend index. Having completed the survey efforts for 2022, we can now publish the completed 2022 Big Broadcast Survey Global trend index (below).

While there are several observations about the index we will cover in subsequent posts and at the upcoming Devoncroft Executive Summit | Amsterdam, this article is focused on the top ranked trend for 2022, ‘IP networking & content delivery.’

Some background is helpful to understand the chart.

For the past 14 years we have surveyed a large, cross-section of the global media technology professional community. And each year we asked respondents to select the ‘most important’ trend to the future commercial success of their business, the ‘second most important,’ and other trends (plural) they consider ‘also very important.’ While the list of trends is modified (as appropriate) on annual basis based on feedback from BBS stakeholders, the question has not changed. This conservative approach allows for a more straightforward comparison of how trends were ranked versus previous iterations of the survey.

The results are then statistically weighted across the three tiers of importance and visualized as the above index.

The description of the methodology is intended to cast the annual index as a point in time snapshot of what the technology side of the media industry views as the most important commercial trends to their business. More notable than ‘IP networking & content delivery’ ranking first for 2022 is the considerable margin recorded versus the second ranked trend of ‘multi-platform content delivery’ (the largest margin observed since 2017). This is noteworthy since ‘IP networking & content delivery’ was not simply ‘most important’ to a small set of respondents or ‘also important’ to a large set of respondents, it was all levels of important to all manner of respondents.

Those respondents distributed across the media technology value chain. Here is a visualization of the products these respondents buy, specify, or use.

The above cuts across a broad swath of product categories. This is not particularly surprising given how fundamentally connectivity and networking are to the media value chain. It then follows the impact is considerable to the business of media technology.

Just as the trend encompasses many use cases, the remainder of this post weaves across many areas of the value chain.

Background on the Media Industry’s Technology Journey

The Media Workflow Puzzle (published March 2021) draws from the vast experience of its editors Chris Lennon (currently Office of the CTO: Director, Standards Strategy at Ross Video) and Clyde Smith (now semi-retired, most recently SVP Advanced Technology for Fox NE&O, and more informally known as the “Godfather of Media Interoperability”) and its twenty expert contributors to offer the reader a “comprehensive look at the entire media workflow from start to finish.” The book is also an interesting self-reflection of grizzled industry participants on the journey of technology evolution in the media industry.

The concluding section ‘Looking Ahead’ includes a noteworthy contribution from industry veteran Al Kovalick about the speed of advancement occurring with general networking technologies. Citing a time series beginning in 1983 Kovalick calculates the data-throughput of networking technologies have advanced at a compound annual growth rate (in terms of packets per second) of 33%. Such a rate would observe a doubling of speeds just shy of every 2.5 years. A rate that Kovalick notes surpasses Moore’s Law “in a sense.”

The above reference helps establish that industry experts have known for some time connectivity disruption was coming, but the speed and – to an extent the viciousness – are still startling.

A good historical anecdote comes from the keynote to the 2014 Devoncroft Executive Summit by (then) EVP Global Operations & Chief Technology Officer Vince Roberts. The below slide was referenced to show the tremendous workflow progress made at Disney studios, moving from the physical transport of hard drives across campus to a technical infrastructure allowing for digital exchange of media content.

Using the Kovalick-metric from above, there has been an order of magnitude (greater than 10-fold) increase in the underlying networking technologies since Vince Roberts keynote in 2014. It is probably only a slight stretch to observe the state-of-the-art of 2014 is akin to a digital bicycle of performance when compared to the commercially available solutions in late 2022.

Play the music of technical progress forward to fully appreciate the force of compounding mathematics. In 2.5 years (early 2025), the distance from state-of-the-art in 2014 is not 12.5x, but 20x.

Such progress is expected given the tremendous resources invested by large technology companies into general networking. Equally illustrative of the tremendous resource of larger technology companies and their preferred desire to partner with the media technology supplier community, the Founder and Chairman of Arista Networks Andy Bechtolsheim offered the following observation during the 2019 Devoncroft Executive Summit | Las Vegas.

“We are helping broadcast technology vendors solve a problem … they are not solving the IP side of the problem on their own … there’s a lot of investment required to do all those protocols, and we have the advantage of selling these same boxes in high volume. We have more than 1,000 people in engineering just dedicated to the software stack.”

Even standing on the shoulders of the considerable research and development investments of larger technology enterprises, lots of broadcast and media professionals spent much of the past decade making IP-based infrastructure work in the rigorous demands of a media environment. The media technology environment of 2022 benefits from their toil; a small measure of the major developments (standards, specifications, and alliances) is illustrated below.

The Big Broadcast Survey has tracked trends in the global media technology industry for well-over a decade. Part of the beauty of an anonymous survey is the candor of the responses. Earlier iterations of the BBS captured – among other data points – the biggest obstacles preventing a respondent from achieving their goals with ‘IP networking & content delivery.’ The below word cloud aggregates the responses for ‘IP networking & content delivery’ from 2018 to 2020. There were clear themes.

Yes, the journey was/is difficult, but the benefits are nothing short of massive – and will continue to steadily accrue to the industry at a compounding rate.

Examples are plentiful on how connectivity growth is benefiting technology customers. Below is a slide shown at the 2019 Devoncroft Executive Summit | Amsterdam reviewing how the NBA’s fiber contract renewal in June 2019 compared to its previous arrangement in 2014. In an approximate time span of five years, the NBA managed to secure a 10x increase in bandwidth (10G to 100G), enabling it to bring back 30 additional cameras at HD quality to its operations center in New Jersey.

Even developments adjacent to connectivity, such as the transition to cloud have as important input connectivity transition. For example, the June 2017 Wall Street Journal CIO Blog Post on Discovery Communications move to the cloud has the below paragraph (emphasis added).

“Discovery Communications Inc. plans to shift all the processing of U.S. television programming to public cloud technology, eliminating processing through its own data centers by the end of the year. The move lets Discovery reduce dependence on expensive satellite networks.”

Yet another (subtle) example comes from the efforts of the technology supplier community to implement the Movielabs 2030 Vision. The first of the 10 principles outlined in the historic whitepaper is “all assets are created or ingested straight into the cloud.” Implicit in the statement is the connectivity environment supports ingesting really, really large media assets into the cloud.

For those viewing this line of discussion as force-fitting connectivity into an unrelated part of the value chain, consider a visual representation of the workflow. Below is an excerpt from a slide presented by the AWS Content Production solution group to highlight how the AWS Content Production Ecosystem is aligning with the Movielabs 2030 Vision.

Again, Movielabs principle one is “all assets are created or ingested straight into the cloud.” This is the reason the content sits in the center. Principle two is “application comes to the media” yielding concentric circles 1 and 2 in the above. Note then the final concentric circle orchestrating and enabling the whole exercise. Labels include ‘high-speed connections,’ ‘video egress,’ ‘accelerated transfer,’ ‘streaming from set,’ ‘efficient ingest,’ and ‘pixel streaming.’

Signiant (top left of above image) provided us with some firm data points to illustrate where the industry is on the journey in the production environment. Currently, more than 20% of the 25,000+ Media Shuttle portals are using cloud storage, and the amount of data transported in Media Shuttle to the major cloud providers grew 16x between the beginning of 2019 and Q2 2022. 16x increases represent foundational change – different operational models and budget priorities.

A Massive Value Shift

Some readers may view advancements in connectivity as obvious, foreseeable, and inevitable. No disagreement, but the impact of orders of magnitude improvements in connectivity – across the media value chain – is forcing a massive value shift. Historical media workflows were designed (a better word is constrained) by limitations of connectivity. For example, global broadcast facility footprints were located according to line-of-sight to satellites, production creative teams grouped to allow for the sharing of intermediate work products, and media facility capacity was built to highest high of possible business requirements.

An undoing of the last point is illustrated by a comment at the 2019 Devoncroft Executive Summit | Amsterdam by Bob Hesskamp, SVP Global Broadcast Technology WarnerMedia.

“We like to call it location-dependent production, so you can pool resources whenever you need them…in the past, CNN built for worst case scenario scale – the biggest story you could possibly imagine – in this [2110] architecture our ability to pool resources between cities and between facilities makes it much easier and much more transparent … and for our operators it makes it feel like its all one big facility.”

The constraints of connectivity are gone or – given the nature of compounding – will soon be gone. Perhaps only imagination is the remaining constraint because certainly the business case is not limiting.

At the recent Devoncroft Executive Summit | Las Vegas, Patrick Sproule, Head of Content Technology Solutions at Australian Broadcasting Corporation reviewed the (incredible) returns of a recent connectivity transformation project by the ABC team.

“We made a big move to convert all of our contribution networks between capital cities over to a 2110 based network. But we actually took four different technologies that we were using to move the video and audio and data around, combined it into one into single data pipe, and saved nearly AUD$1,000,000 a year doing that. It surprised us, but what that transition was setting us up for was actually some efficiencies to reinvest that money in other technology areas.”

Is massive an overstatement when describing the shift in technology spend set to occur at ABC? Let’s extend the point to the entire media industry by noting Australia is the leading implementer of all next-generation connectivity strategies. Wouldn’t massive describe the aggregate shift of technology spend in the global media industry?

The economics – undeniable in the above example – of moving off satellite connectivity are straightforward and compelling.

A good proxy for the savings of trading satellite for IP networks is available from an April 2021 customer case study published by Zixi. The case study concerns Music Choice, a US music television service, transitioning the primary distribution of its channels from satellite to IP networks. The cost savings achieved were 75%. To put a figure of 75% into plain language, it is the equivalent of cutting a technology budget in half, twice.

Even the sternest finance team would embrace such figures in a business proposal.

There is a larger business component to discuss. We are thankful to have a visual courtesy of the Zixi team. The below is an illustration of a Zixi customer’s journey from 34 years of satellite to all IP-based infrastructure to distribute its content to 200 service providers. The transition was absolute and took a mere three months.

What does the chart emote? If satellite were a person, I would feel sorry for it. Over 3 decades of a relationship, conclude in the callousness of a three-month transition – and never, ever going back.

We see this dynamic playing out in the published revenue figures for satellite service providers such as Eutelsat, SES, and Intelsat. (The published figures are dominated by business-to-consumer revenues but still track the trend).

Since June 2016, Eutelsat’s broadcast division has registered only one quarter of year-over-year revenue growth. The other 23 quarters over the past six years were negative, resulting in the most recent fiscal year revenue reaching a level 25% (€241 million) lower than the annual level observed in 2016. Eutelsat does not directly break out its ‘Professional Video’ (backhaul, transport, occasional use) but noted in fiscal 2022 year-end results that this market is ‘still in structural decline.’

Intelsat no longer reports public financials (stopping in Q3 2021) with its emergence from bankruptcy earlier this year. But for the affects of an accounting change to 2018 figures, Intelsat’s media division hadn’t registered a growth quarter in the 16 previous quarters before Q3 2021.

The last two quarters of guidance on Intelsat’s media division including the following: “The decline in media was primarily driven by a planned service migration by a specific customer from Intelsat’s network to the customer’s own network assets. Other factors impacting revenue were terminations and non-renewals reflecting industry trends.”

You can’t fight industry trends.

In fairness to the satellite side of the industry, these groups are owning the reality. (Are other poorly positioned parties in the ecosystem?)

SES’s Video division has not registered a year-over-year quarterly increase in sales since the second quarter of 2017. If you adjust for the impact of the RRMedia acquisition, then the last observed organic quarter of growth is the fourth quarter 2016, equating to 22 consecutive quarters of declining revenue growth.

For the balance of 2022 SES is guiding investors to expect mid-single digital declines in its Video division. A more ambitious goal is stated in SES’s 2022 investor presentation: low-single digital declines beginning in 2023.

There has been a complete redefinition of success in the satellite services segment of the market. It is captured by the below slide from SES’s first half 2022 results (shading added to emphasis the point).

There are a couple related points to make before proceeding.

One might wonder why the revenue drift away from satellite is slow and steady. This is best explained by the relatively long duration of satellite contracts, lasting between 5 to 10 years. As contracts come up for renewal, they don’t renew, or they renew at lower levels.

We would also like to take the opportunity to leverage hindsight to showcase the deeply flawed growth hypothesis around certain trends. Investor presentations of SES in the 2016 timeframe cited UHD as a future growth driver of satellite services. Checking in on the tally a half decade later, UHD channel count on the SES network grew from 21 channels at the end of 2016 to 25 channels in May 2022. At a brisk clip of less than one channel per year. SES was not alone on the distribution side of the industry hoping for UHD to drive revenues; that hope persists.

If not already apparent to the reader, trends are the kingmakers for the technology supplier community.

A preferred example for the IP transition is the meteoric rise of Lawo as a video solution provider (heritage was in audio). The below chart – referenced during the 2018 Devoncroft Executive Summit | Amsterdam – shows the ‘Innovation’ league tables from the 2015 BBS and 2018 BBS. Both league tables are for video brands; the background of the chart is the M&E IP adoption index generated from the BBS.

The above chart shows a technology supplier massively increasing its perception as an innovator. At the same time the same supplier was scoring several high-profile wins with early adopters of IP-based infrastructure (ZDF World Cup Coverage, NEP Andrews Hub, CBC Montreal Facility, …). We see a correlation.

Referencing Lawo’s regulatory filings, revenue almost tripled between the 2015 calendar year and 2019 calendar year. During 2019, Lawo’s sales of video products even exceeded the sales of its audio products for the first time in the company’s history. We again see a correlation.

There are other rewards for aligning with large, macro trends. Wherever you find industry transitions you will find investors looking to put money to work. The below chart highlights a few recent connectivity-related transactions and equity raises.

The point is again that trends, or rather alignment with industry trends, are king makers.

The BBS Global Trend index is an effort to predict what trends will impact decisions by technology buyers in the global media industry. Since it is forward-looking, all discussed in this post is prelude for what is next.

Our minds then drift to the second order developments from breaking the paradigm of workflow construction ushered in by ‘IP connectivity & content delivery.’

What is next? The best place to start to answer this question is asking the executives responsible for building the media infrastructure of the future.

We hope to see you in Amsterdam at the 2022 Devoncroft Executive Summit | Amsterdam, and we encourage you to listen intently to the panel we have organized on “Building the Facility of the Future.”

© Devoncroft Partners 2009 – 2022. All Rights Reserved.