For Equipment Sellers, a Cautious Tone

Researcher says an improving economy should help, but challenges remain
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How much money is spent globally each year on radio broadcast equipment?

One observer, consultant Douglas I. Sheer, takes a stab and estimates that product-related spending worldwide in radio in 2009 was the equivalent of about $1.2 billion in U.S. dollars, down from about $1.5 billion the year before.

His company D.I.S. Consulting makes the estimate in a book published by The NAB Show, "The 2010 Broadcasting, Audio & Video Global Industry Trends Report." The book, which is now in its second year, aims to give exhibitors and associate members some insight into the outlook for spending. It sells for $450 through the NAB Store, www.nabstore.com.

The global spending estimate is an aside. D.I.S. took an average survey response of $35,000 product spending in 2008 per site and multiplied that by 44,000 radio stations in the world; but the report doesn't pretend to give a statistically reliable number. There's probably no way to know with certainty; and I've learned during many years of working in and around the equipment marketplace to treat estimates with caution.

More to the point are the report's conclusions about the outlook for the gear market. A robust hardware industry matters — not only to keep your favorite publications in business, but as a barometer of radio's fundamental health. The company based its findings on what equipment users and buyers say about their plans. The report is heavy on TV, exploring such topics as 3D, HD and online alternatives to traditional video distribution; but it includes discussion of relevant general trends as well as radio specifics.

It suggests this should be a somewhat better year for the radio equipment marketplace, but that manufacturers and sellers continue to face significant challenges.

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"You would have to have been on another planet to not know that our industry has been confronted by its most challenging economic environment in history," Sheer writes in his introduction. He notes elsewhere that U.S. television and radio equipment manufacturers "had an increasingly tough time as the recession proceeded, and 2009 was truly harrowing for many," with layoffs, hiring freezes and marketing cutbacks.

But he thinks the economy will improve and that the broadcast hardware marketplace as a result will see "genuine recovery," though this will be unpredictable, even "confounding."

"D.I.S. feels that the worst of the recession for our industry is behind us. And, in fact, as far back as The NAB Show last year, we were speaking of the depth that the decline would sink by — about 14 percent — in 2009 and the growth in 2010, and we predicted — roughly 4.8 percent — overall in recovery.

"Our optimism last year … drew some derision," he said, "but has proven to be fairly solid. While 2010 is still young at this writing, the early indications are that the industry will see a continued recovery."

Leaner

In radio specifically, D.I.S. described the "radical" technological changes that have moved through the business over two decades, including the shift to digital systems, expansion of automation and increased reliance on "packaged and formula-oriented programming." In recent times, the company finds, the hardware biz has seemed lackluster — "even Google, who had been excited about it, pulled out in 2009" — and while ownership consolidation has slowed, its impact remains powerful.

"Radio as a marketplace has been both a labor-intensive and mature industry," D.I.S. continued. "But today it is listening to renewed demand and has been getting more creative with its technological mediums; delivering broadcasts across the Internet has been a major growth area, along with satellite delivery and digital radio broadcasts."

Recent mild improvement in the radio revenue picture probably will translate to a boost in purchases; D.I.S. expects a spending increase of about 5 percent globally.

"With the exception of western Europe and the USA, there continues to be a strong market for radio (and TV) transmitters," it found. "Outside the USA and Europe, the primary 'dollar-per-dollar' earners are radio transmitters, antennas and towers. That is likely to continue to be the case." Improved purchasing also is expected in consoles, routing systems, servers, infrastructure products and other segments.

D.I.S. says several factors are driving the radio equip¬ment market, here and abroad:

  • - Continuing upgrade of remaining analog facilities;
  • - Need for additional studios;
  • - Ongoing automation, including radio operations for the Web;
  • - Replacement of aging radio or audio equip¬ment and broader infrastructure, "some of which is easily 50 years old"
  • - Expansion of Internet radio and other new media platforms
  • - "Massive increases" in storage and content archiving
  • - The buildout of server-based systems


Impediments include the condition of the economy; the absence this year of a presidential election or Olympics; ongoing consolidation of operations (thus reducing the number of buyers); saturation within some product genres; a glut of competitors; and the lowering of product prices for all of these reasons.

"To see a bubbling up of radio ad revenues — or at least the end of the period of decline — is certainly an encouraging sign," the company states.

"But some product genres have seen better days and are not likely to be elevated much even with boosted revenues … other genres will benefit, as the revenues return and the general economy lifts." D.I.S. hopes for improvement in the short term and maybe stronger recovery beyond that.

"A good deal of further automation of stations is likely to be another strong trend, with so much pressure to limit labor costs and repurpose and redeploy assets. Beyond that first year or two, we see a recovery and the meeting of a freshly stronger demand making the third, fourth and fifth years much more bullish." But D.I.S. cautions manufacturers that prices will tend to remain lower and that some segments will continue to be saturated.

"Topping those concerns off is the added concern that with increasingly software-driven systems, more automation, less diversified ownership, some customers will abandon legacy systems entirely for purely software-based solutions as the new decade arrives and the market advances."

The overall tone of the report is cautiously optimistic. But unsurprisingly, an overarching trend for U.S. broadcast is that we'll continue to do more with fewer people. Sheer concludes:

"Sites will be more and more automated. Crews will remain smaller. Equipment will remain lighter and more compact. There will be more com¬pression in ownership, not only of the production world and distribution world but also in the manu¬facturing and services side of the market.

"We would expect that some of the rules of ownership will have to change to allow small to mid-size stations to be owned by less owners, making the number of truly independent stations shrink. Perhaps this will encourage or allow groups to expand or networks to re-configure to better survive the adjusted USA reality of business. At this time we cannot say definitively. But although the USA market will rebound, it will not look entirely the same as it did. It will be leaner and meaner."

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