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Cable Technology Feature Article

December 17, 2013

HEVC Set to Drive the Video Transcoder Market Forward

By Tara Seals, TMCnet Contributor

As higher-definition displays come to market, particularly 4K UltraHD, new compression technologies are being developed to help operators and content providers deliver media efficiently, even if the raw files are much larger than standard definition or 720p HD. The move to use HEVC compression in particular is spurring operator upgrades in the multi-format transcoder market, with tangible impacts expected in 2014 and beyond, according to research firm MRG.

MRG expects revenues for total transcoders to reach just over $490 million by 2017, as the live portion of the total continues to account for higher revenues.

Multi-format transcoders are used to process video and audio streams for distribution via over-the-top (OTT) and multiscreen services, as well as for other purposes like digital archiving. Many live transcoders are bought by pay-TV providers that are offering TV Everywhere multiscreen services out of fear of OTT providers undermining their business. But, they are spending money without generating additional revenue or improving margins. The main benefit lies in improving video quality, which can impact customer churn—a key metric for TV operators in a saturated market like the United States.

Meanwhile, many of the customers for file transcoders buy them for mezzanine transcoding and workflow automation, which can save money and time, thereby boosting profits and possibly generating revenue if it allows them to distribute their content more widely, the firm noted.

“The greatest change to transcoder technology will come from the adoption of the HEVC codecs,” said senior analyst Michelle Abraham. “All vendors are preparing software upgrades to existing equipment or have plans for new HEVC transcoders. Some of their customers are already making the investment in HEVC equipment but most are sitting on the sidelines right now. That is expected to change in 2014.”

She added, “The use of HEVC compression will be the greatest driver of revenue growth for the next few years, reversing the slowing growth we have seen.”

HEVC will not necessarily require new equipment, but providers will likely buy more because they will still need to process H.264 as well as HEVC. With live streams, that means duplicating exactly the number of streams to be processed. For files, a customer may have current downtime to process HEVC as well as H.264. The density of HEVC solutions will not be as great as that of H.264, so it is expected to drive additional transcoder sales.

Edited by Blaise McNamee

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