Pay-TV operators pause investments as subscribers slow, competition accelerates

CAMPBELL, CA — Market research firm Infonetics Research published 3 video-related market research reports in June: 2 first quarter of 2010 (1Q10) market share and forecast reports, Set-Top Boxes and Subscribers and Video Infrastructure and Subscribers, and its new IPTV Services Deployment Strategies: Global Service Provider Survey.

“The overall video market is in a state of transition. Pay-TV providers are trying to figure out how to grow their subscriber base in a hyper-competitive environment, while looking over their shoulders at Google, Apple, and other over-the-top video providers who could threaten (or enhance) their long-term growth prospects. Personalizing the video experience via video-on-demand and targeted advertising remains a strategic focus for all pay-TV providers, especially as new subscriber growth is difficult to come by. Meanwhile, anemic subscriber growth coupled with a traditionally weak first quarter hurt worldwide IPTV set-top box sales. We expect the STB market to resume single-digit growth in ensuing quarters. However, that doesn’t calm the current turbulence of the video market,” notes Jeff Heynen, directing analyst for broadband and video at Infonetics Research.

Video Infrastructure Market Highlights

• Huawei holds on to its lead in video-on-demand and streaming content server revenue market share despite a significant drop in revenue, followed by ARRIS and Motorola, the only 2 vendors with positive server revenue in 1Q10
• Worldwide video infrastructure revenue sequentially decreased 15% in 1Q10 to $533 million, as operators continued to keep their infrastructure investments to a minimum while new subscriber growth remains tepid and existing subscribers forgo upgrades to new services
• Even spending on VOD and streaming content servers took a hit this quarter, after consecutive quarters of growth, although the upcoming rollout of Comcast and Time Warner’s TV Everywhere service should drive more growth in VOD and streaming content servers
• Infonetics forecasts the worldwide video infrastructure market to grow to $3.1 billion in 2014, driven by cable, telco, and satellite operators investing in equipment to offer VOD, start-over services, remote storage digital video recording (RS-DVR), targeted advertising, expanded channel lineups, and more HD and 3D TV content

Set-Top Box Market Highlights

• Worldwide total STB revenue hit $3.7 billion in 1Q10, a 7% decrease from 4Q09
• The first quarter is usually one of the weakest of the year for the STB market, as consumers typically purchase new STBs or upgrade their existing appliances during the holiday season of the fourth quarter, when most new televisions are purchased
• Revenue is expected to increase over the next four quarters as more subscribers opt for premium boxes
• In 1Q10, Motorola continues to lead in worldwide cable set-top box and telco IP set-top box revenue market share, followed by Cisco in both segments
• Verizon has suspended new FiOS rollouts to focus on areas where it has already passed homes, which will limit the total STB market

IPTV Survey Highlights

• Most IP television operators are focused on getting the basic features of their IPTV service right, then plan to layer on more advanced, interactive applications
• Half of the operators surveyed currently offer subscription video-on-demand (S-VOD) — the real money-maker of VOD offerings — for access to content from premium channels (HBO, Showtime, Starz, etc.) and first-run movies
• 80% offer a client DVR and caller ID on TV as basic interactive services, as both are considered must-have features for telcos, with caller ID being positioned as a reason to maintain the home phone as a shared communications platform for the entire family
• By 2011, many operators plan to offer user-generated content and Web browsing to allow users to access optimized Web sites via their TV sets and create their own content channels of home movies and pictures to share with friends and family on the same IPTV system

Report Synopses

Infonetics’ quarterly video infrastructure report provides worldwide and regional market share, market size, analysis, and forecasts for telco IPTV, cable video, and satellite video subscribers and infrastructure, including VOD and streaming content servers, video encoders, edge QAMs, IPTV middleware/content delivery platforms, digital cable middleware, satellite video middleware, and video content protection software. Vendors tracked include Alcatel-Lucent, ARRIS, BitBand, Cisco Systems, Concurrent, Edgeware, Envivio, Ericsson, Espial, Harmonic Inc., Huawei, Microsoft, Motorola, Nokia Siemens, OptiBase, SeaChange, Tandberg TV, Technicolor (Thomson), UTStarcom, ZTE, and others.

Infonetics’ quarterly set-top box report provides market size, market share, analysis, and forecasts for telco IP STBs (pure IP, hybrid IP/over-the-air, hybrid IP/QAM), digital and hybrid IP/QAM cable STBs, satellite STBs, DVR STBs, HD STBs, OTT (over the top) media servers, and subscribers. Vendors tracked include Advanced Digital Broadcast (ADB), Cisco, Coship, Dasan, Echostar, Huawei, Jiuzhou, Motorola, Netgem, Pace plc, Sagem, Samsung, Sumitomo, Technicolor (Thomson), Yinhe, and others.

The IPTV Services Deployment Strategies survey is part of Infonetics’ Continuous Research Service (CRS) series of analyst notes and surveys on IPTV and video. Infonetics surveyed IPTV network purchase decision-makers at incumbent, competitive, and mobile operators in North America, Asia Pacific, and EMEA (Europe, Middle East, and Africa) in May 2010 about the VOD, interactive TV (iTV applications), and broadband video content they offer and plan to offer, their choices of network equipment, and criteria for choosing vendors.