IHS: Video processing market more competitive

IHS Markit says the increasing popularity of time- and place-shifted content viewing is disrupting the media management industry. Global media management revenue is forecast to grow at a 5.9 per cent CAGR from 2015 to 2021. The fastest-growing regions during this time frame are Asia Pacific and South and Central America.

Analysis

Owing to myriad technical and economic drivers, the media management market recorded a growth rate of 6.4 per cent in 2016 and is anticipated to grow another 4.5 per cent in 2017, when global revenue will reach $8.2 billion.

The market is very fragmented across all segments, and while each has a clear market leader, the market as a whole is shared between a variety of vendors with different business models.

The industry has evolved to adapt to the tectonic shifts that are happening in the media landscape, with the key changes being the growing availability of time- and place-shifted content and a decrease in the viewing of linear content. The current media dynamic is not without contradictions, however. Although time- and place-shifted content is prominent, it is not profitable for all content providers. On average, linear viewership is shrinking, but it is still the core product of a pay-TV service. OTT and multiscreen services may be dictating the trends in user experience and expectations, but pay-TV remains the main source of growth for media management service provision.

Content spend continues to be closely correlated with success even as margins erode. The key technical opportunity is the proliferation of internet-connected video-capable devices and the corresponding boom in device types and variations. This has resulted beneficially in increased viewing minutes per person worldwide, but it has also brought about challenges such as consumers viewing content on new devices over unmanaged networks.

The main story in the industry is the continued shift from in-house media management to third-party services. The bulk of media management revenue — 63 per cent in 2017 — is service based, and this trend is expected to continue through at least 2021 when it will rise to 66 per cent. This change was enabled predominantly by virtualisation solutions, both in their technical capabilities and economics. Virtualisation enables capital expenditures (capex) to be converted into less-risky operational expenditures (opex) when confronting uncertainty in the adoption of technical standards, security protocols and legislative environments. Not every media organization is moving to an opex model, but investigating the advantages and disadvantages of moving to a third-party environment is an active line of inquiry for most.

Variations exist in the way in which services are delivered, allowing for differing levels of control of the technical aspects and cost. A fully managed service is a more traditional model and has been used by infrastructure providers for decades to manage broadcaster access to DTT and DTH networks around the world.

Current trends suggest that “as-a-service” (aaS) products are growing faster than fully managed options because they tend to be more accessible and price competitive. Vendors, however, strive to offer a fully managed service option for improved profitability. An aaS-only company may need thousands of clients to remain profitable, while a managed service provider may only need a dozen.

Segment-wise, packaging is the largest segment, accounting for just under $4 billion in 2017, followed by delivery and media asset management.

And on a regional basis, North America is the largest market with 35 per cent of global revenue, trailed by Asia Pacific and Western Europe. Meanwhile, the fastest-growing markets are Asia Pacific and South and Central America, which both have six-year compound annual growth rates (CAGRs) of 7.2 per cent from 2015 to 2021.

Looking ahead, the media management market is forecast by IHS Markit to grow at a CAGR of 5.9 per cent from 2015 to 2021, when revenue will reach $10.5 billion worldwide.

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