Insider Reporter

Insider Report

news and views on broadcast and professional video/audio sectors, worldwide

w/e July 5, 2008 SCRI International, Inc © 1984 - 2008


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Mobile entertainment industry confident, despite economy

The findings of the latest MEF Business Confidence Index (BCI) on the $32 billion global mobile entertainment industry has shown that the industry remains confident despite the current economic challenges, predicting average revenue growth of 28 per cent for the coming year.

Commenting on the findings, Andrew Bud, Global Chair of MEF, said: "In spite of an incredibly difficult economic landscape, the prediction for average revenue growth in the mobile content sector is up 1 per cent on the annual growth prediction from the last BCI to 28 per cent. This echoes the finding that 81 per cent of respondents are as confident about the future of their organisation as they were at the end of last year."

The analysis also shows that the ‘marketing mix’ of communication channels within the industry is evolving. Mark Harding, Director of Digital Content at KPMG, added: "The revenue growth and confidence shown by the sector proves that, despite tougher economic times, consumers are still prepared to spend money on mobile content. The coming of age of the smart phone has no doubt helped to support this, by improving the customer experience and access to exciting mobile applications.

"More organisations in the mobile entertainment value chain are moving their marketing budget towards the industry’s own platform of mobile, at the expense of online and sponsorship and events. However, the mobile entertainment industry’s marketing budgets remained constant over the last quarter and are predicted to remain so over the next, with 87 per cent predicting their marketing budget will remain the same or increase."

IPTV in Europe Could be Viable says New Study

The market growth for IPTV is crucially dependent on the economic viability of its business models according to a study by Berlin-based consulting company Goldmedia. It says the construction and operation of an independent IPTV platform is economically viable only for telecom companies with at least 2.5 million broadband customers.

Revenues from TV services alone do not make IPTV an attractive business model for telecommunications providers. Even for the large network operators, IPTV makes economic sense only after the effects of subscriber churn and growth of customer base are taken into account.

A high degree of quality is decisive for IPTV’s success. Technical start-up difficulties and problems with the service can quickly diminish quality and lead to increased customer loss. Without customer growth and acquisition of new customers, IPTV will remain a subsidised undertaking, even among the large telecommunications companies.

IPTV can also be profitable for smaller companies if they market pre-existing offerings. This so-called "reselling model" is feasible for companies with only 250,000 broadband customers. To present, however, such offerings have spread only minimally in the GSA region (Germany, Switzerland, and Austria). Relevant examples can be found only in Switzerland. They are possible here because of compatible terms of copyright.

IPTV forecast advises watchful optimism

The new IPTV Global Forecast Report - May 2009 from MRG, shows that 2008 actual IPTV subscribers ended up at about 1 million over its last forecast in late 2008, or 21.3 million, resulting in projected subscriber growth of 26.9 million in 2009 to over 81 million in 2013. Combined CapEx revenue plus service revenue will grow from $9.7 billion in 2009 to $25.6 billion in 2013.

The new IPTV forecast for 2009-2013 is both conservative and optimistic, based on very detailed semi-annual analysis that MRG does on individual Service Providers and on a country-by-country basis.

"The relatively strong market in 2008 caused CapEx transactions to flourish through the end of 2008," says Jose Alvear, MRG Analyst. "That anticipatory wave of orders kept vendors' pipelines full all the way through 2008, but in Q1/2009, many IPTV vendors reported single-digit reduction in revenues, which is reflected in our flattened 2009 forecast."

Yet, one positive indicator was strong IPTV subscriber growth of 583,000 combined for Verizon and AT&T in Q1/2009. Another is the large number of new IPTV Operators in Eastern Europe and the Rest-of-World (ROW) region, moving from 64 companies to 84. Countries like Colombia, Qatar, United Arab Emirates, Montenegro and the Russian federation have seen new growth in their operations

As the IPTV market matures, many innovations are emerging, including upgrades like DVRs and MPEG-4/H.264 compression, High-definition programming, and first class System Integration. "Professional services growth is brought on by stronger regional partnerships of vendors and resellers that continue to move into smaller markets," states Alvear. "Growth in System Integration and Professional Services will also be spurred by the growth of turnkey system sales where all the components and services are heavily pre-integrated."

Mobile TV solution market to decline in 2009

The global market for mobile TV chipset solutions is likely to contract 20-30 per cent in 2009 due mainly to declining demand from the PC and automotive segments, according to Yannick Levy, CEO of DiBcom.

To cope with slack demand and varied standards in different markets, DiBcom and other solution vendors such as Siano Mobile Silicon are introducing integrated chipsets that are compatible with multiple technologies, Levy noted.

For example, DiBcom's latest Octopus platform is compatible with DVB-T, DVB-H, DVB-SH, ISDB-T, T-DMB and CMMB standards, said Levy, who added that the company will begin delivering samples of Octopus chipsets to clients in July-August.

DiBcom will outsource the Octopus chipsets to United Microelectronics Corporation (UMC) using a 65nm process, Levy revealed. DiBcom has shipped over 15 million mobile TV solutions so far, and the company is also the top vendor in the DVB segment, Levy claimed.

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Ad Sepnding Down Globally

Global advertising spend is expected to drop 5.5 per cent in 2009, more than previously thought, before a mild recovery begins in 2010, according to a forecast from WPP's Group. Spending on measured media is expected to drop to $417 billion in 2009 and to be down 1.4 per cent to $411 billion in 2010, according to the forecast which looked at 70 countries. Its previous forecast in March put the 2009 decline at 4.4 per cent.

GroupM, which acts as the parent company to the WPP media agencies, said the BRIC nations of Brazil, Russia, India and China were set to lead the recovery. Spending on advertising in the US, Britain, Canada, France, Germany, Italy and Japan was forecast to lag behind the recovery.

"China's economic stimulus has already bolstered confidence, and the demand for advertising in Russia will recover quickly if $70-a-barrel oil prices are here to stay," said GroupM Futures Director Adam Smith. "Brazil and Indonesia remain among the top growth contributors, and India is predicted to come back strongly after pausing in 2009."

Advertising spend in the US was forecast to fall 4.3 per cent in 2009 followed a 6.5 per cent drop in 2010.

"Advertising lagged economic recovery for about 18 months after the recession of 1992 and about 12 months after the one in 2001," Smith said. "Our global forecast for 2009 has finally stopped tumbling. The 15 countries still reporting positive ad growth in 2009 has become 33 in 2010, and the number could rise as we phase through the year."

Comcast & Time Warner Partner for TV Everywhere

Comcast and Time Warner announced a partnership on the "TV Everywhere" initiative. Both companies have been leading proponents of the "authentication" online concept, intended to reinforce the pay-TV model by including access to programming delivered via the Internet as part of the monthly subscription.

But until now, they've taken different approaches. Time Warner’ TV Everywhere envisions a decentralised authentication mechanism, which would allow consumers to log in to any number of participating sites to access content. Comcast's On-Demand Online plan was to be available to the MSO's subscribers only through the company's own Fancast entertainment portal.

The first test of the new system is based on TV Everywhere with authentication on line. The trial will involve about 5,000 Comcast subscribers, and television shows from the Time Warner networks TNT and TBS.

Online distribution threatens TV ad revenue

TV networks risk losing ad revenue by distributing content on Hulu, YouTube, and other Internet video sites, Credit Suisse has warned in a report.

Since programmes on Hulu and websites owned by TV networks contain about one quarter of the amount of advertising that the networks run on TV, content suppliers will lose money online unless they increase the amount of ads that they sell, Credit Suisse says.

"Ultimately online viewing generates less revenue for TV networks than linear TV viewing. This is potentially dangerous as they move online," Credit Suisse analyst Spencer Wang commented.

While Wang says the natural response for TV networks would be to increase the amount of ads they place in online programmes, that move could reduce viewership. Increasing online ad loads will also put pressure on the CPMs [cost per thousand impressions] that networks receive for ads placed in TV shows that run online.

"Our view for the TV networks is it is potentially risky to move [content] online, and fairly uncertain," Wang said. Networks should hope that online viewing is incremental to the audiences they generate on TV, he added.

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Teranex Acquired by Jupiter Systems

Jupiter Systems, provider of display wall processors, announced its acquisition of Teranex Systems, a manufacturer of high-performance video processing platforms for the post-production, and broadcast industries. Teranex, headquartered in Orlando, Florida, will be a wholly-owned subsidiary of Jupiter Systems.

“Teranex is a strategic acquisition for Jupiter Systems,” said Eric Wogsberg, Jupiter founder and CEO. “Its technology, solutions, and market complement our own efforts and its high-quality video processing technology enables us to provide our customers with even higher levels of video quality--extending Jupiter’s reach from the command and control market into the broadcast arena.”

“This is an exciting milestone for our company,” said Mike Poirier, General Manager of Teranex. “We look forward to becoming part of Jupiter Systems. Jupiter’s global reach, widely recognized brand name, strong systems and networking expertise and worldwide customer relationships make it an ideal partner for Teranex.”

Teranex will continue to support its customers and its sales channels with its own sales force and will continue its long tradition of developing superlative video processing products based on its patented SIMD architecture.

Omneon withdras IPO

Omneon Inc., a Sunnyvale, Calif.-based provider of digital content storage and processing systems for media companies, has withdrawn registration for a $115 million IPO, citing “current market conditions.”

It had planned to trade on the Nasdaq, with JPMorgan serving as sole bookrunner.

The company has raised around $100 million in VC funding since 1998, from firms like Norwest Venture Partners (16.1%), Accel Partners (16.1%), Advanced Technology Ventures (16.1%), Meritech Capital Partners (7.6%), Invesco Private Capital (6.5%) and Lucent Ventures (5.5%).

Pro-Bel and Snell & Wilcox Merger

Pro-Bel and Snell & Wilcox announced the merger of their businesses, and the creation of a new joint company. The deal, which combines the strengths of two market leading innovators in the broadcast technology industry, creates a formidable competitor in the digital media sector. The combined company has two thousand active customers in more than 100 countries, a comprehensive portfolio of best-in-class products, and a world-wide team of sales and support personnel.

"For more than thirty years, both Pro-Bel and Snell & Wilcox have offered compelling best-of-breed solutions that help to solve real-world customer issues," said Graham Pitman, CEO of Pro-Bel. "During this time the two companies have developed highly complementary product ranges with very little overlap; well-deserved reputations for innovation, product quality and reliability; and a joint commitment to excellence in customer service. Through this merger, the new combined company will build on this strong foundation to create one of the industry's great companies."

"Our industry is in a period of dynamic transition," said Simon Derry, CEO of Snell & Wilcox. "Traditional business models are being rewritten as we embrace the exciting opportunities in the multi-definition, multi-platform world of 21st Century digital media. By joining forces we have created a company that has the talent, technology and resources to meet the evolving needs of our existing customers, while simultaneously taking advantage of new opportunities as they emerge." The management of the new company includes members of the executive teams of both companies, including Graham Pitman, CEO of Pro-Bel, and Simon Derry, CEO of Snell & Wilcox. Pitman has been appointed Deputy Chairman of the new company, and Derry will serve as CEO.

Sony Pictures to Lay Off 300; 4% of Workforce

Sony Corp.'s Sony Pictures Entertainment studio is set to lay off about 300 employees, or around 4% of its total staff, a person familiar with the situation told the Los Angeles Times. The layoffs follow cuts at fellow studios Warner Bros., Universal and Paramount, and belt-tightening at Sony such as reduced expense accounts and overtime pay.

Revenue at Sony Pictures was down 8% for the recent quarter, to $1.9 billion, which the company blamed on slumping sales of its DVD products and television programs.

New release DVD sales were down more than 15% for Sony, while sales of catalog titles were also down.

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Harmonic tops encoder shipments

According to Instat, Harmonic led the industry in encoder shipments in 2008, with 28 per cent market share, according to research from industry analyst In-Stat. In 2008, Harmonic shipped more than 12,000 encoding channels to broadcast, cable, satellite and telecom video service providers.

Around the world, more than 60,000 MPEG-2 and MPEG-4 AVC (H.264) standard and high definition video channels have been provisioned using Harmonic’s DiviCom encoders since 1996. Eight of the 10 largest direct-to-home (DTH) satellite operators worldwide and nine of the top 10 cable operators in the US use Harmonic encoders. Harmonic compression solutions also power more than 6,500 telco IPTV channels around the world, and over 300 TV stations in the US broadcast their digital TV programs using Harmonic encoders.

Digital media revenues decline

The Q1 2009 Global Digital Media Index (DMI) from the Strategy Analytics Digital Media Strategies Service shows that along with the worsened economic environment, digital media revenue growth continues to drop since Q1 2008. The Digital Media Index grew only 0.9 per cent in Q1 2009 on a seasonally adjusted annual TTM basis, down from 3.4 per cent in Q4 2008 and from 6.6 per cent in Q1 2008. On a year-over-year basis, quarterly digital media revenues grew 3.6 per cent in Q1 2009, down from 29.2 per cent in Q1 2008. While the prolonged economic recession decelerates digital media growth significantly, digital media companies, based on consumer-paid models, are withstanding the economic downturn better than companies focused on advertising.

"Although many digital media companies will still choose the advertising revenue model given the relative ease of gaining user traffic, Strategy Analytics believes that the consumer-paid model is more resilient in the recession as it maximizes the value of content." commented Jia Wu, Analyst at Strategy Analytics Digital Media Practice and author of the DMI.

"As the US digital media market’s major players suffer from revenue decline, the international market—in particular the European and Asian markets—is still weathering the economic downturn," said Martin Olausson, Director of Digital Media Strategies.

Hybrid STBs jump-starting IPTV services

A global report from MRG shows how hybrid IPTV set-top boxes (STBs) are helping IPTV Operators "jump-start" early service deployment or extend the reach of their existing video IP Networks. By merging existing digital video broadcast programming with IPTV services, Operators are finding they can significantly slash CapEx and lead-time costs from typical IPTV deployment costs. In 2008, there were already 14.4 million installed hybrid STB units worldwide, with estimated growth to 22.3 million in 2012.

The report explains how by using existing broadcast sources in addition to on-demand IPTV service, the content acquisition and early network infrastructure requirements are simplified significantly.

"Use of hybrids can solve some serious problems presented by technical restrictions or lack of content," says Huw Price-Stephens, MRG Analyst. "They can also create new and bigger problems unless acquired with an effective exit strategy, which does not require swapping out the STBs."

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2009-2010 Broadcast Pro Video Marketplace Reports

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