IABM: Profits will be tight this year
The TV technology industry is in for a tough year. That is the underlying message from the latest IABM report (IABM Industry Index), which examines the latest revenue and profits of some of the largest broadcasting suppliers. “As to hard data it is clear that sales and profits are suffering during Q1/2009,” says IABM director Roger Crumpton.
“What is important about this study is that it is real facts, rather than opinions. What we are looking at is an analysis of some 70 companies, with about half of them in the US and the other half in Europe. We have looked at their last published financial information. I can tell you that some 70% of the data is dated Dec 1 2008, or later. In other words the bulk of the research is using very recent numbers,” says Crumpton.
Growth in sales by companies supplying technology to broadcast and media companies grew by 11.7% year on year to the end of March 2009. While 78% of companies tracked in this analysis are in profit, the level of profitability is in decline. European-based vendors are particularly affected by this, with profitability in North American companies holding up well, says the study.
“These figures should be seen in context: financial statements published up to the end of March largely reflect the business trends for 2008, so not only are they only just beginning to be affected by the recession, they cover a particularly big year for the broadcast industry,” says Crumpton. “That said, it does show that this is a healthy industry, as ready as any to face the difficult times ahead.”
“The data shows that 2008 was, as we all knew, a cracking year. It was helped by being not only a quadrennial year of Olympic Games and the presidential election but also the year when most broadcasters in the US readied themselves for digital switchover,” adds Crumpton. “However, the year following a quadrennial is always a more difficult year for trading. Our last study, our Global Market report published last September, warned at that time that we expected about only about 1% compound growth for 2009. The fact that trade is much more subdued at the moment is something we were anticipating. But were not predicting the global collapse in trade! This latest report talks about an 11% growth in sales, but there are wide variations. The large corporate members were doing about 15% more business, but the smaller players were doing about [minus] –5%. There’s a big difference therefore between the established major players, and the smaller suppliers. On the sales side we are still seeing growth in the final quarter for the majors, but weaker sales for the smaller operators.”
Crumpton also says that the normal rate of Merger & Acquisition business has dried up these past months. “I think the banks and finance players have been too concerned about other developments of a more global nature. Everyone is risk-averse no matter what the risk. But I think we’ll begin to see more now that the dust is beginning to settle, and I am beginning to see more activity. I don’t see any big deals on the immediate horizon but I do see more consolidation taking place. It has to happen. Of the 1000 or so companies in the industry, the Top 10 account for 50% of the business, the Top 100 take more than 90% of the business, with the other 900 or so companies surviving on the remaining crumbs on the table.”
“There’s one other major change taking place. Broadcasters generally are no longer buying from individual suppliers. They are more and more buying from integrators and suppliers of joined-up infrastructures. There is still scope for innovation, but it is more difficult for these especially innovative businesses to get their equipment in front of broadcasters.”