Broadcast Video Encoders: Maturing Market, Drivers
and Challenges
Vidya S Nath, Senior Industry Analyst
Digital Media
July 23, 2009
vnath@frost.com

Agenda
• Overview of Frost & Sullivan Encoders-Transcoders Market
Coverage, 2009
• Introduction to the Broadcast & DTT Video Encoders Market
• Digital Deadlines Worldwide
• Industry Challenges
• Market Restraints
• Regional Trends
• Market Drivers: So where is the opportunity?
• Market Trends
• Technology Trends
• Competitive Landscape: Changes Expected
• Conclusions
• Questions
2

Overview of Frost & Sullivan Encoders-Transcoders Market
Coverage, 2009
World Video Encoders-Transcoders Market
World Broadcast & DTT Video World Pay TV Video Encoders World Enterprise, Internet and
Encoders Market Market Mobile Video Encoders-
(published) (published) Transcoders Market (to be
published)
Customer Segments: Customer Segments: Customer Segments:
Broadcasters, DTT Service Cable, Satellite, IPTV Service Enterprise: Corporate,
Providers Providers Government, Hospitality, etc.
Internet: Web Portals,
Broadcasters, Service Providers
etc.
Mobile: Telco Service Providers,
Web Portals, Content Providers
Applications: Applications: Applications:
Contribution, Distribution, DTT Distribution, Video-on-demand, Real time streaming,
(digital terrestrial television), multicasting, video-on-demand
Others (archiving, mastering,
redundancy)
3

Introduction to the Broadcast & DTT Video Encoders
Market
4

Digital Deadlines, Broadcast Standards and Compression Formats in Use
(World), 2008
UK – 2012; DVB-T; China– 2015; Hong Kong – 2012;
MPEG-2 and H.264 DMB-T/H; DMB-T/H;
MPEG-2 MPEG-2/H.264
Czech Republic – 2010;
DVB-T; MPEG-2
Canada – 2011;
ATSC;
MPEG-2 and
H.264
United States;
2009;
ATSC;
MPEG-2 and Italy– 2012; DVB-T; Japan– 2011;
H.264 MPEG-2 and ISDB-T;
H.264 MPEG-2
Mexico – 2022; ATSC;
MPEG-2, H.264/MPEG-4
Malaysia– 2015; DVB-T;
MPEG-4/H.264
Brazil – 2016; ISDB-T;
Key: H.264/MPEG-4, AVC
Country name; Digital
Deadline Year; Broadcast Standard; South Africa– 2011; DVB-T; Australia – 2013; DVB-T;
Compression format in use H.264/MPEG-4 MPEG-2 and H.264
Source: Frost & Sullivan
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Industry Challenges
Advertising Market Trends (World)
10%
• Economic Recession:
advertising revenues
5% decline- major cost
Growth Rate
0% restructuring
2005 2006 2007 2008 2009 2010 2011 2012
-5%
-10% • Likely Postponement of
Digital Deadlines
-15%
Source: Internet Sources such as
Year
Adage.com, PWC; Frost & Sullivan • Promising HD Demand; but
Media Companies Growth Rate (Quarterly)
challenged by the standard
15%
definition legacy
10%
5%
0%
Ad revenue for Network
TV from top 100 leading
-5%
advertisers, (U.S.,) 2008
-10%
Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 $26.71 Bn
Source: Adage.com
Source: Internet Sources & Annual Reports of companies
such as Disney and News Corp.
6

Market Restraints
Broadcast Video Encoders Growth Rate (2008-2015)
10.0%
0.0%
2008 2009 2010 2011 2012 2013 2014 2015
Growth Rate
-10.0%
-20.0%
-30.0%
-40.0%
Year
Source: Frost & Sullivan
Legacy equipment and
long sales cycles
External Restraint Further intensifies
Interoperability issues
Reduced
•Global Economic other existing
Slowdown restraints Demand
Reduction in product prices
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Regional Trends
Total Broadcast Video Encoders Market: Region-wise Revenues
(World), 2008-2015
120.0
100.0
80.0
$ Million
60.0
40.0
20.0
-
2008 2009 2010 2011 2012 2013 2014 2015
AmericasYear
EMEA APAC Source: Frost & Sullivan
• Americas to decline at a CAGR of 20% till 2011
• EMEA to decline at nearly 13% till 2011
• APAC demand will weather the storm- still single digit CAGR over forecast period
8

Market Drivers: So where is the opportunity?
AVC/H.264, 41.7%
SD, 51.2%
MPEG-2, 58.3% HD, 48.8%
Source: Frost & Sullivan
Source: Frost & Sullivan
• Demand for products- especially in the newsgathering/ contribution category-
for high resolution
• Even emerging (typically price-sensitive) countries transitioning to HD
workflows
• New products supporting H.264 AVC/ JPEG2000 etc. in demand
• High demand for software-intensive solutions-that are highly scalable, easily
upgradeable; cheaper, and can sit on top of server systems
9

Market Trends
2006-2009: Strengths: Weakness:
Comtech acquires Radyne •Aggressive demand •Tremendous price
in Asia pressure, low margins
Thomson divests its stake in Grass Valley •Demand for high •Saturation in demand
resolution, advanced from premium
Harmonic acquires Rhozet, Entone formats regional markets
Technologies and recently, Scopus
•Broadcasters
Tandberg Television acquired by Ericsson
diversifying: investing
in alternate media
Motorola acquires Tut Systems and Opportunities: Threats:
Modulus Video
•Overall fall in pricing •Highly competitive
for hardware- calls for market
Scientific Atlanta acquired by Cisco
Systems innovation •Not a lucrative
•Potential to create segment: low
turnkey efficient and volumes
robust software- •Alternative media:
• Market Consolidation: acquisitions based systems complex and
and mergers •Alternative media fragmented customer
• Inorganic growth efforts: new product markets demands; demand for
lines, new regions cheap solutions- high
risk of failure
10

Technology Trends
• Ultra HD Technology from NHK Broadcasting
UltraHD format is four times as high and four times as wide as HD. It is a prototype for a new
digital video format, proposed as replacement for existing high definition television (HDTV). The
current High-Definition Television (HDTV) uses 1,080 lines of resolution, where as UltraHD uses
7,680 x 4,320 pixels in a widescreen aspect ratio of 16x9, making for a total of approximately 33
million pixels. UltraHD is so named because it provides a video resolution containing 16 times
as many pixels as current HD.
• AVS- Format in China
Audio Video Coding Standard or AVS is an independent coding-decoding standard, which
officially became the national standard of China in 2005. AVC is 2-3 times more efficient as
compared to the traditional MPEG-2 standard. The performance of AVS and AVC is similar.
However, AVC's licensing mode is complex and fees expensive, where as AVS's licensing
mode is as simple as that of MPEG-2 and fees competitive.
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Competitive Landscape: Changes Expected
More than 20 vendors in this market globally
Usual Suspects (Global Presence):
•Tandberg Television (Ericsson) Examples of Emerging Vendors
•Cisco Scientific Atlanta
•Motorola NTT, Fujitsu
•Harmonic
•Grass Valley Streambox
•Envivio
•Harris Digital Rapids,
•Comtech TV (earlier Radyne) Telestream,
Viewcast
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Conclusions
• Broadcast market maturing in North America and Western Europe
• Immediate growth expected in Asia
• Vendors need to innovate: demand for lower cost, highly efficient and
scalable software solutions
• For survival, if not robust growth: “expand your horizons,” alternative
market segments
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For Additional Information
Craig Hays
Jake Wengroff Sales Manager
Corporate Communications Information & Communications
(210) 247-3806 Technologies
jake.wengroff@frost.com (210) 247-2460
craig.hays@frost.com
Mukul Krishna
Research Director
Digital Media
(210) 247-3850
mukul_krishna@frost.com
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