Industry Insights: Coronavirus, expenditures and the upgrade cycle
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Many organizations are also freezing or cutting expenditures for 2020 and beyond as the next two years look to be a turbulent time.
Make sure to read the earlier part of our coronavirus-focused Industry Insights series:
As part of our continuing coronavirus coverage, we recently gathered a virtual Industry Insights roundtable of industry service providers about the impacts of the virus. In this first edition, our experts tackle spending and upgrade cycles following the outbreak.
How is CapEx impacted for 2020? What about 2021?
“The impact on CapEx from the buyer side is still very unclear. We have seen different behaviors: some are delaying all investment; some are reducing and focusing the investment on very specific areas (dependent on their specific needs); and some are keeping the same investments but re-routing it to address their business continuity and work-from-home plans (mostly public broadcasters) We don’t yet have an aggregated view of how these different trends will consolidate, but we expect a significant reduction in CapEx investment in 2020 and early 2021, with a portion of that moving to OpEx investments,” said Kevin Savina, director of product strategy for Dalet.
“Next year is anybody’s guess, but remote production workflows are an idea that was already catching on in a big way before the coronavirus hit. We only see this paradigm expanding over time, especially as broadcasters realize just how much they can do with remote operations, and how much money they save. REMI workflows were already growing for large-scale productions like the Olympics. Now that the summer games are postponed to 2021, I would not be surprised if the bulk of those games are produced using remote production,” said Namdev Lisman, executive vice president at Primestream.
“As the broadcast industry transitions in current circumstances to a remote workforce, CapEx has rebalanced to include new expenditures that ensure workers are able to efficiently communicate with remote teams and manage productions from home. In many cases, streaming products and remote desktop software are being utilized to keep traditional infrastructure up and running. Many products, like those from AJA, offer built-in web servers to enable remote configuration and control, and these capabilities have helped sustain many broadcast outfits. While some operations have been reduced, companies involved in streaming and OTT have experienced a period of growth and expansion, as consumers are sheltered in place and seek forms of entertainment from the comfort of their homes. To help professionals work remotely and aid in streamlining remote production and content delivery, broadcast tech providers are investing in streaming and OTT products and services, in addition to solutions that bridge HDMI, SDI, IP and streaming equipment. Even prior to the current crisis, the industry was experiencing a shift towards remote production workflows that leverage SDI infrastructures in tandem with IP and/or streaming technology, and we can expect to see this trend continue throughout the end of the year and into 2021,” suggested Bryce Button, director of product marketing for AJA Video Systems.
“While, with many people around the globe stuck at home, ratings may have increased, with sporting and other events and many primetime shows canceled, advertising revenues have fallen. Even as sports and primetime shows start to resume, where media organizations may previously have sold high value advertising spots months ahead at a time, with the uncertainty around future events in 2020, into 2021 and even beyond, advertiser behavior has changed and ad placements are, and will continue to happen much closer to air time. This makes it hard for those media organizations to plan ahead and that has an obvious impact on planning CapEx,” said Ben Davenport, portfolio manager at Vidispine/Arvato Systems.
“We are seeing what I would describe as cautious turmoil, meaning we have seen little change in most projects, but we are expecting to see change. Clients simply haven’t figured out what those changes will be. At a minimum, there will be pivots in how we approach various projects, and in some cases projects will be scaled back. I suspect we are going to see some expansions, too, but they will be in different directions than originally planned,” said Dave Van Hoy, president at Advanced Systems Group.
“It’s difficult to make reliable projections for the rest of the year, let alone forecasting next year. The coronavirus has undoubtedly impacted the broadcast industry as it has impacted a variety of other industries. Some of our broadcast customers have put major investments on hold, as is expected in uncertain times. For our other clients and prospects, this crisis is a good reminder that investments towards remote- or cloud solutions, and web-based workflows, that support flexible, efficient News- and Radio Production, are more important than ever and adoption should be highly considered,” said Michael Pfitzner, VP of newsroom solutions at CGI (formerly known as SCISYS Media Solutions).
“The impact on CapEx for ChyronHego has been twofold: our clients’ budgets for investment were frozen as soon as the coronavirus began to spread, and our ability to deliver and commission systems has been challenged by the need to distance and limit travel. While it is difficult to migrate CapEx customers to OpEx, we do offer subscription-based system purchases and expect to see more customers take advantage of that model going into 2021,” answered Olivier Cohen, senior VP of marketing for ChyronHego.
“As a SaaS company, Signiant is OpEx versus CapEx. I do expect CapEx to slow but hard to tell by how much from our lens due to our model. Companies with a SaaS model do appear to be in a much stronger position in the current environment,” said Signiant CMO Jon Finegold.
“According to many reports in the industry, the trend in 2020 is to move from CapEx to OpEx, but this is moving slowly with less than 20% of companies currently migrating in that direction. So we expect that the percentage will be increasing in 2021, taking into consideration that some investments in products that were made a couple of years ago will be renewed and most likely attributed to OpEx,” said Tedial’s CTO, Julián Fernández-Campón.