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Upside Growth Opportunities in Video Entertainment

Infonetics Research released results from their latest market study of the video on demand (VOD) entertainment landscape, which tracks equipment sold to telco IPTV, cable video, and satellite video service providers.

Moreover, Infonetics assessed the current pay-TV IP, cable, satellite, and hybrid set-top box (STB) and over-the-top (OTT) media servers market.

"Operators are being extremely cautious with their video infrastructure spending right now, looking to sweat their assets as much as they can -- knowing that a spending spree looms on the horizon to support more unicast and multi-screen services, including RS-DVR, start-over, look-back, and streaming delivery to mobile devices," said Jeff Heynen, directing analyst at Infonetics Research.

Infonetics said that they expect a noticeable increase in video equipment spending during 2013. Clearly, this year will be a challenging one for most pay-TV service providers in the saturated markets -- such as North America and Europe.

Both are key markets, as the legacy video entertainment distribution chain seeks ways to counter the adoption and growth of lower-cost over-the-top (OTT) streaming video offerings. Traditional vendors are experiencing some buyer hesitation, due to a cloudy outlook in these markets.

Ultimately, these legacy pay-TV service providers must find a way to create offers that appeal to younger consumers -- that solution likely includes embracing the high-growth streaming video value proposition. I believe that's where the current upside growth opportunities exist.


3Q12 VOD and encoder market highlights include:
  • Infonetics has increased its long-term forecast for the overall video infrastructure market to $1.1 billion by 2016, as operators worldwide migrate to MPEG-4 HD encoders to support higher picture quality using less bandwidth and as multi-screen services take off.
  • For the quarter, VOD and encoder equipment revenue fell 3 percent in 3Q12 from 2Q12, with all regions declining by single digits.
  • Following 2 consecutive quarters of declines, spending on VOD and streaming content servers grew 1.8 percent in 3Q12.
  • Infonetics forecasts the number of IPTV subscribers to nearly double between 2012 and 2016, from 83 million to 165 million worldwide.

3Q12 set-top box market highlights include:
  • Worldwide set-top box revenue was essentially flat in 3Q12, totaling $3.7 billion.
  • Cisco held serve as the cable set-top box market share leader for the second straight quarter, beating out Motorola by a hair.
  • The IP set-top box segment grew the most in 3Q12, with revenue up 27 percent from the previous quarter.
  • 45 percent of all set-top boxes shipped now have HD capabilities.
  • Infonetics has increased its long-term overall STB forecast, due mainly to a pick up in the pace of cable and satellite STB shipments in the Asia-Pacific region, principally in China and India; Infonetics expects the global STB market to grow to $16.6 billion in 2016.

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