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The need for transcoding is being driven by the increase in multiscreen, over-the-top and TV Everywhere services from content and pay TV providers. Providers are offering content in more formats than ever to more devices with resolutions scaling from mobile to 4K. The increased demand is expected to boost transcoder revenue by more than 10% per year through 2020.
The estimated revenue from the shipment of transcoding equipment grew by 14% in 2015, with file transcoding growing faster at 18% as compared to live transcoding at 11%. We forecast the file transcoder growth rate to remain higher through 2020, causing file transcoder revenue to reach $286 million, up from $152 million in 2015. Live transcoder revenue is expected to grow from $176 million in 2015 to $287 million in 2020.
Transcoding has moved to software running on general purpose server appliances and away from fixed function hardware. Software is cheaper than appliances, which is squeezing revenue for transcoder vendors. On the other hand, vendor consolidation has eliminated some competitors, so some vendors have seen less price pressure. Transcoding is also moving to the cloud, which is changing the vendor revenue model.