We must confess to being a little perplexed at the IPTV number produced by Infonetics Research this week, until we got to the last paragraph. Infonetics seems to have concluded that IPTV is losing traction and that although it is still growing, it has slowed down somewhat, especially in North America, and Infonetics blamed much of it on the global economic conditions.
This contradicts the numbers that came out of AT&T and Verizon this month which have shown substantial, accelerated growth in IPTV subs, as have all of those companies which have reported globally in the IPTV sector.
Infonetics says that IPTV is still on track to reach 72 million homes by 2011 having adjusted its forecast to reflect the current state of the global economy.
The two things that suddenly made sense of it all was when in the last paragraph it makes it clear that Infonetics gets a lot of its numbers from the suppliers to the industry, and secondly it was citing second quarter numbers for US IPTV operators, not third quarter.
In the first quarter AT&T and Verizon combined grew by some 516,000 IPTV home, but during the second quarter (remember that started in April, long before anyone was discussing economic turmoil) these fell to 346,000. Since then have recovered to 465,000, a rise of 29%. Strange to come out with a report which has just been contradicted by new numbers, which were bought about by changes to the bundled offerings, because of the results of Q2. Of course charging less will have brought down margins and that will have been reflected in supplier deal prices.
And Infonetics points to other issues in the market, not to do with recession such as the availability of new chips from ST Micro, Sigma Designs and Broadcom. But of course as the set top market commoditizes around cheap volume chips for Mediaroom, it’s bound to lower the unit price and the revenues for those set top firms. The report went on to say that the IP set-top box market is down 10% due to the subscriber slowdown, but the IP video encoder market was up 8% as subscribers seek to add channels, particularly high definition (HD) channels. This is another howler in that it is more likely that new encoders are being bought by the operators to stimulate subscriber demand. And Pc figures out this week, show that IPTV (and other) set tops are not down in the least.
And yet another howler was when Infonetics said that, ‘In environments where the future of the economy is unknown, IPTV and SDV subscribers are more apt to stay with their current provider, rather than look for a new provider with whom they may have to invest in new equipment and other upfront fees; this is especially true in North America and Western Europe right now.’ So how come one quarter later there was increased movement towards Telcos IPTV offerings almost back to their peak.
One reason is that Infonetics is seeing the IPTV market and switched digital cable as one and the same market, which it most certainly is not, quite simply because switched digital buyers are already cable customers, whereas IPTV customers are stolen from the cable and satellite markets.
During the second quarter the researcher said that there were healthy increases in EMEA, Asia Pacific, and CALA, and particularly in France which saw record growth. The Chunghwa Telecom numbers in Taiwan just out this week will also support that with net adds of 82,000 IPTV subscribers during the third quarter, up over 65% on last year. Expect its next quarter figures to talk about huge growth despite the economic conditions.
It’s reports like these that spread fear and panic through the pay TV community. There are dangers, but it’s not the recession, it’s the competitive rivalry, with Telcos on the way to getting the upper hand against cable, and satellite still growing.