This week the headlines all seem to be made up by the research groups, each trying to outdo one another unveiling the combined effects of the recession and technology advances ‘ pulling in separate directions.
The same is true of the In-Stat piece that says how the Broadcast MPEG encoder market has gone into a decline. This is a market that continued to grow during 2008, but In-Stat says that it will go negative as the 2GHz relocation project in the US comes to an end. At first we thought surely they mean the UHF 700 MHz relocation? But what In-Stat is talking about is the shift to 2 GHz of the Broadcast Auxiliary Service band to distribute TV channels. The encoder market will also turn down as the economy slumps. Harmonic is given the largest market share by In-Stat followed by Tandberg, Scopus and Motorola.
Overall In-Stat says that Real-Time Broadcast Encoder revenue will see a slight decline in 2009 mainly due to declining selling prices as units grow slightly, but the contraction will accelerate in 2010, as revenue declines more than 15%.
We find none of that surprising. There are many different influences over encoding. The emergence of more and more web video usually does not require real time encoding, but offline encoding and that market is invariably calling for more encode streams, and the servers which provide them are invariably commodity and under huge pricing pressures. The emergence of more cellular TV channels which are transmitted over 3GPP cellular streaming will require more encoders, many of them real time and broadcast in nature. Mobile TV will add to that, but the total amount of data they process is far lower and therefore one encoder can handle multiple TV channels.
There is a shift towards HD encoding and these devices are expensive and that drift will continue for years to come, but once again, the very high prices charged in the early days for HD will now come down as it goes commodity. In-Stat said that worldwide HD H.264 professional encoder revenue for terrestrial broadcast stations will more than double between 2008 and 2013. But that’s in a market which is overall down if you include SD.
Overall, commoditization is an issue too with encoder chips becoming more standard and more chip vendors chasing the market. At the same time the drift to HD is an odd one with pay TV operators not wanting to change client devices throughout their customer base and so only introducing it piecemeal.
Globally the roll out of DVB-T, with mostly free services still has some ways to go, including about 30 countries on the brink of taking those decisions. They can put these on hold for the duration of the recession, and they can buy cheap after it, but business will still be done.
In-Stat makes another point about encoders being put in to reduce costs, such as those which reduce bandwidth for a digital transmission, so that plant upgrades are not needed.
One area this may occur is in operations that wish to encode two or three signals for three different screens, from the same encoder, and replacements to the core head end for an operator may save costs elsewhere.
All in all we wouldn’t sell our shares in any favoured encoder companies, especially where their sales organization exten way beyond the ailing US market into the global entertainment hotspots in Europe, China and India and beyond.
In-Stat adds that the European region will be the largest geographic segment for HD H.264 professional encoder revenue for mobile contribution, representing nearly 33% of the worldwide $111 million market in 2013.
In-Stat said H.264 will make greater inroads into the HD contribution segment, as content producers want to use the same bandwidth for HD contribution as they were previously using for SD contribution.