IABM Industry Update. Peter White, CEO, IABM Peter Bruce, APAC Director, IABM

Transcription

1 IABM Industry Update Peter White, CEO, IABM Peter Bruce, APAC Director, IABM

2 Regional Focus: Asia-Pacific Peter Bruce, APAC Director, IABM

3 Asia-Pacific An Overview CAGR ( ) Population 3421m 3450m 3477m 3504m 3530m 3555m 3579m 0.8% GDP / Capita US$ $6,200 $6,433 $6,799 $7,209 $7,705 $8,288 $8, % Internet Penetration (%) 43.2% 45.5% 48.0% 50.5% 53.1% 55.9% 58.7% 5.3% Smartphone Penetration (%) 29.1% 32.4% 35.3% 37.9% 40.1% 42.0% 43.6% 7.0% Source: Statista The market in APAC is varied as it includes countries at very different stages of broadcast industry development Some countries are in the midst of transitioning to digital/hd broadcasting with a great deal of spending going into digital transmission, infrastructure and monitoring equipment Others have already migrated to digital/hd broadcasting and are pioneering the adoption of cutting-edge technologies such as UHD and ATSC 3.0

4 Asia-Pacific An Overview

5 Business Environment Asia-Pacific Economic Outlook: Stronger than the rest of the world Economic growth in APAC remains the highest in the world, mostly driven by India and China India > China 8% 7% GDP Growth in Major World regions, World Output The slowdown in the Chinese economy during 2015 softened in 2016 and 2017 as a result of a renewed increase in infrastructure investment Growth in Southeast Asia will average 4.8% in the next three years driven by the Philippines, Vietnam, Cambodia, Lao and Myanmar 6% 5% 4% 3% 2% 1% 0% -1% -2% * 2018* Source: IMF Advanced Economies Emerging and Developing Asia Emerging and Developing Europe Latin America and the Caribbean Middle East, North Africa, Afghanistan, and Pakistan Sub-Saharan Africa

6 Business Environment Most economies are dependent on China 35% Trade Linkages with China (Export and Import Ratios), Top 10 countries 30% 25% 20% 15% Export ratio Import ratio Slowdown in China has affected economic activity in other countries as well! 10% 5% 0% Singapore Korea Malaysia Chile Thailand Saudi Arabia Australia New Zealand Philippines Source: OECD (Organization for Economic Co-operation and Development) Japan

7 Business Environment Southeast Asia Economic Outlook: Generally Stronger Indonesia: GDP and manufacturing PMI are both rising. Economic conditions are still very positive. Infrastructure spending is though slowing Thailand: Strength of the baht undermining local export sector imports have soared at the beginning of 2017 due to the currency s appreciation. Infrastructure spending is accelerating Malaysia: Economy still suffering from low oil prices and lower global trade this situation should improve in 2017 (more trade) Lao & Myanmar: the region s fastest growing economies (growing 7% or higher) Myanmar Lao Cambodia Vietnam Philippines Indonesia Malaysia Thailand Singapore GDP Growth Forecasts -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Singapore: will grow the lowest as it is the more mature economy (and it is more dependent on China s growth) Brunei Source: IMF

8 Business Environment In the first part of 2017, most currencies have appreciated Vs USD Selected APAC currencies, Gain/Loss Vs USD January-May % 8% Appreciation Vs USD 6% 4% 2% 0% -2% -4% -6% -8% Depreciation Vs USD -10% AUD/USD CNY/USD INR/USD IDR/USD JPY/USD MYR/USD NZD/USD PHP/USD SGD/USD KRW/USD TWD/USD VND/USD THB/USD Source: PACIFIC Exchange Rate Services

9 China Business Environment Trade barriers in China & India India China imposes a trade tariffs and other export restraints such as quotas and licences on a variety of products Weak Intellectual Property Rights (IPR) protection & lack of trade transparency: trade secrets theft, registration of trademarks in bad faith, procurement preferences for local companies, excessively subsidization of local companies Onerous requirements on the use of encryption, including intrusive approval processes and, in many cases, mandatory use of indigenous encryption algorithms continue to be cited as a significant trade barrier says USTR report New Cybersecurity Law issued at the end of 2016 restricts market access for cloud computing and internet-enabled services India imposes tariff and non-tariff barriers. The tariff structure is composed by basic customs duty, an additional duty, a special additional duty, an education assessment ( cess ) and, possibly, a landing fee In 2009, India initiated a web-based Indian Customs Electronic Commerce/Electronic Data Interchange Gateway, known as ICEGATE ( more info on the BI Digest Tariffs on a variety of products (including telecommunications equipment) were increased recently 2014 policy mandates Electronics and Information Technology Equipment Manufacturers register their products with laboratories affiliated or certified by the Bureau of Indian Standards (BIS) even if these have already been certified by accredited international laboratories higher compliance costs

10 End-Users Performance Both Revenues and Profits are up! Positive operational performance at constant exchange rates. This changes when accounting for variance in exchange rates (between 2015 and 2016) most currencies have lost ground Vs. USD 6% 5% 4% 5% Growing Pay-TV market rising revenues and profits across the whole region 3% 2% 3% Pay-TV threatened by online piracy it is rife in Asia- Pacific 1% 0% Revenue Change Profit Change Advertising picture varies depending on the country considered Asia-Pacific Source: IABM End-User Index (Constant Exchange Rates)

11 End-Users Performance Linear advertising is a liability for end-users in some countries In advanced broadcast markets, ad spending is shrinking In Australia, the commercial broadcaster Ten Network posted a FY loss of $157m for 2016 and issued a profit warning in February 2017 saying that the advertising industry is "under severe duress. Advertising revenues in Australia were down by 3% in the period July-December 2016 (ThinkTV) The same is not true for emerging markets such as the Philippines, Thailand and Indonesia broadcast advertising is up there 4,000 KRWbn 3,500 KRWbn 3,000 KRWbn 2,500 KRWbn 2,000 KRWbn 1,500 KRWbn 1,000 KRWbn 500 KRWbn 0 KRWbn 2,500 USDm 2,000 USDm 1,500 USDm 1,000 USDm 500 USDm 0 USDm Ad Spending in South Korea Ad Spending in Indonesia Broadcast Digital Source: CJ E&M, emarketer

12 End-Users Performance Piracy & Ad-Blocking are major issues in APAC Pay-TV is expected to grow by 5.8% in the period This is slower than before due to piracy opportunity for conditional access & DRM vendors Subscriber growth is expected to slow down in Southeast Asia although ARPU is set to remain healthy Russian Federation Active Users of Adblocking Browsers by Country, March 2016 (millions) China India Indonesia Pakistan Saudi Arabia Ad-blocking software is highly concentrated in Asia. For instance, the Asia-Pacific region contains 55% of global smartphone users but 93% of ad-blocking browser usage! In India and Indonesia, more than half the smartphone population use ad-blocking browsers. Pop-up ads appearing on browsers reduce page loading speed and this is exacerbated in emerging countries as mobile broadband infrastructure is less developed Brazil United States Malaysia Vietnam Philippines Nigeria UAE France Great Britain Germany Egypt Source: Pagefair

13 Broadcast & Media Tech Market Media Technology Spending in APAC Asia-Pacific represents 19% of global media technology spending It represents an increasing source of revenue for many vendors 19% Many suppliers that suffered from the recession continued to report positive figures Important market for acquisition and production technology vendors. HDTV and digital are still relevant spending drivers in the region Source: IABM DC

14 Digital Transition Status of Digital Transition in APAC Only five countries have completed the digital transition in APAC (12.5%), the rest is either going through the transition or has not started it yet. Major constraint to completing the transition is: lack of government funding to household and broadcasters One of the few exceptions is Thailand (where the transition is ongoing): the communications regulator has distributed millions of vouchers to buy digital equipment. Eligible households include those living in social housing and state enterprise officials. The expected DSO date is 2020 In Myanmar, the original DSO plan entails the analogue switch-off of over 200 stations between 2017 and The expected DSO date is The Myanmar government has recently issued five new free-to-air licences (DVB-T2) in April 2017 to the following broadcasters: DVB Multi Media, Fortune International, Kuang Myanmar Aung, Mizzima Media, and Young Investment Group 70% 60% 50% 40% 30% 20% 10% 0% Status of Digital Transition in APAC Completed Ongoing Not Started Unknown Source: ITU

15 Digital Transition Status of Digital Transition in APAC Vietnam intends to complete the transition to digital by Between 2017 and 2018 over 20 provinces will switch to digital Not Started Unknown Completed Ongoing The two most populous Southeast Asian countries, Indonesia and the Philippines, should complete their transitions by 2018 and 2023 respectively In Indonesia, DTT has been tested in 20 cities including Jakarta since 2016 Indonesia is set to become the third-largest digital TV market by the end of the decade In the Philippines, GMA network has already invested in digital equipment. ABS-CBN has begun testing the technology in major cities. The government has recently unveiled its plan for transmission via the Japanese system ISBD-T Source: ITU

16 HD Spending HD Deployment in APAC South East Asia s potential for increased HDTV channel deployment is big In China there is 1 HD channel for every 9.4m TV households. In the US there is 1 HD channel for every 197K TV households Other countries (except from Japan, South Korea etc.) have very low HD penetration rates as well Satellite broadcasting is important to the development of HD in Asia- Pacific. Many satellite service providers have expanded their capacity in the region to allow for a more extensive coverage In the next three years, the digital dividend in countries transitioning to digital will allow for more efficient delivery more HD channels No. of HD Channels US Source: Statista China

17 4K/UHD Spending 4K/UHD Adoption in APAC S Korea ATSC 3.0 UHD transmission to start the 31st May 2017 (beating USA). ATSC 3.0 will aid the further growth of 4K/UHD channels in the country The transition to 4K/UHD is underway in Japan, South Korea and India, where some local Pay-TV operators have already started broadcasting in the new format In Japan, some operators such as Sky Perfect JSAT have already launched 4K/UHD channels in Japan s Ministry of Internal Affairs & Communications announced that it aims at having K/UHD channels (operated by both FTA and Pay-TV broadcasters) on air by 2018 to focus on 8K deployment ahead of 2020 Tokyo Summer Games There have not been any noteworthy initiatives in Southeast Asia except from a few cases. First Media, an Indonesian Pay-TV provider, launched 4K/UHD in mid-2016

18 Other Spending Drivers File-Base Workflows & Media Asset Management The transition to file-based technology is still relevant in Asia-Pacific. According to our End- User data, about 20% of our APAC respondents have transitioned less than 50% of their operations to from tape to file filebased workflows ranks high in the tech priorities index. This, along with digitization of workflows, is being adopted to make operations more efficient Facilis Technology partnered with local resellers in India, Hong Kong and The Philippines to help Asian broadcasters such as ABS-CBN and Powervision TV migrate to non-linear workflows Media asset management ranks very high as well in the tech priorities index although primary priority remains multi-platform delivery same in all other regions Telestream and Vizrt have partnered to integrate MAM and transcode solutions for media customers in the APAC region

19 Transition to New Media Offerings Connectivity in APAC Poor broadband infrastructure and payment systems in less developed countries constitute a hurdle to OTT growth in APAC The situation varies country by country: countries where broadband speed is the issue and countries where penetration is a more serious problem In Thailand: average connection speed is 13.7Mbps but fixed broadband penetration is 30% Plan to make broadband more affordable to lowerincome households ITU study finds that average monthly prices for an entry-level service cost between US$5 to US$45 with high speed between US$17.6 and US$500 30Mbps 25Mbps 20Mbps 15Mbps 10Mbps 5Mbps 0Mbps Connectivity (Average), selected Asia-Pacific countries Average Source: Akamai

20 Transition to New Media Offerings Financial sector development in Southeast Asia In most Southeast Asian countries, bank account penetration is very low Singapore is the exception 96% penetration, like Luxembourg The majority of people who have a bank account often do not engage with it: Indonesia: 36% bank account penetration and 26% debit card ownership. Only 1% and 8.5% of these accounts are engaged in credit card and debit card transactions respectively Philippines: 31% bank account penetration and 20.5% debit card ownership. Usage rates are 2% and 3.5% respectively 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Bank account penetration in Southeast Asia Singapore Malaysia Thailand Indonesia Philippines Vietnam Myanmar Cambodia Average Source: World Bank

21 Transition to New Media Offerings Netflix in APAC The arrival of Netflix in the region in 2016 (in all countries except China and North Korea) has prompted other OTT operators to ramp up their investment in local content seen as Netflix s major weakness in this market Netflix is still an elite service in most emerging APAC economies 3m+ subs in the region at the end of 2016, mostly in Australia, Japan, Korea and New Zealand Content localization (not only subtitling & dubbing) is key to attract Asian viewers Amazon Instant Video launched in Singapore, Malaysia, Taiwan, Hong Kong, Cambodia, Indonesia, Philippines, Thailand and Vietnam at the end of In India, the service is included with Prime at no additional charge 4,500K 4,000K 3,500K 3,000K 2,500K 2,000K 1,500K 1,000K 500K 0K Netflix subscribers in selected APAC countries, 2017*-2020* (estimates) Malaysia Philippines South Korea Source: Nakono 2017* 2018* 2019* 2020* Indonesia Thailand Singapore

22 Transition to New Media Offerings Other New Media offerings Viu: launched by Hong Kong-based media behemoth PCCW in It boasts over 9m subscribers in over 10 countries and is Netflix s main competitor in the region. It offers both free and paid subscriptions LeEco: is the leader in the Chinese OTT market. It is a technology provider offering integration of its OTT subscription with its smart devices and TVs. LeEco acquired the rights for broadcasting important sports events such as the English Premier League and the World Cup Iflix: provides a paid subscription service offering in countries such as Malaysia, Indonesia, The Philippines and Thailand. In 2016, it entered a strategic partnership with the European Pay-TV operator, Sky HOOQ: is offered in Indonesia, The Philippines, Thailand and India. It is a video streaming service provider backed by Sony, Warner Bros. and Singaporean telco Singtel

23 The State of the Global Broadcast & Media Industry Peter White, CEO, IABM

24 Live Streaming Decline in Linear TV Cloud Technology Cyber Security Multi-Platform Delivery ATSC 3.0 & Re-pack Interoperable Technologies Hardware to Software CAPEX to OPEX Transition to UHD VR/AR Broadcasting OTT Technology IP Technology Change

25 The Rise of OTT Despite live streaming challenges, OTT continues to grow Still difficult to support the massive linear audiences with live streaming although demand is growing Weekly time spent with TV and OTT in US (hours) Live streaming still represents a small share of overall live viewing 15 However, time spent with TV is declining, particularly for younger generations. Consumption of OTT services continues to grow 10 5 Online on-demand viewing acquiring increased importance 0 Source: Nielsen, TDG TV (Millennials) OTT (Overall) Leslie Moonves, CEO, CBS

26 The Rise of OTT Traditional US Broadcast & Media Landscape

27 The Rise of OTT New US Broadcast & Media Landscape Traditional Traditional New New

28 The Rise of OTT US OTT Media Landscape

29 0% The Rise of OTT Percentage revenue from traditional broadcast operations versus new activities such as web, mobile, streaming, multi-platform content delivery? 2013 NAB 2013 IBC 2014 NAB 2014 IBC 2015 NAB 2015 IBC 2016 NAB 2016 IBC 2017 NAB CURRENT 20% 40% 60% 80% 30% 35% 38% 11% 9% 8% 9% 14% 11% 12% 18% 16% 17% 9% 11% 22% 39% 10% 11% 16% 29% 11% 12% 19% 48% 10% 9% 16% 25% 17% 16% 22% 29% 11% 16% 17% New Traditional 100% 35% 28% 27% 40% 24% 29% 17% 20% 27% Source: IABM Pre-NAB Show 2017 End-User Survey

30 0% The Rise of OTT Percentage revenue from traditional broadcast operations versus new activities such as web, mobile, streaming, multi-platform content delivery? 2013 NAB 2013 IBC 2014 NAB 2014 IBC 2015 NAB 2015 IBC 2016 NAB 2016 IBC 2017 NAB IN 2 3 YEARS TIME 20% 40% 60% 80% 29% 34% 37% 7% 14% 9% 13% 20% 16% 18% 21% 20% 18% 12% 22% 25% 39% 11% 16% 20% 30% 15% 18% 21% 22% 18% 48% 11% 27% 15% 15% 22% 26% 17% 17% 25% New Traditional 100% 27% 16% 17% 24% 14% 16% 11% 11% 15% Source: IABM Pre-NAB Show 2017 End-User Survey

31 Transition to multi-platform delivery continues to disrupt the traditional broadcast landscape The Rise of OTT Transition to TV Everywhere & Automated Workflows Changing viewing habits have forced broadcasters to launch new media offerings OTT Realm Broadcast Realm 30% Initially, assets needed to be prepared both for linear and OTT delivery duplication of efforts, additional costs, additional complexities Transition to a unified approach to media workflows Source: IABM End-User Index % OF COMPANIES 25% 20% 15% 10% 5% 0% < 0% 0% - 10% 11% - 20% 21% - 30% 31% - 40% > 40% PROFIT MARGIN

32 Cloud Technology All in the Cloud Cloud customers can avoid high fixed costs by consuming services on demand 14,000 12,000 AWS Revenues ($m) AWS Pubic Cloud Adoption They can benefit from the economies of scale (better utilization rates) that cloud service offerings provide and launch services on the fly 10,000 8,000 Azure Google Cloud Some media workflows such as post-production and content distribution are already moving into the cloud 6,000 4,000 IBM Oracle Cloud Some major media technology suppliers are making the transition to cloud-based offerings this involves a transition from a product to a SaaS model Source: AWS, RightScale 2, Digital Ocean 0% 20% 40% 60% Public Cloud adoption is rising across the media spectrum although media & entertainment customers generally prefer a mixed use of cloud strategies

33 Cloud Technology How likely are you to deploy some sort of cloud-based technology in the next 2-3 years? What is the preferred deployment strategy for the adoption of cloud-based technology in your organisation? 35% 15% 85% 30% 28% Hybrid Cloud 35% 25% 20% Private Cloud (Off-Premise) 24% 15% Public Cloud 19% 10% 5% Private Cloud (On-Premise) 18% 0% Not at all likely Unlikely Somewhat likely Very likely We are already doing it today Other 4% 0% 10% 20% 30% 40% 50%

34 At CES 2017, AI was the most talked about emerging technology. It can help end-users deal with the increasing costs of online delivery AI Technology AI to the rescue? 35% How likely are you to deploy some sort of artificial intelligence (AI) technology in the next 2-3 years? 57% 43% AI can be defined as intelligent technology capable of replicating human learning and problem solving skills AI applications to the broadcast and media industry have been rare so far with only a few suppliers launching offerings that included some 30% 25% 20% 15% 10% Major applications include: ad sales recommendations (Turner started using IBM Watson for this in 2016), recommendation engine (Netflix claims it saves $1bn thanks to it), search and metadata labelling for media asset management and efficiency network management Source: IABM pre-nab Show 2017 End-User Survey 5% 0% Not at all likely Unlikely Somewhat likely Very likely 5% We are already doing it today The greater the organization, the greater is the probability to adopt AI

35 Cyber Security Check Hackers continue to threaten media companies Has your organization experienced any Cyber Attacks in the last three years? 90% 80% 70% How high or low a priority is Cyber Security in your organization s technology strategy? 6% 4% 60% 50% 40% 30% No Yes 16% 40% Very high Quite high Quite low Very low 20% Don't know 10% 0% From 1 to 50 from 51 to 500 from 500 to Over Number of Employees The default assumption is that everything is vulnerable Robert Watson, Computer Scientist, University of Cambridge 34% IP-Networking, Cloud & Data Explosion create new vulnerabilities Source: IABM pre-nab Show 2017 End-User Survey

36 Customers Performance Broadcast Revenue Sources Advertising 7% 9% 35% Subscriptions License Fee/Gov. Funding 28% 37% 30% 19% 47% 35% 53% Increase Decline Stay the Same Don t Know Increase Decline Stay the Same Increase Decline Stay the Same Source: IABM pre-nab Show 2017 End-User Survey

37 Customers Performance Traditional Broadcast & Media Technology Buyers Product Vendors Routing & Networking Products Focus Media Organizations Next-Generation Broadcast & Media Technology Buyers Production Switchers Test & Measurement Tools Playout Automation Products Ingest / Transcoding / Streaming Products Transmitters Video Editing Tools Demand Audio Mixers & Consoles System cameras (Studio / Location) Non-Media Organizations Other Broadcast & Media Technology Buyers Integrated Playout (Channel-in-a-Box) Near-Line / Off-Line Storage Products Workflow / Asset Management Demand Demand Service Providers Production / Post-Production Outside Broadcast Transmission Services Equipment Rental OTT/OVP Platforms Content Delivery Networks

38 Customers Performance 7% 15% 10% 9% Overall Industry % of Total Industry Revenues 75% 25% Media Networks % of Total Industry Revenues Pay-TV Operators 5% 93% 0% Profit-Making -5% -10% -7% 15% 10% 5% 10% 8% 9% Loss-Making 0% -15% Revenue Change Profit Change -5% -10% -9% 47 countries covered -15% Revenue Change Profit Change Revenue Change Profit Change Source: IABM End-User Index 187 companies included in the sample Media Networks Pay-TV Operators

39 Customers Performance 15% 10% 11% 5% 0% 5% 1% 5% 3% -5% -10% -15% Revenue Change Profit Change Revenue Change Profit Change Revenue Change Profit Change -10% EMEA Americas Asia-Pacific % of Total Industry Revenues

40 Customers Performance OTT Realm Broadcast Realm 30% 25% % OF COMPANIES 20% 15% 10% 5% 0% < 0% 0% - 10% 11% - 20% 21% - 30% 31% - 40% > 40% PROFIT MARGIN

41 Suppliers Performance Year on Year Sales Growth, last 24 months up to March % Global 3 mth mov avg. Large 3 mth mov avg. SME 3 mth mov avg. 10% 5% 0% 13.5% -5% -10% -15% Source: IABM Industry Index March 2017

42 Suppliers Performance Profit Statistics: Profit Growth (left) & % of Companies in Profit and Loss (right) Global 3 month mov avg. 25% 15% 65.5% 5% 34.5% -5% Profit Making Loss Making -15% Nov-16 Mar-17 Trend In profit both years 53.4% 53.8% -25% Moving from loss to profit 11.7% 11.7% = Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 In loss both years 24.3% 22.8% Moving from profit to loss 10.7% 11.7% Source: IABM Industry Index March 2017

43 Total Market Size by Region Helicopter view of the Broadcast & Media Technology Industry $60b $50b $40b $30b $50.1 billion Americas 38% Asia Pacific 19% $20b $10b EMEA 43% $b Americas EMEA Asia Pacific IABM DC IABM Industry Update Breakfast Broadcast Asia 2017

44 Total Market Size by Segment 57% 9% 2% 2% 3% 6% IABM DC 4% 5% 13% Total Services include the following categories: System Integration Consultancy Dry Hire / Rental Services to Live Production (outside broadcast, etc.) Post-Production, Facilities & Studio Rental Playout Facilities Content Delivery Networks (CDNs) Acquisition and production Post production Content and communication infrastructure Audio Storage Playout and delivery systems System automation and control Test, quality control and monitoring Total Services Infrastructure as a Service (IaaS): Bandwidth Infrastructure as a Service (IaaS): Compute & Storage Commercial, Long-Form Content & VOD Delivery OTT - Managed Service Providers OTT - Platform and Component Providers Localization/Data Services Terrestrial Transmission Satellite Transmission 60% 55% 50% 45% 40% 35% 30% Services and Products as % of Total Industry Value Total Services Total Products IABM Industry Update Breakfast Broadcast Asia 2017

45 Product & Services Revenue Growth 10.0% 8.0% 6.0% Overall Products Services IP-Networking Virtualization Automation % 2.0% 0.0% Structural Shift 2.3% 0.9% 3.3% -2.0% -4.0% Digital/HD Spending starts to fade -6.0% -8.0% -10.0% CAGR Products: 2.1% CAGR Services: 4.7% Shift in Technology Spending CAGR Products: -3.6% CAGR Services: -1.9% IABM DC IABM Industry Update Breakfast Broadcast Asia 2017

46 Suppliers View 2 Important Transitions From Hardware to Software Many traditional broadcast and media technology suppliers still rely on hardware as their primary source of revenues From CAPEX to OPEX Broadcast and media technology users have traditionally relied on a CAPEX model with product upgrade cycles of up to 10 years With end-users moving to software-defined infrastructures built on COTS equipment, bespoke hardware revenues are under pressure The take-up of cloud computing in media & entertainment is favoring the transition to an OPEX model where costs flexibly vary on the basis of user demand Traditional suppliers are therefore embarking on a difficult transition from purpose-built hardware to delivering software running on general-purpose equipment Subscriptions guarantee steadier cash flows (and shorter product cycles) but suppliers are used to finance their high R&D expenditures with large money influxes (typical of licence fee/hardware model)

47 State of 4K/UHD Adoption 4K/UHD Adoption A Timeline What is the most likely timeline for the launch of UHD offerings in your organization? Only 22% plan to launch UHD offerings in the next 3 years 40% 35% 30% 55% 35% 25% 20% 15% 10% 10% 5% 0% Already launched 1 to 3 years 4 to 6 years 7 to 10 years No plan to launch

48 State of 4K/UHD Adoption 4K/UHD Adoption Low revenue potential of UHD programming makes it not a priority for many end-users ATSC 3.0 could be a catalyst for the transition to UHD operations Patrick Harshman CEO Harmonic Infrastructure upgrade necessary to deliver in the new format. Most prefer IP or Hybrid SDI-IP solutions over 12G SDI and Quad-3G SDI 4K/UHD big in Japan and South Korea with many broadcasters already delivering content in the new format

49 State of VR Adoption Doubts remain over VR experience & business models 30% 25% 20% 15% 10% 5% 0% How likely are you to launch some sort of VR video offering in the next 2-3 years? How are you planning to monetize VR video? Adoption Challenges 45% 55% Cost premiums remain high Not at all likely Unlikely Somewhat likely Very likely 10% We are already doing it today Don't know We are not planning to monetize it Advertising Subscriptions Other Pay-per-View / EST 68% 0% 10% 20% 30% 40% 50% Business models supporting it are still unclear Doubts over VR experience: isolation, VR sickness as well as customers potential reluctance to play an active role in storytelling

50 Transition to IP Transition to IP Infrastructures Of the products / solutions that you plan to purchase over the next 12 months, which is the most important priority? (Top 10) All Respondents Large Broadcasters Video editing tools Workflow / asset management solutions Camcorders Routing & networking products (IP) Workflow / asset management solutions Camera support & accessories Camera support & accessories System cameras (studio / location) Ingest / transcoding / streaming products Routing & networking products (IP) Camera lenses Production switchers Transmitters Newsroom systems Routing & networking products (baseband & hybrid) Playout / transmission servers System cameras (studio / location) Audio mixers & consoles Library & storage management products Playout automation products John Stroup CEO Belden 0% 5% 10% 15% 0% 5% 10% 15% Source: IABM pre-nab Show 2017 End-User Survey

51 Never, ever want to be locked in to one vendor The Importance of Interoperability Customer preferences & Interoperability Customers still prefer best-of-breed solutions Multiple suppliers for custom 'best of breed' One stop shop "end to end" solution provider NAB 2017 IBC % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Therefore, interoperability is important for most of them 3% 2% 20% 36% 39% Not at all important Source: IABM pre-nab Show 2017 End-User Survey Not Important Moderately Important Important Very Important

52 The Importance of Interoperability How familiar you are with the various interoperability initiatives? Best-of-breed solutions presents the challenge of interoperability between different technologies Interoperability is costly: according to Avid Technology, the cost associated with making technologies talk to each other is equal to about 25% of the total solution cost Unfamiliar with this initiative Know about but we are not a participant Most end-users (67%) are unfamiliar with interoperability initiatives. This is higher for North American respondents Used to participate but no longer do However, several interoperability initiatives have I / My company is an active participant made notable improvements. AIMS had 70 total members at the end of March 2017, up from 30 in March % 10% 20% 30% 40% 50% 60% 70% 80% Source: IABM pre-nab Show 2017 End-User Survey NAB 2017 IBC 2016

53 Suppliers Confidence is up IABM Confidence Ratio H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: IABM Industry Trends Survey December 2016

54 But Customers remain more confident Outlook for the business environment, Suppliers and End-Users Suppliers End-Users 33% 6% Very Positive 22% 4% 15% Quite Positive Neutral 25% 46% Quite Negative Very Negative 48% Source: IABM pre-nab Show 2017 End-User Survey, IABM Industry Trends Survey December 2016

55 The State of the Global Broadcast & Media Industry Peter White, CEO, IABM

56 IABM Industry Update Peter White, CEO, IABM Peter Bruce, APAC Director, IABM