UK set top maker Pace is one of the best indicators of the state of pay TV and broadcast markets because it does so well in the US, is spread across both pay TV and free to air terrestrial digital, and because it is not overly dependent upon a single format ‘ cable, terrestrial, IPTV or satellite.
So when it said this week that it was business as usual and that it would meet all of its 2008 expectations, it gives you an idea of how counter cyclical entertainment markets are, as we have been saying all along, since the first whiff of a recession.
The only blot on the landscape for Pace this week was the fact that it had to talk about currency fluctuation, which it says it will hedge against but which has also made it revise down expectations for 2009 profitability, though not revenue.
Pace is doing a fair chunk of its revenues in the US, and as that gets stronger, it will get a upside when reporting in pounds and much the same against the Euro. It is only Asia Pacific business where the opposite might be true. But Pace said that around 95% of the components it uses, although not bought in the US, are quoted in dollars, effectively taking costs up. Given the strength of the dollar and the reluctance for even Asian countries to be paid in their own currency, this will take some fixing.
Pace has made good inroads by being very early with HD products, especially HD DVRs, and has just commenced shipments of one to MultiChoice in South Africa. Pace is also behind the digital to analogue converter that Comcast is offering in the US.
Pace also said that it is introducing low environment impact devices, and is making good progress with its multidweller product which addresses triple play options in apartment blocks without rewiring.
To mitigate the impact of currency movements, Pace said it has begun a review of costs, projects and future expenditure and working with its value chain to align the balance of currency exposure between purchases and sales in the US dollar, UK pound and Euro. Well if that works, then it will have positive surprises in store for its next reporting period. Pace is expected to report revenue of £664 million ($1.06 billion) with profits £28 million ($45 million) for 2008.