Saturday, May 03, 2008

Who Ate All The Pies ?

The broadcast and broadcast services sector remains in the doldrums despite the radical changes going on in the broadcast world. The move to cheaper, easier ways of disseminating video content is bad news for most of the broadcast service companies and the telco sector is also failing to benefit.

For example, the merger of Alcatel and Lucent is in danger of dragging down two of the great names in technology as the strength of the dollar hits and it isn't able to replace traditional telcoms revenue fast enough with data traffic such as video.

At the same time, broadcast advertising dollars are disappearing and they're not reappearing again anywhere else - there is a tectonic shift to internet ads, but internet video is nowhere near making up for the lost revenues being suffered by companies such as ITV, for example.

As the pie gets cut into smaller segments, the market loses the old oligopolies and no longer has the economies of scale that were once available to the dominant players.

The basic problem is that the pie is the same size, new entrants are taking big slices out of this pie (IPTV players in Southern Europe, Google) there, quite simply, too many companies treading on each others' toes. And we all remember from second year economics that competition drives prices down.

It is companies diversifying away from video, such as MTV owners Viacom, who are benefiting the most - they have just announced stellar figures based on the success of the Rock Band video game.

Broadcasting has always had an allure beyond its station (the media industry as a whole is tiny when compared to, say, oil production or banking). Now companies wanting to operate in the sector are in danger of feeding off crumbs.

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