NAB: Protecting a $30M Cash Engine

As the sprawling NAB Show opens in Las Vegas next week, NAB executives may be able to breathe easier knowing that the annual convention has recaptured much of the attendance and exhibit space lost in the meltdown of the U.S. economy in 2008.

But it’s no time for a nap because the increasing strength of  other international conferences that showcase video technology is threatening to check the NAB convention’s growth and the revenue — now around $30 million a year — that comes with it.

“There’s nothing that tells me NAB is going to have a huge growth,” says John Abel, a former NAB EVP. “They [NAB officials] have got a really stiff competitor that we didn’t have, and that’s IBC,” adds Abel, who was in charge of the NAB convention from 1986 into 1995 — a period during which convention exhibit space more than tripled and attendance shot up by more than 80%.

IBC, an international convention that takes place in Amsterdam each September, is now drawing more than 50,000 people a year, according to the group’s website.

NAB’s high-water mark for attendance (115,500) was set in 2000 when the Internet financial bubble was still expanding. The record for exhibit space (1.1 million square feet) came a year later.

After that bubble burst, exhibit space and attendance fell sharply, but rebounded and grew steadily until the Great Recession of 2008-09 again slammed the numbers.

Last year, the show drew 91,600 and sold 807,788 square feet. This year, NAB has already booked 840,000 square feet of space, the most since 2008, and expects at least 90,000 people.

Even in its diminished state, NAB was the 11th largest trade show in the U.S. during 2011, based on exhibit space, according to Trade Show Executive magazine.

Abel and other industry observers say IBC, and a growing number of other international shows, are siphoning off some of NAB’s potential international attendees — along with providing important alternative venues for NAB exhibitors.

With the advent of international competition for NAB’s conference, overseas companies that once sent 50 people to the NAB Show each year, “maybe they will send only 20 … now,” says Terri Black, global marketing director for Harris Broadcast, a long-time NAB exhibitor. “And they’ll spend the rest of their time at an international show or at a regional show.”

Registered international attendance at the NAB’s 2012 convention was 24,928, down 12% from the 28,310 reported by the association in 2008, but overall attendance was also down about 12% over the same period, according to the association.

“They [IBC organizers] are doing a great job,” says Chris Brown, who has been the NAB EVP in charge of the association’s convention since 2006. “We have to operate like everybody else does with a pretty healthy level of paranoia,” he adds. “The challenge there is we’re competing for that international audience, and for us that’s been huge.”

For Harris, Black says, the NAB used to be the “only game in town.”

Now, however, Harris regularly showcases its wares at the IBC, CABSAT in Dubai, SET Broadcast & Cable in Brazil, CAPER in Argentina, BES in India, Broadcast Asia in Singapore and BIRTV in China.

Grass Valley, another major NAB exhibitor, shows its products at most of the same international venues Harris does, along with Moscow’s NATExpo and Japan’s InterBEE.

Many of the smaller, more local,  shows around the globe — particularly in China, Asia, the Middle East and Russia — have also become increasingly important to Grass Valley, says Eric DuFosse, VP of marketing. “The growth of our business in these regions has been very big.”

Nonetheless, DuFosse says the two dominant shows on Grass Valley’s calendar are IBC and NAB, with NAB’s confab the bigger draw in terms of potential buyers.

With the emergence of alternatives for NAB, Harris has been slowly decreasing its “footprint” there over the past several years, with its net investment “flat or slightly down over a period of time,” Black says.

In addition, over the last three years, Harris has made important product announcements at the CABSAT show in Dubai in March, before the NAB show. “Sometimes it’s better to spread your eggs among multiple baskets,” Black says. “We spend a lot of money on NAB,” she adds. “I think there are probably more effective ways to generate leads and awareness than NAB.”

But the bottom line, according to Black, is that Harris is still doing enough business at NAB to merit the company’s investment. “It [NAB] is a major investment and major expense, but as long as our key customers continue to go, and they send the right people, then we will be there to support it,” she says.

NAB “is always a costly event, but we are very comfortable with NAB,” says Grass Valley’s DuFosse, adding that his company has been satisfied with the return on investment in terms of leads and exposure to the company’s customers.

“We have been teaming up with the NAB organization to understand better the impact of the show for us, and NAB did a very reasonable job to act as a business partner to see how we can add revenues from audiences, but also to have complementary marketing actions around the show,” DuFosse says.

Attendance and exhibit space numbers are important to NAB because the show has long been the association’s major revenue driver, generating up to 70% of the organization’s total revenue each year, Brown says.

Over the past few years, the convention has been generating revenue of about $30 million annually, with about two-thirds of that going to the association’s bottom line, according to NAB IRS reports.

The infusion of convention revenue eases the pressure on the association to jack up radio and TV station membership dues, and gives the association piles of cash to spend on lobbying operations.

NAB’s 2011 convention revenue of $31.4 million for the year ending March 31, 2012, left the association with total net assets of $53 million, as of March 31, 2012, according to the NAB’s most recently available IRS report.

In the year ending March 31, 2007, before the 2008 economic meltdown, NAB had total net assets of $78 million, according to the association’s IRS report.

“It [the convention money] has helped underwrite the financial well-being of the association,” says Eddie Fritts, who was NAB president-CEO from 1982 until 2006, a period during which the convention was climbing a steep growth curve.

About 90% of the show revenue comes from the sale of exhibit space, which now goes for $47.50 per square foot, according to the rate card. Conference advertising and sponsorships generate a little less than 6% of convention revenues, according to Brown, while registration fees represent about 3% to 4% of the total take.

One of the more recent growth sectors for the convention, according to Brown, has been the Hollywood production community, which now accounts for 12% of the show’s audience.

The production and post-production sectors are responsible for about 30% of the convention’s audience currently, while broadcasters now represent about 20%, Brown says.

One major challenge to keeping any trade show on financially sound footing is that it must be sensitive to the booms and busts in the economy as a whole, Brown says. By way of example, he says that when the NAB was riding high during its convention in 2001, 150,000 square feet of its 1 million-plus record square feet of exhibit space were devoted to Internet companies. “We certainly rode the dot.com wave as well,” Brown says. “A lot of them were new entrants and spending like drunken sailors; it was great for everybody.”

But in the wake of the downturn in the U.S. economy, the bursting of the dot.com bubble, and the 9/11 terrorist attacks on the World Trade Center and Pentagon, attendance dropped dramatically the following year.

“There were companies that literally just vanished,” Brown says.

The convention then experienced steady growth to its next peak, in 2008. “And what happens then? Recession again,” Brown says. “Trade shows kind of follow that economic curve,” he continues. “It doesn’t necessarily hit us the year of the recession, but it does hit us the following year.”

The key to keeping the convention on track now, Brown says, is to “look constantly at how the industry is evolving. This is something where we really have to spend a lot of time reading the tea leaves and figuring out where we think those new opportunities will be.”

Particular growth opportunities that Brown has in mind over the longer term include the online video and IT sectors, with the latter represented by companies like IBM, Microsoft, HP and Intel.

“I think we might see a more significant presence from some of those kinds of companies as the nature of what happens in a broadcast operation changes, and not see as much of the big camera guys.”

This story originally appeared in TVNewsCheck’s Executive Outlook, a quarterly print publication devoted to the future of broadcasting. Subscribe here.