An industry in consolidation

About three years ago a consolidation movement began timidly among the industry's suppliers, which accelerated the following year to take on an unusual pace towards the end of 2005. It appears that the M&A fever will continue in 2006.

In late 2001 Thomson acquired Grass Valley (it had already bought Philips' camera division). Leitch then bought Videotek, Avid from Pinnacle, and Adobe from Syntrilium Software. Harris then absorbed Encoda, Leitch to Inscriber, Vizrt to Curious Software. At the end of 2005, Thomson bought 50% of Canopus and a division of Thales, Cisco took control of Scientific Atlanta and Harris acquired Leitch. I am sure that I have several left in the pipeline, but the phenomenon is illustrated: the industry of television and video equipment is going through an accelerated process of consolidation.

I will allow myself to play a little analyst by throwing some hypotheses to interpret this phenomenon, both from the technological point of view and from the economic perspective.

1. The digitalization of the processes of production, post-production, distribution, broadcast and transmission of video caused a paradigm shift in the industry, which made many companies stagger. Brands previously dominant in certain areas, feel that new technologies break their power. Likewise, companies that grew up taking advantage of emerging technologies need to establish themselves solidly in markets where they have no history. This has led to mergers and acquisitions on both sides.
2. The process of consolidation in the industry began earlier with the purchase of hundreds of independent television channels by the large television networks in the United States. The broadcasting equipment industry reacts to this consolidation, seeking the ability to offer more complete solutions to large consolidated companies.
3. The need to develop new business models (IPTV, mobile TV, interactive television, datacasting, etc.) motivates solution providers to merge. Technological 'islands' alone do not have the strength to generate novel solutions. The synergy of several products enables new business models.

Regardless of the hypotheses that purport to explain the phenomenon of consolidation in our industry, the result is a more mature market, with fewer players and less uncertainty.