Understanding the Total Cost of Ownership of Media and News Production

Broadcast Investment Cycles Are Shortening

Looking at how media and news production workflows have developed lately, it's apparent that one factor in particular is having a transformative effect: the migration away from on-premises production and storage infrastructures. Up until relatively recently, media economics were largely defined by capital expenditure (CapEx) investments that took a long-term view of spending on physical assets such as equipment, vehicles, and buildings.

Now, we're seeing a decisive move toward a greater emphasis on operating expenditure (OpEx) thanks to two primary technology trends: the increasing reliance on cloud-based subscription models and/or managed services, supplanting the traditional dependence on in-house infrastructures; and the ability to reduce major infrastructural spending due to the rise of distributed production.

It's no wonder, then, that there is much talk in the industry of investment cycles becoming shorter and more intense. "Where once we might have planned for major investments on five- or 10-year cycles, it is becoming apparent that two- or three-year cycles are going to be necessary," one senior production executive at a public broadcaster said, pointing to "the relentless pace" of change throughout M&E.

Given this fluid outlook, any continuing element of distance between the production and finance departments will surely need to be addressed as a matter of priority. One need only look at the current media landscape, with its trends toward both fragmentation within viewerships and consolidation among the big players, to understand why total cost of ownership will remain as critical as ever.

4 Factors to Weigh When Calculating Total Cost of Ownership

The duration and complexity of calculating TCO will inevitably depend on the size and scope of the company in question. That said, the following four factors should provide a strong starting point for any organization contemplating the future of its news production workflow.

1. People and Places

How many people are working for you now, and how do you expect the size of your workforce to change over the next few years? Migration away from on-premises production resources and a greater reliance on freelance assistance, as and when required, means that permanent employment levels are likely to decline at many organizations.

Simultaneously, more staff will spend more time working from home at least part of the time going forward—hence, we can be pretty certain that the next generation of broadcast centers will be more compact than their forerunners.

2. Technology

With long-term investment cycles becoming less appropriate, organizations will have to build in more leeway in terms of their overall technology spend. Just look at how quickly the larger media companies have had to find the money for 4K, HDR and IP streaming—or else risk a slide into irrelevance.

Coming down the line we have AI and machine learning, Augmented Reality, Mixed Reality and even 8K to think about. In general terms, though, it seems inevitable that most media firms will be spending more on new technology in the current decade than they did in the 2010s—and via evolving subscription models, too.

3. Management and Administration

In theory this should be one of the more consistent components of TCO, but here, too, there are some extra factors to consider. With more production elements and workflow tasks taking place on external "real estate," in-house management requirements—especially on the high-level tech maintenance side—could be somewhat diminished. Nonetheless, most organizations will surely wish to retain dedicated in-house technical staff who can address sudden failures or other emerging issues.

4. Business Models

This is arguably the most problematic element of all, given the widespread changes taking place in global media. Not only are most broadcasters having to increase their production output and serve an ever-growing number of platforms, there are also shifts taking place that are largely outside their control—the present turbulence in sports rights being a prime example.

It is hard to imagine that any media company's business model will be unchanged by current events, and only by thinking carefully about core activities and obligations—primary content services, "prestige" offerings, demographics, monetization, etc.—can the changing cost implications be accurately assessed.

It is not particularly reassuring to realize that having an accurate sense of TCO is only going to become more challenging in the short-term—but then, these are not exactly stable times for any industry. More than ever, media companies will have to accept the certainty of constant change and hard-wire flexibility into their operational DNA. This will be especially true of the news production workflow, where content requirements are continuing to multiply.

Keeping on top of all these developments will be far from easy, and it's for that reason that strengthening the lines of communication between departments should arguably be the top priority for all companies keen to navigate this brave new world successfully.