The following post comes from Kagan, a research group within S&P Global Market Intelligence. To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.
Despite repeated emphasis from pay TV service providers about the advantages of the cloud, the number of subscriber households using a cloud-based user interface, or UI, remains modest.
At the same time, even in a relatively small and emerging market segment, the growth rate of cloud UI households this year has been notable. Kagan, a media research group within S&P Global Market Intelligence, forecasts worldwide pay TV households with cloud UIs to nearly double in 2017, reaching over 29 million households.
The traditional UI, which includes the program guide, metadata and other navigation tools, historically has resided on the set-top box, or STB. Similar to moving DVR capabilities to the cloud, service providers are intrigued with the potential cost savings and network efficiencies offered by moving the UI to the cloud.
Defining what is, and what isn't, a cloud UI can be challenging. The key sticking point with the definition is really a single issue: Where are the graphics supporting the UI actually rendered? Or more precisely, are the graphics rendered fully in the cloud, or can they be rendered on the STB?
A widely quoted, but still somewhat narrow, definition of a cloud UI is one that is fully rendered in the cloud and then served on a device (an STB or some other client device). A broader definition is that a cloud UI can be served from the cloud and then rendered on the device. This broader definition has most of the media and metadata being gathered and managed in the cloud, but it requires the STB to render the graphics, offering both more processing power and on-board memory than if all rendering were to take place in the cloud.
An example of the first type of cloud UI definition is Charter Communications Inc.'s Spectrum Guide, which is based on ActiveVideo's CloudTV platform. An example of the second type of cloud UI definition is Comcast Corp.'s X1 platform, which renders the UI's graphics on the powerful X1 hybrid IP gateway.
Similarly to the majority of pay TV service providers, Kagan counts both definitions as a cloud UI. More specifically, our operating definition of a cloud UI includes a UI that does not reside fully on the STB. This essentially means that if any portion of the UI is hosted in the cloud, it is counted as a cloud UI.
We do not, however, include remote UIs that support a TV Everywhere-type of service as a cloud UI. Remote UIs are projected directly from a server device in the home, commonly an STB, to other client devices (laptops, tablets, smartphones, etc.) throughout the home. While remote UI's allow a service provider to offer a cloud UI-like capability, since they are actually hosted in the home, we do not consider them in this analysis.
Benefits of a cloud UI
Most elements of a traditional pay TV UI — such as the program guide; metadata; navigation tools; and emerging capabilities such as an app store — rely heavily on the STB. The STB not only hosts the middleware, it provides the processing power and communications capability the UI needs to update its information and to communicate with the service provider's network.
However, moving the UI into the cloud decouples the user experience from any potential limitations imposed by the host STB or client device. For example, one key benefit is that even if an installed STB has limited processing power or on-board memory, it should still be able to serve an advanced cloud-based UI.
Other potential benefits of deploying a cloud UI include:
- A faster time-to-market with any services tied to the UI, including the ability to update the entire UI without replacing any installed customer premises equipment, or CPE.
- Increased personalization capability. A cloud UI can potentially provide a unique UI for each viewer or family member, something that is difficult to offer with an STB-based UI.
- Increased functionality of the UI, to include integration of capabilities such as voice recognition and new apps-based packages.
- The ability to conduct remote maintenance and diagnostics across an entire subscriber footprint.
- The potential virtualization of the STB could offer service providers significant capital expenditure and operating expense savings.
It's also noteworthy that even if the STB does not disappear from the subscriber household, the use of a cloud UI could still permit any CPE device with a video decoder to serve as the in-home client. This opens up the possibility of allowing subscribers to directly purchase STBs or CPE devices, instead of leasing the devices through their pay TV service provider.
Another benefit that is being touted by a few service providers with a deployed cloud UI is the potential to create a new revenue stream. While most cloud UI deployments have no attached revenue stream (i.e. there is no fee charged to a subscriber), there is broad discussion about potentially having a cloud UI incorporate an app store. This could allow the service provider to sell new services or content directly to the subscriber.
An exception to the "no revenue stream rule" is Altice USA Inc., which has deployed a cloud UI to support its integration of Hulu LLC. Accessing Hulu requires an Altice Cablevision subscriber to pay an additional $8 to $12 per month, depending on their service tier.
A number of leading cloud UI platform developers state that Ziggo NV, the leading cable TV operator in the Netherlands, deployed the first cloud-based UI. Rolled out in early 2013, Ziggo's cloud UI supports the operator's video-on-demand service and is available to all subscriber households.
Four years after Ziggo's rollout, cloud UI deployments by pay TV service providers are increasing, but still only reach a small percentage of the world's pay TV households. As of late 2017, there were right around a dozen service providers with deployed cloud UIs.
Two of the higher-profile deployments in 2017 have been:
- Korea Telecom's Internet Protocol Television service, which is using Alticast's platform to support its cloud UI.
- Cox Communications Inc., which is licensing the X1 platform from Comcast. Offered as part of the cable operator's Contour TV experience, Cox announced in October that one million of its approximately four million subscribers were on the Contour TV platform.
Several technology companies offer platforms or infrastructure to support cloud UI capabilities. Many of these vendors consider ActiveVideo, which is a joint venture owned by ARRIS International plc and Charter Communications, as the current market leader in terms of pay TV service provider deployments.
ActiveVideo's CloudTV is currently being used for cloud UI deployments by several service providers, including Charter Communications, Liberty Global plc, and Altice.
Other companies with cloud UI platforms include:
- Cisco Systems with its Infinite Home platform.
- Alticast with its Apex UX virtualization platform.
- Ericsson AB, which supports a cloud UI capability on its MediaFirst platform.
- Comcast with its RDK-based X1 platform that supports a cloud UI capability. This same platform is being licensed by Cox Communications and Shaw Communications in Canada.
- ENTRIX, a subsidiary of SK Telecom Co. Ltd., with its Cloud Streaming solution.
- Zenterio AB and TiVo Corp., which both offer middleware-based solutions that support cloud UIs.
Since the first deployment in 2013, pay TV service providers have been very deliberate with their deployment of cloud-based UI capabilities. A growing number of service providers continue to profess their interest in moving the UI to the cloud, but they also note they are in no great rush to do so. The most common reason voiced by these service providers is the potential disruption the deployment of a cloud UI could have on their network operations.
While a few tier-one service providers have been quite aggressive in deploying a cloud UI, the total number of worldwide pay TV households with access to a cloud UI remains quite modest. However, cloud UI household growth has been on the upswing over the past 12 months.
The table below provides our forecast for households with a cloud UI. At year-end 2017, we are projecting just over 29 million households using a cloud UI, up from just over 15 million at year-end 2016.
We are projecting cloud UI deployment growth to continue throughout the forecast period, exceeding 77 million by 2021.
Based on conversations with both service providers and platform developers, the number of cloud UI households is expected to increase significantly in 2020 as several new deployments begin in North America and Western Europe.