UltraHD, HEVC to spur transcoder market

Michelle Clancy | 18-12-2013

The rise of HD video streaming, 3D and, eventually, 4K UltraHD has presented significant challenges to operators looking to deliver video streams that are much more bandwidth-intensive than their existing infrastructures were built for. To maximise efficiency, new compression technologies are being developed, like HEVC compression, and these are poised for significant uptake.

The market can expect to see a rash of upgrades in the multi-format transcoder market, with an impact in 2014 and beyond, according to research firm MRG. It 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 amounts.

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 who are offering TV everywhere multiscreen services, and while they aren't generating additional revenue or improving margins, they can reduce churn by offering more than just best-efforts quality when it comes to digital distribution.

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 will drive additional transcoder sales.