The following post comes from Kagan, a media research group within S&P Global Market Intelligence. To learn more about this research, please request a call.
MPEG broadcast encoder revenue is dropping as the move from hardware to software takes place, lacking enough growth in unit shipments to keep revenue stable. Kagan, a media research group within S&P Global Market Intelligence, expects the encoder market to drop from $599.4 million in 2016 to $516 million in 2021 as average selling prices (ASPs) continue to decline.
Multichannel video programming distributor (MVPD) consolidation is having an impact on the secondary distribution encoder segment as ever-increasing shipments of higher-priced, high-efficiency video coding (HEVC) encoders is not enough to keep secondary distribution encoder revenue from falling. While new channel launches are helping the segment, particularly for HD channels that do help HD unit shipments grow, the growth is not enough to offset the across-the-board price decreases. Today, the secondary distribution segment is the largest of the three segments that include contribution encoders, primary distribution encoders, and secondary distribution encoders, but Kagan estimates that contribution encoders will pass the secondary segment in 2018.
Contribution encoder increases have been fueled by the growth in the number of camera feeds per event, while at the same time the methods for transmitting the contribution feeds adjust. Unit shipments are positively impacted partly due to the need for new equipment for ultra-high definition (UHD) contribution, as well as the continued growth in the bonded cellular segment. However, bonded cellular encoder shipment growth will slow over time and declining ASPs will cause total revenues to fall in 2021.
The primary distribution segment, the smallest of the three, is similarly seeing price declines while unit shipments remain flat. However, the shipments are buoyed by the remaining SD-to-HD transition, new channel launches, and technological shifts as encoders transition from older compression schemes like MPEG-2 to newer ones like HEVC.
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