Pro AV Industry - Market Movements, Emerging Opportunities and the Road to Recovery
There is no doubt that COVID-19 is having a sustained impact on a wide range of markets, from video conferencing and video content production, to installation verticals, touring and rental. Additionally, as the world starts to ease lockdown restrictions, and return to a ‘new normal’, discussions turn to the effects felt by the various industry sectors and focuses in on what the AV industry might look like once the pandemic moves into the rear-view mirror.
Futuresource is continuously taking the pulse of the AV industry and looking beyond its boundaries to understand the cumulative effects of the current situation. Futuresource is in a unique position to do this, as it works across the entire supply chain, as well as having three other dedicated groups within Futuresource that specialise in content, B2B electronics and consumer electronics. This is allowing us as a firm to create context and build a picture of what the world will look like once it begins to emerge from COVID-19.
Strength in the Supply Chain
When COVID-19 hit, things happened fast, and a lot of people and businesses were taken by surprise. The initial focus for many was on the upstream supply chain and what was happening at component and assembly level. It also exposed an increasing dependence on contract partners, perhaps even an over-reliance on that model. However, the industry proved to be robust, with Chinese New Year, the US-China tariff wars and Brexit all contributing to a tendency to stockpile. This meant that the industry was already manoeuvring into a position that helped many to cope in terms of supply. Although there are still some supply issues, generally the supply chain is now robust and back to full strength.
However, a lot of good people and businesses are suffering. There has been unbearable pressure placed on companies whose financials were already tight before the crisis. This has happened across many verticals and we have seen companies fall away. Margins have been challenged in the pro AV hardware space for a long time. Retail, which was a major bright spot for the industry as it began to move to experiential from transactional, has ground to a halt. There will be extreme pressures on retailers for a long time to come. Transport, OOH, leisure, events, pleasure, and airline all share the same challenges as the retail industry.
Chasing Opportunities and Looking for Growth
Yet, there are growth areas and opportunities shining through. Collaboration, control room, esports and home studio are all experiencing an uptick. What’s more, many companies that have been able to maintain a diverse approach to business were able to switch focus and reconfigure their businesses in order to weather the COVID-19 storm more effectively.
Collaboration will Lead the Way to AV Recovery
There has been a sweeping change in commercial and consumer attitudes towards collaboration and video conferencing since lockdown and social distancing measures have been instigated. Futuresource called it the ‘first click challenge’. There is a natural resistance to video conferencing, primarily because people just do not understand it. Now that many have been placed in a position where they have had to get to grips with the technology, most have realised that it is actually quite easy to use. Video conferencing also spilled into people’s personal lives, plugging the gap, and acting as a halfway house between social media and physical contact.
Our research shows that homeworking and remote working were already on the rise before COVID-19 appeared on the horizon. Industry interviews that we carried out in 2019 showed that 65% of people were working from home occasionally, with 10% working from home three or more days a week. As people begin to return to the workplace, our research shows that working practices will continue to include a greater element of homeworking.
At the moment, video conferencing and collaboration kit is focused around the peripheral technologies of speakerphones, headsets and cameras. However, we will start to see entry level professional grade kit move into the home office. Moving forward, on business premises, we will begin to see more rooms that are conference room enabled. Not just the big conference rooms, but mid-sized and small meeting rooms as well. Types of device are also beginning to evolve, room-based devices are already giving way to bring-your-own devices and this trend will continue. Video conferencing is definitely a real bright spot for the industry. It is accelerating a trend which was already happening.
The Continuing Rise of Esports
Futuresource has been tracking the growth of esports for a number of years now. The upsurge of growth has been startling. So much money is now being generated in this vertical, which has smashed through the $1 billion mark, and will double by 2023. Even as recently as last year, a huge swathe of companies that could benefit from the esports explosion were just not aware of the opportunities and the buzz around the space. Now the rise of esports can be seen everywhere.
The esports format lends itself well to a world of social distancing, so this is a growth opportunity for many AV companies. Only the final stages of tournaments are concerned with the big physical productions. Prior to the final stages, competitions are undertaken in people’s homes. It is true that crews have needed to adapt to a remote workflow, but the coverage in esports is already virtualised. It is all about screen capture, so offers another advantage, and that space will only continue to grow. Looking back to January this year, at Bett 2020, the amount of focus on esports was incredible. A return to large-scale productions of physical events is still some way off in the future though.
Home Studios Diversify and Strengthen
Futuresource has been reporting on the home studio market for the last four years and the sector continues to grow incredibly quickly worldwide. There is a burgeoning opportunity for many AV-based businesses and not just limited to catering for musicians. Esports activities continue to seize a share of the home studio market, and with the rising tide of podcasting, blogging and vlogging, it is a diverse opportunity with many brands trying to build a presence and vying for business in this space.
Innovation in Virtual Events Cannot Offset Live Event Losses
Live events, touring and rental have been hit hard. It is difficult to think of a vertical that has been impacted worse. For these businesses, the world ground to a halt. Most companies operating in this sector are looking at lockdown for the rest of 2020. Smaller events will begin to happen, without question, but it is dependent on how governments decide to open up that side of the market. The question is whether businesses will have the cash flow to keep operating. There is hope though, as many are diversified businesses and better placed to get through this by shifting focus towards production and content creation.
Looking forward, companies will be holding onto their assets and trying to make their existing equipment last far, far longer. There have been relief funds set up to support the creative community, with Netflix, Warner and Sony making notable commitments, along with some government support.
We have heard suggestions that there will be pent-up demand for live shows and these markets will bounce straight back again. However, all signs indicate that this will be very slow and 2021 will be a difficult year as well.
If there is one thing that has been shining through, it’s the wealth of creativity and innovation which is being unleashed within the industry. The virtual events market and virtual shows have allowed innovation to flourish and have provided something of a lifeline. Virtual performances have been discussed for a long time, but there has been no real reason to go down that route. The current situation has opened up the opportunity, but it will never fill the overwhelming revenue gap created by a lack of live events.
An EdTech Acceleration
Remote learning and Ed Tech have been accelerated by school closures across the globe. Deployment of tech has also been fast-tracked, with projects that would usually take months now happening in just a matter of weeks. Not only has it encouraged children to learn remotely, but it has also forced that ‘first click challenge’ in teachers as well, encouraging many to accelerate their digital knowledge. Many more in the teaching community will migrate from the front of a classroom, paper-based resource and start to understand what the digital platforms can deliver. As higher education and universities were already on an accelerated path to technology uptake, COVID-19 has not made such an impact there as it has in K-12, as this was already a key focus for the industry.
The Road to Recovery
As lockdown eases in many countries, the collaboration space will be at the front of the queue. As we all begin to return to full capacity, we will see an already rapidly growing market begin to skyrocket. It is difficult to see how we will move away from these platforms now that we have all grown accustomed to them. Before 2020, most people were worried or uncomfortable with turning their cameras on for calls, but now it is hard to imagine a voice only call.
It’s great to see that across the entire pro AV space, companies who are in struggling areas are looking to pivot their businesses towards collaboration tech. Almost everybody is asking us about collaboration and video conferencing, what does the market look like, and how can they get into it. That is, and will continue to be, the biggest success story of the year.
For more information on the Futuresource Consulting Enterprise AV Suite of Reports including: Smart Buildings, Audio Visual Video Conferencing Solutions (Audio and Video), Wireless Presentation Solutions and its Corporate/ Enterprise End User Report please contact Matthew Ledgerwood via firstname.lastname@example.org
Here at Futuresource Consulting we deliver specialist research and consulting services, providing market forecasts and intelligence reports. Since the 1980s we have supported a range of industry sectors, which has grown to include: CE, Broadcast, Entertainment Content, EdTech and many more.