Winners And Losers In Lockdown Video Lottery

The first set of quarterly financial results during the lockdown has given the clearest indication yet of what impact the crisis is having on sectors and individual companies in the video services and broadcasting sector, with a stark divide between winners and losers, but with all players affected in some way.

Even those that have benefited through offering the right product or service at the right time have had to embrace the crisis and develop plans to see their way through it. This could be rotating staff attending work premises, or furloughing some in the hope they can return when the recovery gets underway.

Harmonic, as one of the largest of the original independent video infrastructure vendors from the pre-IP era after its erstwhile rivals have been either acquired or disappeared, was expected to escape relatively unscathed at least in the short term, but has actually suffered a downward spiral. Its Q1 revenue for 2020 fell 2.1% year on year to $78.42 million, with a net loss close to $22 million. The expectation or perhaps hope had been that demand for VoD and news content would offset the loss of live sports among Harmonic’s customers and to some extent that was the case, but it would have been a miracle if the two sides of this equation balanced exactly.

In the event, the latter impact was strongest with video revenues tanking 19% to $54.4 million, although significantly offset by a near doubling in revenue from the cable access division to $24 million for the quarter. Similarly, a revenue drop in the Appliance and Integration segment of 8.8% to $47.7 million was partially offset by service revenues, including SaaS (Software as a Service), rising 10.5% to $30.7 million for Q1 2020.

In Harmonic’s case, results only indirectly reflect trends among its operator customers but the impact is almost immediate on revenues for CDN vendors. Of these the largest Akamai has found that the lockdown inspired boom in VoD and news content has more than offset the loss in live sports. This was reflected at once in peak traffic levels, which in March 2020 soared to 167 Tbps, just over double the 82 Tbps in the same month a year earlier. Of course, CDN traffic tends to rise month by month anyway, so a more relevant measure was the fact Akamai’s traffic surged by 30% in March 2020 compared with February, against an average monthly rise in recent times of 3%.

Naturally this traffic rise translated into revenues, which for Akamai rose 8% year on year to $764 million for Q1 2020. The rise for March would have been sharper, perhaps over 20%, given that most of the quarter occurred before lockdowns began in many of its biggest markets.

Telestream is another vendor to experience an uptick from the lockdown as sales of its live video streaming production tool Wirecast rose. According to its CEO Dan Castles, Wirecast has been in demand at a community level among churches and schools for example as a professional class production tool more robust and secure than some of the popular systems in use. But Telestream has still had to adjust, offering more technical support remotely and being quick to enforce social distancing among its own staff.

Castles believed many of the changes will stick, which is good news for those well able to operate remotely like his company but bad for many in the events business. He predicted the big iconic broadcasting shows like IBC and NAB will be permanently shrunk by the Covid-19 crisis. He suggested that many press conferences and seminars as well as longer events will continue to be held remotely, with reduced face to face contact. Castles admitted though it remained to be seen how effective virtual events would be in marketing, making contacts and generating sales leads compared with the long-established physical versions upon which the industry has come to rely.

Then Swedish media transport technology company Net Insight is one of the losers from the lockdown but also exemplifies the benefits of taking swift action to minimize losses and damage, while aiming to retain as many staff as possible. The company reported net sales down 13.5% year on year to $9.6 million for Q1 2020 and operating profits also off, but had already early in April implemented a short-term layoff, temporarily reducing staff time by 20%. The aim was to avoid discernible impact on delivery capability while stemming losses and retaining skilled staff.

During normal times such measures would provoke an exodus but that is unlikely to happen now and the company has reasonable prospects of emerging with relatively little damage. While its home country of Sweden has averted a hard lockdown with bars, restaurants, gyms and many workplaces still open, most of Net Insight’s business is among other countries that have enacted more typically draconian measures.

Of course all these varying impacts are mirrored and driven by equally diverse outcomes among service providers. While SVoD providers like Netflix, Amazon Prime Video, Hulu and Disney+ have boomed, those pay TV operators that are heavily reliant on premium live sport have suffered. Comcast’s European subsidiary Sky has lost 65,000 subscribers since the lockdown began, while Q1 revenue was down 5.8% to US$4.5 billion. D2C (Direct to Consumer) revenue fell 1.9% to $3.7 billion, largely due to ARPU (Average Revenue Per User) falling as a result of Covid-19. Advertising revenue slipped more by 11.6% to $513 million, reflecting prior market weakness exacerbated by the crisis.

Again, Sky had acted to cut its losses, mainly by allowing customers to pause their subscriptions in the hope they would not churn away altogether and be ready to resume viewing when major sports return.

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