Industry Updates

Analysis from Frost & Sullivan found that the encoder market earned revenues of $435.1 million in 2013 — and the firm estimates this to double to $895.2 million by 2020.

"Advanced markets are investing in sophisticated video encoder technologies, while other markets are just beginning their cable digitalisation journeys," said Frost & Sullivan digital media research analyst Robert Cavin. "Overall, pay-TV subscriber bases are expanding in all markets across the globe, indicating ample opportunities for pay -TV video encoder vendors in the coming years."

Market participants can achieve strong growth rates either through encouraging greenfield deployments in emerging regions such as China, India and Latin America, or by upgrading existing infrastructure in long-standing regions like North America and Europe.

Of these two options, Frost & Sullivan said that the latter will be more rewarding, as North America and Europe have high average revenue per user (ARPU) despite the higher number of overall pay-TV subscribers elsewhere. Robust ARPU and subscription fees mean higher pay-TV industry revenues that will allow service providers to deploy state-of-the-art equipment.

All of that said, there are caveats. For one, escalating consumer awareness and usage of over-the-top (OTT) video services continues to challenge the linear pay TV business model, limiting the sales volumes of encoders. In addition, the shift towards software-based architectures and multiscreen viewing options is also adversely affecting market development.

"As such, it is a competitive necessity for pay-TV video encoder vendors to offer unified multiscreen services along with linear pay-TV, as this will give consumers the viewing freedom they desire without having to leave the pay-TV ecosystem," said Cavin. "It is also important for pay-TV video encoder vendors to roll out reliable products with efficient compression technologies."