Encoder market likely to double, but challenges loom

Robert Cavin, Frost & Sullivan

The global market for pay TV video encoders is expected to double to US$895.2 million (€704.4 million) by 2020, up from US$435.1 million at the end of last year, according to a report by Frost & Sullivan. 

According to the report, established markets including North America and Europe will continue to deliver dividends thanks to higher average revenue per user than high-growth markets such as China, India and Latin America.

However, the rise of over-the-top video services challenges the linear pay TV business model, thereby potentially limiting the sales volumes of encoders. In addition, the shift towards software-based architectures and multiscreen viewing options is also adversely affecting market development, according to the report.

“Advanced markets are investing in sophisticated video encoder technologies, while other markets are just beginning their cable digitalisation journeys. 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,” said Frost & Sullivan’s digital media research analyst Robert Cavin.

Addressing the question of the OTT threat and the challenge of the move to software, Cavin said: “It is a competitive necessity for pay TV video encoder vendors to offer unified multi-screen services along with linear pay TV as this will give consumers the viewing freedom they desire without having to leave the pay TV ecosystem. It is also important for pay TV video encoder vendors to roll out reliable products with efficient compression technologies.”