State of the Union
I use this phrase to indicate that I am about to tell you something from a thirty-thousand foot view, pertaining to our industry in very general terms. The subtitle should read: Business is booming, but it has CHANGED.
WHAT A DAY
We just finished a remarkable SMPTE meeting in Orlando, Florida where i understand over two hundred people attended and there were dozens of manufacturers on display. The group's facebook page is here - https://www.facebook.com/groups/SMPTE.FLA/ . I was surprised and thrilled to see such a turn-out for a local event. The topic of conversation, predominately, was SMPTE 2110. It was a chance to hear from the mouth of the organization the intended direction and purpose of standards in general and specifically the momentum of the industry. We are still very likely several years away, though, from most facilities being able to afford or have the need to incorporate SMPTE 2110 infrastructure into their workflow, from my point of view. I think this gathering went a long way in boosting confidence and encouraging the broadcast community.
Clyde Smith, industry veteran and legend, said something in his address that I think bares re-stating. He tried to encourage the engineers in the audience by reminding them that we have gone through vast and challenging changes over the decades and today's challenges are no different except in one way. They never happened all at once, and the rate at which the industry is changing now is concentrated in such a way that has brought the "union" to a stalemate of sorts. Vendors and manufactures are having back office discussions about where the next opportunities lie, and there is a lot of speculation and some concern.
The day of our meeting about broadcast and IP fabric infrastructure, Net Neutrality was rescinded by the FCC. I found this somewhat coincidental, not that they are related really in any way, except to say that the undercurrent of conversation at the show was about business potential and direction not so much technology.
On the Net Neutrality issue, I have not done enough studying on this particular subject to really claim a strong position. That said, something emerged yesterday during a conversation at the SMPTE meeting in Orlando that caught my attention. There was a report issued by CISCO in June that talks about the exponential growth of internet traffic, measured now in ZETTABYTES, 82% of which is video. Given the rates of growth indicated, I cannot help but think that the rescinding of Net Neutrality may very well be intentional if perhaps in part to keep the internet afloat via throttling, let alone any benefit to big business. I have to say that big government and big business do seem deeply intertwined no matter the big party affiliation these days. Here is a link to that cool report - https://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/vni-hyperconnectivity-wp.html
Business is booming, BUT... One associate put his perspective this way. Our industry from a vendor perspective used to look like a triangle. You had high concentrations of opportunity at the top, but those were almost always factory direct deals or involved only the largest integrators. There was a lower crust of opportunities which made up a much larger volume of business but for commodities and pro-sumer gear that did not amount to much in the way of profit or margin. Only those companies designed to work with large volumes at low margin have been able to make money here consistently. There is a lot of overhead, management and gamesmenship required to ride in that lane. Then there was a meaty middle section of the triangle where the vast majority of the vendors and manufacturers spent their resources to cultivate opportunities. This is where we have always done our best, both for ourselves and also our clients. This is what has really built our industry from the perspective of commerce.
What has changed? The speculation and concensus is that the industry no longer looks like a triangle but instead an "apple core". The business is now concentrated solely in the upper and lower tiers and the meaty middle is highly diminished. Every vendor or manufacturer i have talked with in the last six months has indicated a similar observation, but it was never quite put into such an accurate word picture.
What this means for the union moving forward is we continue to adapt. We continue to be honest with ourselves and reflect on what our value proposition is to the marketplace. We change as we have to. There have been reports of forecasts and revenues down over the last 12-24 months, and downsizing has happened to some degree in the manufacturing space. That said, everyone I talk to also has a positive outlook for 2018. One broadcast camera manufacturer told me that they have between twelve and eighteen sports opportunities forecasted, which would equate to millions of dollars in sales. COMMAND Corporation, has a great 2018 forecasted, so we remain encouraged as well. However, you may find this year that our technology portfolio is evolving a bit. We hope to be able to share some of that with you in the new year. For now, we wish you a Merry Christmas & Happy Holidays!