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Insider Report

news and views on broadcast and professional video/audio sectors, worldwide

w/e May 24, 2010 SCRI International, Inc © 1984 - 2010


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Cuban’s HD Net going 3D

Mark Cuban’s HD Net is producing original 3D programs to begin distributing later this year.

At therecent Cable Show in Los Angeles, an HD Net exhibit was most prominently demonstrating 3D programming — lots of hot chicks in bikinis and a bit of footage of an NBA game (Cuban owns the Dallas Mavericks).

CableShowLA2010HDnet3DAlthough there was nothing specific being touted and reps had little information to provide, Cuban later told / “We are starting to produce now, with the goal of having our travel shows in full duel 3D/2D production in December.”

Although there are no plans at this time to launch a 3D channel as he did when he was one of the first to launch a fully dedicated HiDef channel — HD Net — Cuban said, “We will make it available on VOD and to our distribution partners who create linear 3D channels.”

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Broaddcast Industry Post NAB Overview

Two boutique investment banks, Silverwood Partners and Pharus Advisors have recently published notes to clients detailing their impressions of the NAB 2010 show.

Silverwood has been involved in a number of broadcast M&A deals including Blackmagic / DaVinci and Avid / Euphonix. Prior to the 2010 NAB show the company published a 40 page report about the broadcast industry for their investment banking clients, which is worth reading to get their full perspective on the broadcast market.

Pharus has also been involved in a number of industry transactions including Neural Audio / DTS and Virgin Media / Two Way Media. The company published their post-NAB thoughts in their industry newsletter, which also includes a summary of recent M&A transactions in the digital media space, and a comparison of publicly traded companies.

Silverwood NAB Perspectives:
Revenue Flow versus Work Flow. Broadcast and media customers are principally focused on sustaining advertising revenue from traditional outlets and driving incremental revenue over emerging outlets. The focus over recent years on cost containment through automation and technology efficiencies has been eclipsed by the need to adapt technology infrastructure to a changing business model. The Newspaper industry provides an instructive lesson on the need to be responsive to external challenges to traditional business norms. Technology vendors are faced with customers that have shifting purchasing priorities and that are scrutinizing expenditures on conventional broadcast infrastructure.

3D will not Reverse Industry Revenue Decline. While 3D may drive some additional short term revenue, widespread adoption is still in question because certain content will never lend itself to the 3D medium. Furthermore, with the exception of large screen environments showing purpose produced content (Avatar, Alice in Wonderland), the current 3D experience requires additional improvement. There are no clear standards for end user devices (TVs and glasses) so mass end-consumer device adoption – if it is to occur – will take time. Consider that the ongoing HD transition began with the first HDTV broadcast in 1998 and is still only 40% complete in the US market. Lastly, production methods themselves must also adapt to the creation of 3D content – there is no consistency in the content acquisition process, much of which is based on trial and error and research. 3D requires a new approach in the creative production process as fast switching and cuts can prove to be nauseating to the viewer. There are also concerns that poorly produced 3D will lead to negative customer perceptions in the near term which will slow adoption and the long term success of the medium.

Pricing is Collapsing. Years of substantial profitability for media and broadcast customers masked poor cost discipline in the sourcing of technology. Recent weakness in the advertising market and the broader economic disruption has caused customers to focus on capital budgets and look for more cost effective solutions. Compounding this challenge, inexpensive general purpose IT infrastructure continues to replace purpose built hardware solutions, creating good enough solutions at attractive prices for many use cases. This is putting pressure on margins for many traditional Broadcast technology vendors who organized their cost structures for the high price, ‘boom’ years and cannot adapt quickly enough to the changed industry circumstances.

Value Separation: Software, Hardware, Connectivity. Historically, broadcast and post-production customers purchased purpose built solutions where the discrete software, hardware and connectivity components were blended within a hardware solution. As the hardware portion becomes increasingly standardized, vendors will need to focus on defensible segments of the value chain, particularly within the software layer. In many cases specialized hardware vendors are effectively software companies burdened with a legacy hardware orientation. It is expected that vendors will need transformative change rather than evolutionary adaptation to address the fundamental changes in the media technology industry.

Growing Software Opportunity. It is expected that software companies will continue to be a growing presence in the media technology industry. Differentiation from IT solutions for incumbent vendors resides in the software layer. Well-positioned companies have software solutions that extend and leverage basic IT functionality, which will continue to improve in speed and capability. From a product perspective, technology vendors should examine their product portfolios to identify and extract the unique software functionality that is truly differentiating their offerings. In addition, the increasing use of standardized IT platform technology is creating a growing market for software vendors that can use the standardization to scale efficiently.

Commercial Opportunity: Customer Diversification. Well-positioned companies are diversifying and selling to a broader customer base, particularly customers outside the traditional broadcast market. Targeting other industry verticals is not feasible with a customized hardware solution and an industry focused direct sales model. In contrast, software solutions that extend standardized hardware and that are deployed through VARs and channel partners can be more easily adapted to large, adjacent industry verticals (Medical, Military, Enterprise).

Business Model Disruption. For NAB exhibitors there remains fundamental weakness in the traditional broadcast technology industry. The reduction in industry revenues will highlight one of the principal difficulties for many NAB exhibitors: sales and marketing expense is too high for revenue levels. With pricing pressure, many vendors will need to change to a distribution model or become part of a larger solution that can support the fixed sales expense. Well-positioned, well-capitalized vendors will have a unique opportunity to acquire established, respected brands with large user bases over the coming year.

Service Opportunity – Revenue Flow. Broadcasters and media companies are faced with a proliferation of technologies and monetization possibilities, and an accelerating rate of technology change. Historically, broadcasting challenges were solved by buying incremental technologies to plug into an existing well-understood technology infrastructure. Current business challenges require business model innovation coupled with technology platform innovation to drive revenues across a growing range of end-point devices and outlets. Given the lack of clarity on the optimal revenue model and the rapid pace of technology change, broadcasters and media customers are reluctant to invest in standalone technology purchases. This is creating an attractive service opportunity driven by the ability to provide incremental revenue growth with a low barrier to entry, a receptive customer and an attractive ROI.


NAB OVERVIEW: We recently attended the NAB 2010 conference in Las Vegas. We came out of the conference feeling the media and broadcast technology market is experiencing a healthy recovery from 2009. The recurring comment echoed by many industry players was that the deals in the customer pipeline that were stalled in 2009 are now morphing into real opportunities. The RFP activity is showing decent improvement, however, the sales-cycle continues to be long and spending not completely flowing.

Even though the network spending in North America, which was driven by conversion to HDTV over last few years, is slowing, other factors like changes in customer preferences, and pressure to generate new sources of revenues and reduce costs are expected to continue to drive technology capital expenditure for networks. These new developments are adding new dynamism to the sector, which can be witnessed by the plethora of vendors and solutions.

Here are some of prominent themes that we witnessed at the NAB show this year.

  • Emergence of 3D television broadcasting: As expected, this was the major theme at NAB similar to what was the case at CES earlier this year. TV manufacturers continue to be enthusiastic about this trend. CES expects 4.3 million 3D TV sets to be sold in 2010, with about 25% of total TVs sold in 2013 to be 3D-enabled. Even though some major players (like DIRECTV, Discovery, IMAX, and etc.) have made announcements over last few months about launching 3D content, a lot of the content producers and broadcasters are still not sure about how quickly this market opportunity will grow in the near term. As a result, they tend to be reticent to make investment in this area at this point.
  • Development of multi-platform content distribution (broadcast, web and mobile) capability: The spending on TV advertising is gradually declining. According to Yankee Group, the TV ad market declined 21.2%, from $52 billion to $41 billion, between 2008 and 2009. During this same period spending on Internet advertising grew as a result of consumers spending more time online and less time watching TV. With more and more eyeballs consuming video content on Web and mobile devices, broadcasters are investing in technologies which enable delivery of content over multitude of platforms.
  • Adoption of file-based workflows: One of the important areas of investment for broadcasters remains implementation of file-based workflow infrastructure. This is viewed as important by broadcasters to augment flexibility in day-to-day operations, facilitate reduction in operational costs, and enable efficient multi-platform content distribution.
  • Emergence of Over-the-Top (OTT) Video and convergence of TV and Internet: The other recurring trend at the show was the focus on growing convergence between broadcast TV and Web video. Internet users are increasingly interested in streaming full length video directly onto their TVs and as a result variety of models are appearing to provide consumers with this capability. According to report by Tender Research from October 2009, about 7% of households will forgo Pay TV subscriptions by 2012 in favor of OTT services and free over-the-air television. OTT market is moving very fast with proliferation of enabling devices like Roku, Xbox, and a range of new HDTV models and growth of online video sites such as Hulu, Netflix,

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    Echolab Bites the Dust

    Long-established broadcast production switcher vendor Echolab announced via email that the company has been put into liquidation.

    Echolab, which has been in business since 1974, had been on the ascendance recently under the leadership of company CEO Nigel Spratling.

    Spratling revamped the company’s product line-up, which culminated in the launch of the Atem production switcher family. At NAB 2010 Echolab announced that it had signed an OEM deal for the Atem line with the broadcast communications division of Harris (who has now removed the press release about the deal from their website).

    The email from Spratling said the company’s primary investor was no longer prepared to fund the company, and that the news was a great show to everyone.

    The full text of Spratling’s email is below:

    "It is with much sadness that I have to tell you that yesterday (May 19th) Echolab was put into liquidation. Our primary investor who had negotiated the recent agreement with Harris was no longer prepared to fund the company through the transition and decided that this was his only course of action; it was a great shock to us all.

    I am truly sorry that this action leaves many unemployed, suppliers with unpaid bills and customers with unsupported products. The recent introduction of an expanded Atem switcher family look set to take us into growth and profit as the market reception was excellent and our sales funnel had grown by $2M as a result. We had been sustaining a run rate of about $5M and the addition of Atem was set to double that.

    I truly believe that our small team had created the very best of breed in small and medium sized production switchers and at a price point that provided exceptional value and margin, facing the loss of these efforts is difficult for everyone involved.

    The liquidation company will be trying to sell the companies assets, product IP and inventory in order to pay creditors over the next few weeks. Hopefully they will be successful in their efforts.

    Naturally there are now some good people looking for jobs (including me), so if anyone is hiring please let me know."

    ViewCast Q1 Up

    ViewCast Corporation reported its results for the first quarter ended March 31, 2010. The Company reported that its turnaround and improving results continued in the first quarter as revenues increased sequentially from the 2009 fourth quarter, sales improved across all product categories, new and established customers showed renewed interest in ViewCast products, including the largest OEM customer, and significant milestones were met in product development initiatives.

    ViewCast President and Chief Executive Officer Dave Stoner said, "Results from the first quarter and our visibility into the second quarter have energized the entire team around what we can accomplish this year. We believe the work we did during the economic downturn of 2009, including product development and cost cutting, has positioned us for significant growth and much improved financial results. We saw first hand at NAB the energy our new products, including our VMp media portal, have generated in the digital media community. Our new Vice President of Sales, John Hammock, has already established momentum with large channel partners and volume buyers. And, more recently, our work with Apple and other high-profile mobile device manufacturers has us very optimistic about all of 2010 and beyond.

    Tektronix Buys Mixed Signals Inc.

    Tektronix, a Beaverton, Ore.-based supplier of test, measurement and monitoring equipment has announced the acquisition of Mixed Signals Inc., an El Segundo, Calif. Company that specializes in digital content monitoring. Terms of the transaction were not disclosed.

    “The acquisition of Mixed Signals, Inc. brings to Tektronix a strong team that has delivered leading innovation to the video monitoring market,” said Eben Jenkins, general manager of the Tektronix Video Business. “The combination of Mixed Signals and Tektronix accelerates our ability to provide unmatched next-generation video test and monitoring solutions to our customers.”

    Mixed Signals is best known for its transport stream monitoring products, which are used by television broadcasters, satellite system and cable operators, content aggregators and IPTV providers.

    Vizrt Q1 Revenue up 38%

    Revenue growth of 38% in Q1 2010, which followed on the strong revenue pick-up in Q4 2009, supports our expectations that we are on track to return to historic levels within the next 12 months.

    Martin Burkhalter, Vizrt CEO, commented on the results, "The reasons for the strong year on year increase in revenues are the same as our strong Q4 2009 was based on. The broadcast markets are slowly recovering and existing and new customers are coming back to us now that CAPEX budgets and discretionary spending are being restored. We also continue to benefit from the shift towards HDTV. Our results in MAM are promising, as budgets in this sector seem to recover. Customers seem to recognize the fact that investments in this area are a prerequisite for an efficient workflow and to develop new revenue streams. Development in our Online business is somewhat behind schedule, but this is to be expected as our traditional customers in this segment continue to struggle with the effects of the economic downturn."

    Ross Video 7% Growth in H1

    Ross Video announced a year over year growth of over 7% in the first half of their fiscal year, ending April 30, 2010.

    “We continue to buck the downward trend and have enjoyed some record months,” said David Ross, CEO, Ross Video. “A big thank you to our clients and business partners for their support in a challenging environment. Our openGear Terminal Equipment product line really led the way for us the past two quarters, while other product lines remained strong. We have some excellent momentum coming out of NAB, and the environment appears to be improving nicely.”

    Ross Video has continued to maintain its competitive edge with new products and product upgrades, providing quality solutions in production switching, automation, terminal equipment, graphics and video servers.

    Autodesk Reports Strong Q1

    Autodesk, Inc. reported financial results for the first quarter of fiscal 2011.

    "Our strong first quarter results reflect the continued improvement in the demand environment for our products and robust revenue growth in our international geographies,” said Carl Bass, Autodesk president and CEO. “Over the past several quarters we have been positioning the company to participate in the eventual global recovery. Our results reflect the work we’ve done to drive revenue, control costs and improve our profitability. We continue to be optimistic about delivering margin expansion this year, tempered with appropriate concern regarding the uncertainty of the European economy.”

    Autodesk experienced strong year-over-year growth in several key areas including maintenance billings, revenue from commercial new licenses, and cash flow from operations. Growth in total revenue, coupled with a continued focus on cost containment and improving operational efficiencies led to significant year-over-year improvement to Autodesk’s operating margin, cash flow from operations, and profitability.

    First quarter results included a one-time benefit of approximately $15 million in upgrade revenue related to a promotion that was run in advance of an increase in upgrade pricing.

    Optibase Q1 Post Sale of Video Biz to Vitec

    Optibase announced financial results for the first quarter ended March 31, 2010.

    “Following the signing of an asset purchase agreement to sell our video business to Vitec, our shareholders approved the transaction in a special general meeting on May 6th. We are currently working with Vitec towards closing this transaction and smoothly transitioning the business.”

    Total revenues for the first quarter ended March 31, 2010 were $2.6 million compared with $3.6 million for the first quarter of 2009 and $3.4 million for the fourth quarter of 2009. From total revenues for the first quarter of 2010 an amount of $396,000 relates to real estate income compared to $272,000 for the fourth quarter of 2009.

    Commenting on the quarter, CFO of Optibase, Amir Philips, said; “During the first quarter revenue from our real estate business was as we expected, while our video business continued to decline. At the same time, our operating loss decreased compared to the previous quarter and the first quarter of 2009 due to our efforts to manage costs.” Commenting on recent events he added; “Following the signing of an asset purchase agreement to sell our video business to Vitec, our shareholders approved the transaction in a special general meeting on May 6th. We are currently working with Vitec towards closing this transaction and smoothly transitioning the business.”

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    Grass Valley & Front Porch Digital in Technology& Sales Agreement

    Front Porch Digital announced an agreement whereby its DIVArchive(TM) content storage management (CSM) solutions will be sold in the Americas through Grass Valley(TM). The agreement in effect makes Grass Valley both a Front Porch Digital reseller and a technology partner, cementing a longstanding relationship between the two companies whose complementary technologies are already integrated and working successfully in name-brand installations, including the MLB Network and local ABC and CBS stations.

    "More than just looking for products, customers are looking for solutions," said Dave Polyard, Front Porch Digital senior vice president of strategic sales. "With this partnership, Grass Valley can offer customers not only its own outstanding products for news and production, but also system design and integration with the benefits of Front Porch Digital's world-leading CSM solution. At the same time, Grass Valley users who have not yet implemented a CSM system can now do so with total confidence in the two technologies' combined effectiveness."

    The formal agreement between Front Porch Digital and Grass Valley affords enhanced assurance for users that the two companies' best-of-breed production and archiving systems will work together seamlessly and effectively. In addition, Grass Valley's extensive sales and systems integration network in the Americas will support expanded access to the benefits of Front Porch Digital's DIVArchive system.

    "At Grass Valley, we provide end-to-end solutions for news and sports production, and for play-to-air systems," said Larry Mast, Director, Broadcast Systems Group, Grass Valley. "Today, a large percentage of these systems require a disk- or tape-based archive system. Front Porch Digital is the global leader for CSM as a result of its highly flexible archive management solution, DIVArchive, which has been successfully deployed with Grass Valley products at many significant customer sites. With this agreement, we look forward to continuing and expanding upon that relationship."

    Sinclair Broadcast Group Expands use of Chyron's AXIS Services

    Chyron and Sinclair Broadcast Group have announced the full implementation of Chyron's AXIS suite of Internet-based graphics services.

    Already a client of AXIS maps for all of its news producing stations for nearly five years, Sinclair will add AXIS news, charts and quotes functionality. Sinclair will also utilize AXIS track & order that will allow their centralized environment to quickly order, fulfill and track customized assets quickly and efficiently.

    "Working in the AXIS 'cloud' allows Sinclair to increase productivity within our news producing stations and to gain efficiencies in the process as a whole," said Del Parks, Vice President of Operations and Engineering, Sinclair. "The entire suite of AXIS solutions allows our producers and editors more flexibility to respond to breaking news with dynamic graphics across all channels."

    To further shorten the graphics production cycle, Chyron has integrated its AXIS news with MGN Online, a web based graphics repository allowing producers to tap into that library from the AXIS environment.

    "Sinclair's adoption of our full suite of AXIS services represents a major endorsement of our unique approach to content creation based upon the Cloud Computing model. The savings that AXIS brings are significant and yet the quality and 'look' of a TV station's news graphics is consistently enhanced. Our agreement with Sinclair marks another significant milestone towards our goal of becoming the leading provider of Cloud based content creation and workflow solutions to our media customers," said Chyron's CEO, Michael Wellesley-Wesley.



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    2010 Real-Time 2D-to-3D Conversion

    SCRI via its strategic research partner, Insight Media is now offering the "2010 Real-Time 2D-to-3D Conversion" report, a 75 page overview of the market for 2D to 3D conversion.

    The Need:
    The 2010 Consumer Electronics Show in Las Vegas, NV brought to the forefront how far the technology of S-3D has advanced; major consumer electronics brands such as Sony, Samsung, Panasonic, Vizio, Sharp, Toshiba, LG and others demonstrated state-of-the-art 3D technologies that are ready for mass production in consumer products. The establishment of Stereoscopic 3D specifications for Blu-ray (optical storage and distribution) and HDMI (data transport) from host (Blu-ray Player, Set-Top-Box, Video Game Console, etc.) to the 3D-capable television enables the creation of 3D products with the plug-and-play functionality expected by consumers. Major 3D content channels and distribution deals have been announced by ESPN, DirecTV and the Discovery Channel, and there is much behind-the-scenes activity at the cable providers. And, NAB'10 confirmed that all parts of the content creation, production and distribution infrastructure are getting behind the roll out of 3D content to the home in 2010.

    In the near term, however, there is very little content available for the consumer to enjoy on their new 3DTVs. A possible solution is converting existing 2D content to 3D. Such conversions can be done in real time, in near real time and in a time consuming off-line process. The quality is basically commensurate with the level of effort, with the real time solutions producing the lowest quality conversions. However, because there are many potential platforms where real time conversion can be embedded (3DTVs, Blu-ray Players, Set-Top-Boxes, etc.), this report focuses on this aspect of the conversion industry.

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    The report is organized to provide a detailed look at the need for real-time 2D-to-3D conversion, the techniques for performing the conversion and a forecast for products including this feature. Additionally, the report provides useful information about the companies involved in real-time 2D-to-3D conversion and the alliances that have formed between them.

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    SCRI announces the availability of a Special 100 page Report on 3D at NAB10, covering all aspects of 3D that were announced and discussed at NAB and the Digital Cinema Summit. The report, prepared by SCRI's strategic research partner, Insight Media, has nearly 100 pages of 3D news, analysis and commentary from Insight Media's team of expert 3D analysts. Topics covered include:

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    2010-2011 Broadcast Pro Video Marketplace (B/PVM)tm Reports Series was released at NAB10. A total of 25 individual product reports as well as a macro industry overview and micro quantitative data analysis reports are available. Contact for more information.

    2010-2011 Broadcast/Pro Video Macro Industry Overview Report:

    88 page report of analysis and information on the state-of-the-industry compiled from secondary online research sources including industry news sites, manufacturers sites, as well as SCRI's own weekly online News Briefs and Insider Reports.

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    30-page report containing quantitative data tables, for all six verical end-user markets, as well as in total, plus a 6 page summary analysis of the quantitative data tables

    2010 - 2011 Broadcast/Pro Video Product Reports (25):

    Video Camcorders; ;Video Cameras; Camera Mounting Systems; Character Generators; Clip / Still Stores; Composite/Component Encoders; Digital Effects Processors; Graphics & Effects Software; Graphics & Effects Workstations; Master Control Switchers; Non-Linear Editing Systems; Production/Post Switchers; RAID Video Storage; Routing Switchers; Standards / Formats Convertors; TBC's / Frame Synchronizers; Telecine Equipment; Terminal Equipment; Up/Down Converters; Video Compression Encoders; Video Disk Recorders; Video Monitors; Video Servers; Video Test & Measurement; VTRs

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