When I joined the military and entered basic training after graduating from High School, as soon as I got off the bus a drill instructor was in my face making it clear to me that by the time my training was over, I will have learned that even the most well laid plans can and do fail. Things change, stuff happens and there is only so much you can anticipate. Learning to adapt and overcome unexpected challenges was something we needed to learn if we wanted to make it and this concept is at the core of what they teach all new recruits, in all branches of our military.
Right now, many vendors are working to finalize their go-to-market strategy, budgets and plans in the New Year, with some making big bets on what will impact their business the most in 2013. A lot of vendors have reached out to me over the past few weeks asking what I see coming, where I see the most opportunity for their business and what trends we'll see in the industry.
No matter how well any of us plan, we can never anticipate market dynamics and all vendors need to be able to adjust to changing market conditions. That's what the leading vendors in any industry do, adapt and overcome, by being quick and nimble in how they react to changing conditions. In my opinion, too many vendors are focused on trying to figure out exactly what will happen and instead, should be looking at the bigger macro trends and thinking about the core strengths of their business, the key verticals they need to focus on and the problems they need to solve for customers.
Trying to come up with exactly how many streams will be served, how many more videos a consumer will watch by the end of the year, when Apple (NASDAQ:AAPL) will ship an all-in-one TV, or what percentage of consumers will cut-the-cord (answer: less than 1% a year) aren't questions that help your business in the short or long-term. Any good company needs to be able to make a game plan for steady, consistent growth of their business which highlights their key strengths and will make them successful, no matter how fast or slow a segment of the market grows.
Some vendors made some big bets years ago that TV everywhere would be rolled out by most MSOs and that they would be able to grow their business based on those deployments. Three years later, true TV everywhere deployments are hard to find and many of the vendors who shifted their business models to that segment of the market aren't doing well. Companies like Cisco (NASDAQ:CSCO) can bet big on TV everywhere, with their Videoscape offering, because they have the operational resources and more importantly finances to be able to wait until TV everywhere is a real market. It's the same way Google (NASDAQ:GOOG) was able to buy YouTube and lose money for many years, before the market was large enough, and business and content models had evolved enough, to where Google could profit from the deal. But most vendors aren't in the position of the likes of a Cisco or Google.
Vendors need to get away from hardware products where the only value proposition is "higher performance" and focus on layering software on top of hardware. Delivery networks need to get away from focusing on delivering a huge amount of bits with small or no margins and instead, focus on delivering fewer bits, but ones that are profitable. Most are trying in this regard, but years later, still aren't doing it fast enough. Vendors in the advertising markets need to stop telling us how well they allow for "monetization" and start offering better targeting of ads, better analytics and provide more help to get content owners higher CPMs. Online video platform providers need to stay away from focusing on who has the best platforms for encoding or player development, which are important, but aren't really helping content owners with a strategy that leads to success. Highlighting the fact that you can help a content owner "reach every device" is meaningless if the devices they are reaching have low penetration rates, have no commerce functionality on them, or don't allow for multiple business models and consumption abilities like pay to own, pay to rent, subscription etc. It has to be about more than just devices and hardware.
As a whole, vendors need to do a much better job of moving with the markets and being flexible, quick and nimble. Whenever a vendor tells me they are or have been working on a new product or service for two years or more, that's a problem. Unless you have the financial and operational ability to work on something that won't provide any revenue to your company for two years, you're setting your company up for failure. I keep seeing companies trying to roll out new products and services into markets they should not be in. Just because you are in the broadcast market does not mean you can easily enter the enterprise market. Some companies can make the transition, with the right planning, but most can't from a product, marketing and operational standpoint.
Every day I read reports saying how big a certain facet of our industry is, or how big the market opportunity is, yet when you look at the revenue of the vendors in that segment, it never adds up to the total market opportunity. Yet even with that, we see many vendors decide they no longer need to focus on that one segment and increase their share, but rather offer new products and services that don't really align with their core business or their core verticals. If you are good at a few things, and you haven't saturated your market, and it's still growing by a healthy CAGR (compound annual growth rate), why are you taking your eye off the ball and losing focus?
While segments of the market can get crowded with lots of vendors, if you look at just about any product or service in the market, 3-4 vendors usually own the majority of the market share. And most of the reason for that is their laser focus. But lately, even some of those who have led the market are straying from their expertise and trying to "reinvent" their company, thinking they need to enter new markets or get into services that aren't part of their core focus, just to grow their business. For most, that leads to problems.
The biggest advice I can give all vendors in the industry is to stay focused, spend time growing your core business, don't bet big on services/products that are built on "hype" and learn to be quick and nimble so that you can adapt and overcome to changes in the market. Many companies seem so hell-bent on the idea that there is only one right way to do something or that their product / service is the only way to solve the customers problem at scale / costs / flexibility etc. that they lose sight of the fact that there are many different ways to accomplish the same task, all successfully. Live in the real world, not the fantasy world that most of the media who report on this industry live in. Setting real and proper expectations is all that matters.
The market you are in may not grow as fast as you hoped for, new competitors may start competing with you and customers challenges may become more complex to solve. But that's the case of any industry, it's what tends to take place each year, and in the online video world, that's the cost of doing business. Vendors that are product / vertical focused, have systems in place to be nimble and move with the markets are truly the ones that are going to be able to adapt and overcome.
Disclosure: No positions