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Set top software market congesting with APAC pay TV drive

Prolonging the life expectancy of set tops in the field has fast become a lucrative market, with pay TV operators bringing OTT type features to their subscriber bases while slimming down on hardware deployment costs. This won’t last forever as true OTT video viewing eventually becomes the norm, but another vendor in the space arrived on our radar this week called Seraphic, talking about invading the digital set top market in Asia Pacific which, unlike Western markets, is nowhere near saturation point.

Seraphic’s business model is a simple one, selling HTML5-based TV software products to set top and smart TV manufacturers, compatible with mainstream HbbTV and Freeview standards. It incorporates mainstream web apps, supporting YouTube TV, BBC, CinemaNow, Chili TV, Maxdome and more. The company’s Sraf HTML Browser Engine is used by TV manufacturers to develop HTML5-based user interfaces.

With hundreds of millions of set tops in the field today and many operators still lagging in making the transition to OTT features, as well as a rising popularity in smart TVs, Seraphic seems to have covered two significant bases expected to experience growth. However, major set top suppliers are making their own internal transitions from hardware to software, suggesting this market could quickly become congested and commoditized.

Shanghai-based Seraphic says it has customers in the US and Europe but its priority is opening up the Asia Pacific market for lightweight browser deployments. There are approximately 600 million pay TV subscribers across Asia Pacific, forecast to rise to 666 million in 2022, according to Digital TV Research, driven by growth in China and India. Asia Pacific is also expected to dominate the smart TV market, but what is the value to operators in keeping legacy set tops in the field for as long as possible?

ARPU is the key here but maintaining a high ARPU while simultaneously offering a cheaper OTT video offering alongside a pay TV service, simply to compete with emerging streaming companies, is having a detrimental effect in some cases. Maintaining these high ARPU subscribers is essentially the ultimate selling point for software from vendors such as Seraphic, yet in markets like India where pay TV is strangely dominant, this supposedly high ARPU is, in reality, tiny when compared with pay TV operator equivalents in the US and Europe.

For example, India’s Dish TV had a pay TV ARPU of $2.20 for its 2017 financial year, down from $2.50 in 2016 and $2.64 in 2015. Notably, Dish TV became the first DTH operator in India to launch an OTT service in October 2013 with DishOnline – maybe not a coincidence. Meanwhile, Videocon d2h, which Dish TV is preparing to merge with, has increased ARPU from $2.30 in 2014, to $3.20 in 2017.

China has a slightly higher ARPU than India at around $5.15 in 2015, according to data from IHS, rising from $3.90 in 2010.

The point here is that while much is written about pay TV in markets like India growing exponentially, defying challenges from the parallel growth in OTT video, operators face a challenge to stop already tiny ARPUs from slipping further. Reducing costs on the hardware side is one method of offsetting these losses, with software deployed on major SoC platforms in turn helping the likes of Broadcom and MStar to offer OTT functionalities for entry level devices, reducing time to market.

Seraphic’s Sraf Lite browser, which launched in May last year, is targeting low cost devices with as little as 25 MB Double Data Rate memory consumption and as small as 15 MB footprint size on SoC platforms and has been optimized for bill of materials configuration to support CPU over 2000 DMIPS.

The Chinese vendor teamed up with French UI developer Wiztivi at last year’s IBC, combining the Sraf Browser with Wiztivi’s Timeless UI – enabling mainstream VoD technologies. Seraphic has deployments on smart TVs from Hisense, Sharp, Skyworth Digital, Haier and SoniQ.

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