The convergence of technology and the cloud in media production

The media industry is transforming again. Changes across the industry, new mergers and rising inflation are influencing marketing strategies, putting pressure on broadcasters, media production companies and streamers alike to maximize the value of every dollar spent — and every dollar earned. As the industry visibly shifts from a focus on viewership to one of profitability, companies small and large are searching for ways to streamline operations and improve the bottom line. One result is that media and broadcast companies are sizing up competition in terms of partners rather than combatants.

But consolidation can only get the industry so far, and further challenges lie ahead as production costs keep rising and the competition heats up. One strategy to offset these costs is a transition to an operational expenditure model (OPEX.) Incidentally, this shift away from traditional capital expenditure models (CAPEX) associated with the media industry coincides with the proliferation and adoption of cloud technology.

The sky-high benefits of OPEX and the Cloud

Broadcast companies are increasingly shifting their purchasing models from CAPEX to OPEX, with cloud technology playing a significant role in driving this trend. According to industry heavyweights, this shift allows broadcasters to more effectively manage costs, increase efficiency, and improve their overall operations. Instead of being locked into rapidly depreciating hardware investments, businesses can tap into the flexibility of the cloud, resulting in leaner costs and improved pipelines.

This is prescient given the shaky economic climate. For Geoff Stedman, the CMO of SDVI, it’s simple business sense. “In times of economic uncertainty, it is even more important that large upfront capital expenditures are minimized since utilization is unknown and unpredictable.”

For businesses already transitioning to the cloud, this approach also makes a lot of sense in practical terms. Traditional broadcast and production operating via cable or over the air is more or less fixed. Whether there are 1,000 or 100,000 viewers tuned in doesn’t matter in terms of infrastructure — you either have it or you don’t. This is where the CAPEX investment model comes into play.

As more and more businesses shift to a digital-first focus, they’re realizing the OPEX model is better suited to the age. As Stedman puts it, “moving to an OPEX model where expenses are directly tied to usage helps media companies best match their costs to just the work required.” When you’re transmitting over the web to a digital audience, there’s a significant difference when you add 99,000 more viewers. In simpler terms, broadcasters need a lot more computing and bandwidth to serve that many viewers. Meanwhile, using cloud infrastructure translates into easy, inexpensive scaling, which means the OPEX model is more than a response to economic uncertainty: It’s a better model for the times. “We expect to see more media companies utilize cloud-based infrastructure to minimize CAPEX investments and gain the benefits of consumption economics,” says Stedman.

Media companies taking advantage of the cloud’s scalability can flex their technology footprint up and down as needed. They can accommodate rising demand with a few clicks on a website, and they can move the slider back down when viewing numbers drop. Compared to the capital expenditures most businesses are accustomed to, this ease of scaling is a sharp about-face. For example, businesses that were well-positioned before the pandemic was able to respond infinitely faster to the massive influx of viewers as a result of lockdowns. And now that those numbers are normalizing, all the added capacity is whisked away as if it were never there.

“Today broadcasters need to produce more with less, so as a manufacturer our role is to find ways for them to be more efficient,” said David Jorba, VP of business development, broadcast at Disguise.

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The cloud is nothing if not efficient.

Of course, scalability isn’t the only benefit. Cloud computing also lets media businesses streamline production workflows. By storing assets and tools in the cloud, teams can easily collaborate and share resources in real time, regardless of their location. This means that media production teams can work more efficiently, reducing the time and resources required for tasks such as content creation, editing, and post-production.

The cloud also offers a number of advantages on the financial front. By leveraging cloud-based resources as an operational expense rather than dropping boatloads into capital investments, media organizations and broadcast businesses avoid the high costs associated with on-premises infrastructure. This reduces the overall cost of ownership while freeing resources for other business needs. Additionally, cloud computing can also help to reduce ongoing maintenance costs, as cloud providers handle infrastructure maintenance and upgrades.

Increased competition, more opportunities

Cloud solutions provide a bevy of benefits, but swapping out platforms is complicated — digital or not. In a cloud-based scenario, managing infrastructure becomes the easy part, abstracted away with software widgets and sliders. The difficulty comes when businesses try to adapt to all new workflows, with an eclectic mix of production and broadcast tools vastly different from the ones most media workers are familiar with.

These applications and systems are necessary, to be sure, but that doesn’t mean media workers are capable of using them effectively. And with buy-in to digital tooling and workflows, flexibility is the new normal — a curse and a blessing. On one hand, going digital provides a platform that media workers use to come up with new and innovative ways of creating content. On the other hand, a mature innovation often translates to complex techniques and tooling combinations.

In essence, using these tools entails a new kind of infrastructure that grows and evolves as a kind of internal media ecosystem. Companies seeking to expand in a way that necessitates adding this kind of ecosystem have three options: hire a league of unknown new workers, outsource to unknown freelancers or explore M&A options. When one business has the platform but no content and another business have the talent and workflows, a merger simply makes business sense.

While the above example is simplistic, at the end of the day, the media merger trend is driven by necessity. Broadcasters and other media companies need to scale operations, stay competitive and turn a profit. This is especially true for businesses striving for a toe-hold in streaming, where competition is merciless. In an industry that’s seemingly in constant flux, it’s not an easy directive.

The name of the game is innovation

When interests and directions align, a merger or acquisition can provide a business with the efficiency and talent they need to explore and capitalize within new domains. As media continues evolving, it’s a near certainty that many more M&Es will follow. Whether they’re caused by the industry adoption of some new technology, the adoption of a new business model or the result of economics is anyone’s guess. But it’s important to remember that every merger leaves an opening for a new media upstart with a vision and a mindset of innovation to walk through.

“Consolidation comes in waves and is a fact of life in the media industry. With each consolidation, the tech stack needs to be normalized across the enterprise. Customers are seeing the importance of vendor deployment models that are business enablers instead of impediments and give them the freedom to engage in M&A activity without recapitalizing their infrastructure. At the same time, every consolidation opens the door to new entrants that drive industry innovation,” said Peter Wharton, chief strategy officer, TAG Video Systems.

Any broadcaster or media company that’s seeking a competitive edge needs to adopt this same mindset. Like it or not, becoming a digital-first business is necessary to doing so. And the first step to doing that is leveraging cloud infrastructure and technology. By leaning into the cloud, media businesses can streamline production workflows and improve scalability while reducing costs and improving production efficiency. In other words, they become more nimble and effective at navigating an industry that’s constantly evolving. And these qualities are fast becoming essential for navigating the changing media landscape — one that’s probably better described as a shifting media sea.