All in with Agile

agilecloudAgile methodologies have completed the voyage from buzzword to mainstream. CEOs now routinely brag to customers and boards about their companies’ Agile transformations.

While Agile got its footing in the startup and web applications space as a software development methodology, it has now spread to enterprises of all sizes. Companies that have not yet made the transition to Agile methodologies feel increasing pressure to make the move.

Ten years after our CTO nudged us towards Agile/Scrum at Xprove, and almost eight years in product management leadership at a much larger company, I’ve learned three things about Agile.

  1. Agile transformations limited to the R&D and IT functions will fail and slow time to market.
  2. Agile is not for every development effort, but most exceptions can be managed.
  3. Agile cannot become excuse for loss of strategic focus.

Agile is an organizational methodology

A couple of months ago on the IT Pro Portal Jurriaan Kamer published a really nice article on Agile adoption from the CIO perspective.  He illuminated the most common mistake organizations make – limiting Agile adoption to the IT (or R&D) functions.

[Agile/Scrum] is just a piece of the puzzle — a good first step on a longer journey. Scrum only works as it’s intended when it’s functioning within a fully agile environment — otherwise, any efficiency gained from scrum is lost when it inevitably encounters other departments using more traditional productivity methods.

What we often see is a company having the IT or R&D function make the transition to Agile/Scrum while continuing to go to market with product lifecycle management processes that are aligned with legacy Waterfall development methodology. Excuses abound for this type of behavior, and are perfectly logical within the narrow contexts they are presented. Some justifications for maintaining Waterfall-style program management include:

  • Sales and marketing need to know when specific products and capabilities are coming to market. Collateral, campaigns, and sales training take time to develop.
  • Finance and executive leadership need accurate release dates in order to project revenue and set budgets.
  • Large customers and professional services need accurate dates to plan implementations.

These reasonable concerns pressure the development organization to deliver specific functionality set on a specific date. But it sounds like Waterfall, doesn’t it? A common mistake is to begin the development cycle with “scoping sprints.” Accurate scoping depends upon complete product requirements documents. And down the slippery slope and into the currents of Waterfall we slide. One product management executive who has slid down this path describes his company’s development methodology as “Waterfall with the additional overhead of stand ups and Jira.”

So your organization has not embraced Agile cross functionally, what to do? Rather than succumb to the pressure to maintain fundamentally incompatible legacy PLM processes, wouldn’t it be great to kick off the next project with an exercise that will garner Agile buy-in across the highest levels of the organization and promote more agile behavior? Enter the design sprint.

…a framework for teams of any size to solve and test design problems in 2-5 days. The idea of sprints originates with the Agile framework. The idea of design thinking was developed at IDEO and the d.school at Stanford.

Design sprint materialsMade popular by Google, these one week (or less) exercises’ value extends beyond solving the initial design challenges of a project. A successful design sprint garners stakeholder support. But don’t stop there. The design sprint is great at sparking initial enthusiasm with a prototype, but it’s important to maintain that momentum. In keeping with the spirit of the design sprint and Agile, keep everyone updated throughout the deverlopment process. Customer and stakeholder attendance at sprint demos can be spotty. Record you sprint demos, distribute them, and tirelessly solicit feedback. Make it clear that it’s easier on everyone to give feedback than to continue blowing you off.

It won’t take too long before the organization is moving in a truly Agile direction. Stakeholders will abandon Waterfall’s front loaded, opaque, less successful, and less gratifying ways.

Managing exceptions

I love Agile, and I’ve never come across a group that has made the transformation to Agile eager to return to Waterfall. That said, there a certain programs are simply not well suited for Agile. Sometimes it is inevitable that fixed functionality needs to be delivered on a fixed date. Legacy scoping and resource allocation tools are better suited for those efforts. Hybrid Waterfall-Agile solutions might be in order. Take the tenets of Agile that work for nearly every project – the daily stand ups that foster better communication and transparency, and the Scrum of Scrums to manage cross-team dependencies.

An example of a project least suited for “Agilefall” is one requiring a significant hardware component. Hardware prototypes take time and money to develop and cannot be iterated in one or two week intervals. Waterfall mitigates financial risk in these situations. Cloud storage vendor Backblaze has published a succinct white paper with suggestions for incorporating the best of Agile/Scrum when building hardware.

The challenges of applying Scrum to hardware are considered insurmountable by some, but many teams have found ways to adapt Scrum to hardware development. When considering using Scrum, it’s crucial to acknowledge that, for some teams and for some projects, Agile methodologies are simply not possible. However, in most cases, Scrum can be adapted to fit hardware development projects.

One of the most useful solutions that Scrum teams have found in working with hardware is adjusting the frequent release principle. Instead of delivering a functional, physical product to the customer at the end of each sprint, teams have opted to deliver virtual simulations of the result of the sprint.

Maintain focus

Agile is all the rage. Every organization aspires to be agile. Consultants (like me) make good money helping companies make the necessary transformations. Who doesn’t want their company to be seen as that sleek roadster handling the hairpin curves and avoiding every hazard along the growth roadway? In How CEOs Get Strategy Wrong, And How They Can Get It Right, Cesare Mainardi of the Kellogg School of Management warns of the trap of agility at all costs mentality.

Agility is overrated. It has unfortunately become code for throwing out strategy and chasing any opportunity one thinks might work. The best way to own the future is to be the one to shape it.

Mainardi’s advice isn’t just for those with the key to the executive washroom. Product Owners often lose site of project goals when responding to the latest market data or customer feedback, and are too eager to pivot to meet these recently discovered needs. If teams are making major directional shifts frequently it’s a signal that the upfront work of clearly defining the customer needs and the personas the product or feature is intended to address is incomplete. (Another reason to embark on a design sprint.) Unmet needs don’t change every month. They evolve over time. Here are some simple checks to determine if the initiative is well enough defined for developer hands hit the keyboard.

  • Can the Product Owner give a two-minute pitch that covers what unmet need(s) will be met, what the product or feature does, and who it serves?
  • Are epics that cover the scope of the two-minute pitch complete?
  • What are the risks that the market will change significantly before development is complete?
  • Are all stake holders on board? Customers, executives, customers, sales, customers, finance, customers, architects, and customers should validate the effort.
  • Has a financial model been built? Roughly how much will this cost and how much will it make?

Change is difficult. It takes time to turn the organizational battleship, but knowing the challenges ahead and having a plan for addressing them should make the voyage easier.

 

Everything you know about media is changing dramatically

I mean it. Everything. The media and entertainment industry as we have come to know it is being disrupted, and so is this blog, more on that later. Where to start? Because I did say everything is changing.

Broadcast is dead

Until I spent time this week wandering the exhibit hall and attending talks at INTX 2016 this week, broadcast’s obituary was going to be buried a little deeper in the post. I frontload so heavily because I know how long the average reader spends here. Although I am tempted to name my posts something like “20 things are changing in the media and you won’t flippin’ believe number 19” and then present it as a slide show, I respect your time enough to make but the important stuff first.

We’ve been declaring broadcasting has been braindead for years, but now it’s time to start harvesting the organs. Sports and regional news won’t cover the bill to keep the ventilator pumping indefinitely.

The spectrum currently used by digital television would be put to better use quenching consumers’ insatiable thirst for wireless bandwidth. To that end, the FCC has allowed broadcasters to opt into the Broadcast Incentive Auction. The idea here is simple. Give up spectrum so it can be licensed to wireless providers for 5G service and make some money. As a disincentive to hoarding and holding for a higher price, the first part of the auction is a reverse auction, so it pays to get in early.

As infuriating as it might be for a taxpayer to watch broadcasters profitably sell back to the public airwaves they lobbied so hard for and swore they could not live out, you have to feel a little bit sorry for the dinosaurs now that the asteroid is in sight. I’m partial to the EU’s approach of reallocating the spectrum over 700 MHz for wireless and simply assigning new VHF channels to broadcasters, but here in the US corporations are people too, so we just can’t act in the public’s interest for the sake of the public interest. We have to think of the lobbyists.

Variety had a great explainer on the auction in March. My favorite numbers gleaned are below.

info graphic

The final act of this play will be streamed

Once the video over IP’s latency problem with live events is solved broadcast will have completely outlived its usefulness. We will have reached a point where even the Super Bowl can’t save it. Currently IP network latency delays live events up to thirty seconds. As an MLB.TV fanatic, I have to put the mobile down to enjoy a game otherwise I’ll witness the Twittersphere lighting up before I even see the batter step into the box to crush the game winning home run. For sports to remain a communal activity in the age of social media, latency has get down to about two seconds.

That date is very near. Using a combination 4G LTE bonding and some really nifty video file wrapping tricks, the Israeli startup Zixi has reached that bar with image quality that rivals today’s Xfinity and FiOS pictures. It’s just a matter of adoption. I put it at 24 months for Zixi or a rival technology to make broadcasting over the air obsolete.

The passing of traditional broadcast is interesting enough. In fact, I could stop here and call it a post except that I said everything was changing. And, dammit, everything really is.

Move over Viacom, Fox, and Disney

Amazon, Netflix, Google, Apple, Netflix, Facebook, and Microsoft all want to steal your lunch money. Wall Street believes they will, and these things become self-fulfilling prophecies in short order. They all already own or aspire to own a significant portions of the entertainment value chain. Microsoft and Facebook are longer shots but somewhat more interesting because they are not just looking at the traditional media value chain, but are approaching M&E through significant investment in gaming and VR. For them it comes down to whether VR technology will be ready for primetime soon enough. If one of them wins, just read Ready Player One to see how the story ends. Google’s gotten into VR as well, but it gets lumped it with the others due to its ownership of the world’s most successful online video platform. And how many OVPs does the world really need? Hint: The answer is not greater than two. One rare bit of investment advice from this publication… short OVPs and go long on CDNs.

It going to come down to who can afford to front the large sums of money to create tent pole content, who can store and protect it throughout its lifecycle without losing it to theft or in a theme park fire, who can monetize it effectively, and who can deliver it efficiently. That’s what will determine the winners. Amazon with Elemental and Apple with all its video expertise are positioned for an epic battle. Apple has the edge in video smarts while Amazon has the edge in distribution, pricing, and packaging smarts. How will Apple compete against free two-day shipping for underwear and great programming for $99 a year? Whatever the tech giants come up with will certainly beat a $300 a month cable bill.

Where’s Google in all this? I can’t help but feel that Google will mess it up. Media and entertainment is all about user experience. Google simply doesn’t value design and user experience enough. YouTube and Gmail are still ugly after all these years. While an email client can be ugly and a little clunky as long as it’s free and the user never loses anything, the presentation layer for the night’s entertainment should be inviting.

IaaS the big play

The real money in media then is infrastructure as a service. What Avid, Grass Valley, and the like have done in the past must now become exponentially bigger, more robust, and more open. Avid is right. The industry is crying for a platform. Unfortunately for Avid, it’s crying for a platform a mid-sized tech company doesn’t have the resources to provide. Amazon with Elemental is already closer to realizing Avid’s dream than Avid is. A lot of small players have the necessary pieces built to connect to a network, a larger company, not viewed as  a direct competitor by potential partners is better positioned to roll them up into a unified platform offering.

Simplifying it a bit, whoever can provide the storage, rights management, and monetization tools will win. Dell-EMC is extremely well positioned to contend in that space with its hardware, virtualization expertise, and storage smarts. It makes the servers and intelligent storage. It owns VMware and Virtustream, so it will be able to provision data centers like no one else. Dell-EMC should be able to take a commanding early lead repurposing hardware in real time as audience usage patterns change. Add an acquisition like Telestream or Harmonic, and we have a new media and entertainment powerhouse.

IBM is the cicada in all this. Once every few years IBM shows interest in M&E only to shift focus shortly thereafter. With the right timing, IBM could get lucky.

Over the next few years, the remaining media-specific tech companies will have to become more focused on their core competencies. Their customer bases are buying less, forcing them to compete in a race to the bottom in a shrinking pool. While all are moving as nimbly as they can to make the transition from signal-based to IP video, they are faced with R&D resource limits and the drag of legacy customers such as large state broadcasters moving more slowly to the future.  These legacy customers account for significant portions of media tech’s revenue stream and cannot be ignored until the business transformation is complete.

Acquisition and Post are about to be disrupted too

Camera evolution is the total wildcard that can change the whole production and post process dramatically. When light field cameras get high enough resolution and come down in cost, the cost of shooting will drop dramatically due to shorter set up time and the need for fewer cameras. Composition, focus, lighting, tracking and green screen will all be handled in post, much of it algorithmically. Editing becomes a smaller part of the post process with DPs, directors, and VFX taking on larger roles once shooting stops. As post production for the 2D display requires more 3D capabilities, look for the post solutions market to bifurcate with Adobe taking the lion’s share with a combination of Avid and Autodesk tools owning the extreme high end. Don’t be surprised to see Media Composer land at Autodesk, or Autodesk’s media and entertainment business go to Avid. A number of former (and extremely talented) Avid engineers are now in Autodesk’s media and entertainment development organization.

Adobe has a leg up in the light field world. These cameras have been in development for some time. Light field still image capture is already available to the market, and Adobe has tools under development to enable Photoshop, Lightroom, Premiere, and After Effects to thrive in this new world.

How media is created, distributed, and consumed is all changing. No career in media will be untouched. No company will be sheltered from the disruption. Be agile. Embrace the disruption.

Everything includes this little nook in the internet

I will follow my own advice by embracing disruption and becoming more agile. It will no longer be focused exclusively on media and entertainment technology. Instead I will draw upon my experience of the past fifteen years in technology design, development, and product management. I will adjust my gaze away from LA and put more focus closer to home in the technology hotbed of Boston.

A framework for evaluating asset management needs

DAM
A robust media asset management (MAM) strategy is universally understood as mission critical, but often neglected in today’s small and medium sized media enterprises. The implementation challenges can be daunting, but if approached methodically they can be managed by taking a phased approach to meet the most immediate needs first while building a foundation for the end game. I recommend these three phases as a framework for the approach to MAM adoption.

  1. Protect the assets you need today and in the short term to meet your deliverables deadlines.
  2. Preserve media and metadata with an understanding of how you will use these assets in the future.
  3. Optimize your asset management workflow to streamline complex, non-creative processes. If it doesn’t need thinking, automate it.

Protect: Always have a backup plan

Your media asset management strategy should be in gear before first camera card is removed from the camera and handed to the DIT. Scores of documents and images are created during pre-production and production. Relative to the media files and proxies used in post, these are small files and are only a few gigabytes. Back everything up. Storage is cheap, doing it again isn’t.

A common misconception is that having critical files in Dropbox, Box, Google Drive, or iCloud negates the need for a dedicated backup. The primary job of a sync services is to provide the latest version of a file to multiple devices so everyone with access to the file has the most current version. In a collaborative environment it’s important everyone be working with the latest version of the file, but at some point work on that file is complete and must be protected from further modifications. Leaving it in the collaboration space is a risky proposition. That file is only one careless mouse click away from ruin.

Each of the aforementioned services excepting iCloud feature version control, but for version control to be useful the document owner must know to revert to a previous version prior to the expiration of version control, and has to figure out which version to restore. Often the dicovery that a file has been damaged occurs after the 30 day window these services provide for version control. So, just back it up already.

Cloud backups make the most sense (and are fully buzzword compliant). Since the backup resides offsite it is immune to floods, fire, and physical theft. Cloud-based back up services such as CrashPlan, iDrive, and Carbonite have been around for some time, and they share near feature parity. All of them work and are reasonably priced. My personal preference is CrashPlan. It is the only vendor to offer a free option (provided you supply the remote storage and computer). The remote host can reside on the LAN or WAN and is simple to set up, or you can just pay an annual fee to CrashPlan to backup to their cloud. I have about a terabyte of personal photographs on CrashPlan and mirror what I backup to the cloud to an external drive on a local Mac. If my main drive becomes corrupt, I have a backup a few steps away. If the worst happens, and I lose my photos to flood or fire, CrashPlan will ship me a USB drive with my files (for a fee) so I don’t have to wait for my files to download and I maintain the original directory structure.

Don’t stop using Dropbox and the like. Implement a backup plan to complement it. The moment any asset is in a state that should be preserved, remove it or copy it out of Dropbox and copy it to a backed up directory.

Asset preservation

Post production is another story. There are the native media files from the camera, the proxy editing format files, rendered effects, and the final distribution masters. Backing up everything takes up a lot of storage. Let’s take the example of a season of reality television. The example below illustrates how much storage space is required to preserve a season’s worth of footage. For those with standard business bandwidth, cloud storage is not an option. It would simply take too long to get everything up to and back down from the cloud. I’ve made the spreadsheet available here. (For those interested learning what going all 4K will cost in storage, change the bit rate to something around 600 mbps.)

The workflow is simple.

  1. Bring in the native media on card or USB disk.
  2. Convert it to the edit proxy format.
  3. Park a copy of the native media on a NAS or LTO.
  4. Edit with the proxy material. (Don’t forget to backup your project files daily until you are ready to proceed to a full media asset management solution.)
  5. Bring back the native and convert it to the master format as needed.

The most crucial factor to consider is, like nearly everything else in business, price vs. performance. These most come into play in steps 3 and 5. The cost per terabyte of LTO 7 is about half that of spinning disk (~$40/TB in early 2016). The time required to pull material off LTO vs. spinning disk can be significantly higher. Below is what to consider in your nearline/parking decision:

  • The initial hardware outlay. Using the example above for a 13 hour season of reality television, about 100 TB will be needed. A 25-slot LTO library that will allow the whole season to be loaded will run just under $40,000. An inexpensive 100 TB NAS will cost around $16,000.
  • Performance. LTO 7 has a maximum throughput of 300 MB per second. Tape has come a long way, but the NAS is up to 10x faster.
  • Some inexpensive LTOs do not support partial restore of media file. That means that it doesn’t matter whether 10 seconds or ten minutes of the original clip is needed, the whole clip gets restored. That can eat up storage space and take serious time. Some cost effective LTO solutions, such as StorageDNA handle partial restores to the editing environment quite well.
  • Options proliferate for proxy creation and parking. My personal favorite is Root6’s ContentAgent. It works with every NLE, and can work in standalone, shared storage and project environments, and full asset management systems. Other reliable solutions include Telestream Vantage, and MOG mxfSPEEDRAIL.

Both ContentAgent and Vantage have robust orchestration capabilities that in many facilities delay the need for a full blown asset management solution.

Optimize: The case for full asset management

A backup and preservation plan assists the facility’s current workflows, but does very little to streamline them beyond the orchestration of backup and media transcoding. For five years as product manager for the most successful media asset management systems in the history of the planet, I saw a lot of asset management systems sold. I also saw a lot of unhappy customers. Did our products do everything we claimed? Unequivocally, I say yes. Were all our customers satisfied? Most were, but many weren’t. Every asset management system promises to streamline workflows, connect disparate systems, and cut production time. Profits will increase. For the most part, I found that asset management worked best in fast turnaround broadcast or broadcast-like environments such as recorded studio productions. They were not nearly as successful in traditional post, both scripted and unscripted. Going into the assert management selection and deployment process with clear goals and expectations will greatly increase the odds of success.

Ask yourself the following questions. The answers will help you determine what you need from an asset management system.

Do I own my content?

This is the most important question in the process. If you don’t own the content, there’s a good chance you don’t need an archive. Without the ability to repurpose the content for your own needs, the only reason to maintain an archive is as a client service. Odds are the content owner already has an archive solution for redistribution and repurposing. You likely won’t need to store finished masters. Perhaps you’ll be asked to store the production assets for future re-edits or for use next season. Tread carefully. Many clients think they want that option, but are unwilling to pay enough to make it a worthy investment for you. At 400:1 shooting ratios, storing production assets is far more costly than maintaining an archive of masters. Even at the lower shooting ratios of news, most operations only saw the raw footage from the most important events.

It comes down to this: If you own the content and are looking to repurpose it for future monetization, you’re going to be most interested in media asset management, an enterprise system that connect your library to your OTT, VOD, web CMS, and other enterprise systems. If you don’t own the content, you’ll be exploring production asset managment (PAM) solutions. Its role is limited to the production of the work-for-hire piece, so you are tracking much more granular metadata with less need for complex rights management and hooks into the enterprise systems.

Does my staff consist of full-time employees or freelance contractors?

This is the number one contributing factor when asset management doesn’t deliver to expectations in post. Post workflows are most often executed by freelancers. They work for you for six to twelve weeks, and they’re gone. No matter how intuitive vendors have made asset management systems, they are different from the standard Media Composer / ISIS (Unity) workflows that permeate greater Los Angeles. Change is tough. People resist. And training people is neither easy nor cheap. The more invisible the system is to editors and assistants, the higher the likelihood of success. Solicit input from editors, assistant editors and producers.

Where is my workflow bottlenecked?

Look for manual, serial processes that can be automated and parallelized. It’s not just the raw time saved by a performance boost that benefits the workflow. The lower error rate will save additional time and valuable online storage space. Typical areas in need of optimization include transcode and ingest, logging, and review and approval. Each of these problems can be alleviated without a full asset management solution. Sometimes one or two point products targeted at the issue will be a better value than complete system. We’ve already discussed transcode. Other point solutions such as Media Silo and Aframe for logging and review and approval might fill the gap and save tens of thousands of dollars doing so.

Do our needs fluctuate from week to week?

Asset management systems are typically deployed to solve specific workflow challenges. The traditional transcode and ingest server is not easily repurposed as a logging station when shooting is complete and everyone is ramping up for editing, but an asset management system whose components can be virtualized affords the flexibility to put more compute horsepower behind the services that need it when they need it without complex installs. Even a facility looking for an entry level asset management system should only consider solutions that can be deployed in a VM.

Final Words

After a long evaluation of your workflow and a look at the various vendor offerings, you have decided you need a digital asset management system. I leave you with these final words of advice.

  • Keep it small. All modern MAMs are modular. You can always add capabilities later. Don’t overwhelm your team with too much change all at once. Settle on one or two pain points to ease in the first phase.
  • Minimize customizations. They are expensive to build and always take longer than expected. The cost is not just in the professional services, though those hourly rates add up quickly. Customizations are costlier to support, and add complexity to staff training. If the out of the box solution is almost what you want, it’s probably all you need.
  • Have a bake off. Insist on seeing your current workflow demonstrated live, every aspect of it. Allow a vendor to show an alternative approach, but make sure fully they understand what you need to get done at every phase of production.
  • Go over the statement of work thoroughly with the vendor prior to your first payment. Insist on a single point of contact on the vendor team, and only allow a sinbgle point of contact on your team to sign off on change orders.
  • Don’t skimp on training. This should go without saying, but it always needs saying. MAMs are damn expensive, even “small” systems can run into the six figures. It’s very tempting to scale back on the training, especially in an industry with such high turnover. But it is crucial good habits are instilled from Day One. Also, have one person on staff trained extensively enough to train others and write the production bible for the facility.

Implemented properly, a MAM will increase productivity by eliminating mistakes and increasing the number of people able to access and work with the content in real time. If you have questions or comments send them my way, and I’ll do my best to answer them promptly.

The death of big broadcast iron

gearsIABM DC releaed its 2016 Global Market Valuation and Strategy Report February 24, and the news for media technology companies was not good. Overall spending for media technology products and services was down 4.3% year over year. The report also noted that product revenues have been in decline since 2012, but this is the first year since the report shows a decline in services spending as well.

Much of the decline can be attributed to disruption from the bottom of the market. What were previously considered lower end tools, such as Adobe Premiere Pro in editing and Axle in asset management have matured a surprisingly brisk pace and have proven themselves ready for prime time.

Technology disruption also plays a part in the overall decline. As IP-video takes hold, the need for satellite links can be replaced by bonded 4G connectivity. “@Home” production of live sports is also lessening the demand for infrastructure. A sign of things to come is Boston-based NESN (MLB Red Sox and NHL Bruins) and LiveU’s announcement in December that portends the demise of the OB truck.

The network will utilize multiple cameras feeding back to NESN’s Boston-area studios via bonded cellular technology.

NESN plans to use multiple LU500 portable transmission units to pilot live “@Home Productions” on the majority of Red Sox home and road spring training Games in 2016 as part of a new innovation and business model for sports coverage. NESN and LiveU successfully developed and tested this new means of remote event coverage last spring during Red Sox Grapefruit League games in Florida and during the summer from minor league baseball AAA Red Sox games in Pawtucket, Rhode Island.

If the experiments continue to show progress by the 2018 season these major market franchises might be leaving the heavy iron in the garage. Be assured, sports broadcasters throughout North America are watching this closely as they begin their own cost-cutting efforts.

There’s a case to be made that the news is not as bad as it seems for the larger media tech players such as Avid, EVS, and Belden (Grass Valley). Budget pressures are spurring consolidation of independent broadcasters. These large station groups are likely to settle on a single vendor in each product category. Though the industry is notoriously conservative, all it takes is one disruptor to win a deal to get everybody looking at the new, more cost effective solution. Over the past year there has been a perceptible uptick interest in connecting the Adobe Creative Cloud tools to existing shared storage and asset management infrastructure.

Adobe Creative Cloud Market Size 2018 (projected)

Adobe’s estimated Creative Cloud 2018 revenue projections by segment ©2015 Adobe

Though it’s difficult to extrapolate media technology spend from Adobe’s reported growth in enterprise term licenses, Adobe has pinned much of the growth in Creative Cloud adoption of enterprise term license agreements (ETLAs). These licenses typically have a 36 month term with each customer, giving competitors a very small window once every three years to make a play to convert the enterprise to its solution. Adobe is projecting success in the enterprise, projecting $3.8 billion in recurring revenue from Creative Cloud for teams and enterprise by 2018.

Adobe has been well-rewarded for its brave decision to migrate all Creative Cloud customers to a subscription model, but it will run into some headwinds among some of the large station groups. As one station group executive told me, “Everyone thinks we’re eager to jump to OPEX from CAPEX with our technology spend, but that’s not true. We’re focused on keeping OPEX down.” In a consolidating industry, acquisitions are funded by stock transfers. Share price is tied to operating margins, hence the desire to keep OPEX down. Offering a choice between SaaS and perpetual license models, Avid should be able to maintain its current position, and perhaps grow it, in the station group segment.

Consolidation won’t last forever. There are a finite number of independent broadcast stations remaining ripe for purchase, and nobody is launching new ones. What we’re seeing is similar to the consolidation of newspapers during the 1990s in the early years of this century. As customer bases shrink and profits sink, cost cutting through consolidation takes hold throughout a market segment. No one was buying up newspapers for the long haul.

There is one significant difference between broadcasters and their newspaper cousins that makes a broadcast station a better long term investment. Spectrum, a finite resource. Its value will increase over time. Broadcasters aren’t in the broadcast business as much as they are in the spectrum investment business.

The place to be in media technology these days is IP-based video cloud-based SaaS offerings that multi-platform and OTT delivery. The days of big iron in broadcast, like the days of big iron in post are over.

The Netflix effect

Since this blog’s humble little following is consists of media and entertainment professionals, many may have bypassed Farhad Manjoo’s column, “Why Parallels Between Netflix and Amazon Should Worry Media Titans in today’s New York Times. The first couple paragraphs come straight out of 2007. But if you stick with it, you’ll find some a pretty decent presentation of the situation big media finds itself in.

The parallels between Netflix and Amazon extend beyond the ostentatious aspirations of its founders.

On paper, Mr. Hastings’s plan to take on the traditional TV industry has long sounded slightly nutty, as delusional as Jeff Bezos’s strategy at Amazon to overrun retailing once seemed.

We know how that turned out for mall owners. Manjoo presents cases for both Netflix’s eventual dominance from bullish analysts and its potential to become just another mid-tier media company from Netflix skeptics. It all comes down to who ends up with pricing power.

  • Will producers be able to limit Netflix’s ascendency by maintaining high prices, thus preventing Netflix from stealing away traditional broadcast and cable viewers because Netflix will have to raise its subscription fees significantly?
  • Or will Netflix be so dominant that content producers will have to grant it pricing concessions?

The latter will be the case. It’s only a question of when that day comes. Put simply, it’s the day that the audience values the Netflix model above the traditional broadcast and cable model. No commercials. Binge watching. No need to set the DVR or pay TiVo to do it. The scenario is illustrated below. Once the Netflix model becomes the preferred model, as it already has to the fast growing cord cutter population, along with millennials who would never lease a cord to cut in the first place, it becomes the content owners’ most valuable distribution channel.

VALUE-OF-NETFLIX

To those skeptics who believe broadcasters can go toe to toe against Netflix and come out ahead, I ask: Do you believe they will also emerge victorious against Amazon, Google, and Apple? Someone is going to break the old model.

For a much more in depth analysis of the future of television over IP, read Ken Auletta’s February 2014 New Yorker article on Netflix. In it he quotes Marc Andreessen, who co-invented Mosaic, the first commercial Internet browser.

“TV in ten years is going to be one hundred per cent streamed. On demand. Internet Protocol. Based on computers and based on software.” He said that the television industry has managed the transition to the digital age better than book publishers and music executives, but “software is going to eat television in the exact same way, ultimately, that software ate music and as it ate books.”

Even the Beatles surrendered to iTunes, and then again to Spotify because people were going to stop buying. Your content has to be where the audience wants it or they will live without. She may have crow’s feet by the time it happens, but Taylor Swift’s catalog will be available on Spotify someday.

Netflix customers may cheer this vision of the future, but as surely as night follows day when that moment comes, Netflix streaming will no longer cost them a paltry $8/month. Pricing power cuts both ways.

 

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