The pay TV providers and terrestrial broadcasters that use secondary distribution encoders continue to add more channels, swap SD channels for HD channels and replace older encoders with the latest equipment to squeeze the most out of a fixed amount of bandwidth. Terrestrial broadcasters and cable operators that still operate analog systems are also fueling the increased volumes by buying encoders when they shift to digital, which is an ongoing process in emerging markets. In addition, Ultra High Definition channels are on the horizon.
Though shipments of encoders in the secondary distribution market are expected to grow, declines in average selling prices (ASPs) due to competition, technology maturity and the move away from encoder appliances to software-based approaches are forecast to depress encoder revenues.
Shipments of MPEG broadcast encoders for secondary distribution are forecast to grow from 244,900 in 2015 to 301,600 in 2020. Encoder revenue is modeled to fall from nearly $380 million in 2015 to $304 million in 2020. This is in spite of the launch of higher-priced HEVC encoders. While HEVC encoders have a much higher ASP today, the price differential between HEVC and H.264 encoders will decline rapidly.
HEVC is being used mainly to encode UHD resolution channels, though at the end of 2015, we saw its usage for HD channels rise. DISH HD of Taiwan is shifting to HEVC for over 120 HD and UHD channels using encoders from Thomson Video Networks. In the U.S., Frontier will launch telco TV in more markets with HEVC as well after starting late in 2015.
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