Old School Rules: OTA King of the Hill – For Now

Monday Feburary 23, 2009 – Myra Moore

Over-the-air TV obituaries have been so ubiquitous in recent years, you might think the grave diggers are about to shovel the final earth that will bury the old-school terrestrial TV model.

Granted, it’s not the mighty TV delivery giant it used to be, but an examination of recent Digital TV receiver shipmentsillustrates why “the reports of its demise are greatly exaggerated.” In 2008, more than 55 million digital terrestrial receivers (set-top boxes (STBs) and TVs) shipped in the United States, while almost the same number shipped into the European market.

Digital transitions are helping to propel Digital Terrestrial TV (DTT) receiver salesabove those for Internet Protocol TV (IPTV), digital cable, and Direct-to-Home (DTH) satellite reception. Naturally, the 2009 analog shut-off in the United States is a significant factor in those life-affirming sales. The U.S. and other ATSC standard countries, though, won’t carry the 17% CAGR that DTC projects for DTT receiver shipments through 2013. It will be the European-created Digital Video Broadcasting – Terrestrial (DVB-T) standard that will do the heavy lifting. The chart below depicts the (current) three major digital terrestrial transmission standards and their projected shares in receiver sales.

Source: DTC

That’s a lot of OTA receivers sold in the next few years. If the new Chinese DTT standard is added to the mix (currently a small part of the overall market), 2010 DTT receiver shipment totals are estimated to be as high as 172 million.

DVB-T is the steady digital OTA work horse for a couple of reasons: 1) the standard has been widely adopted all over Europe and other parts of the world – namely India, which will fuel significant growth throughout the forecast period; and 2) there is still a lot of growth left for high-definition transmissions in DVB-T territories.

DTT started out as a way to get more channels into a single slice of spectrum; not for using most of the gained bandwidth for one channel of HD programming. Now, however, compression and transmission technology evolution, and smaller digital displays are helping to create demand for new high-definition receivers.

So, not dead yet.

DTV Snapshot

Monday February 16, 2009 – Maya Jasmin

With digital television at the forefront of everyone’s agenda, it’s important to recognize how prolific the technology truly is, way beyond buzz about analog transitions and digital converter boxes. Digital television is not a new concept by far and has existed in Pay TV form for many years. And with countries around the world planning and executing mandatory transitions to digital terrestrial transmissions it’s important to put the different DTV platforms into perspective.

Terrestrial reception is by far the leading platform in digital television and will continue to be throughout the foreseeable future. DTC forecast 140 million Digital Terrestrial Television (DTT) receivers will ship in 2009 growing to an astronomical 300 million units by 2013. Even with the countries that have yet to transition cyclically adding DTT set top boxes (STB) and Digital-to-Analog (DtA) converter boxes, Integrated Digital TVs (IDTVs) make up an overwhelming majority of DTT receiver shipments throughout the forecasted period.

Albeit in a distant second place, Direct-to-Home (DTH) Satellite receivers still manage to log impressive shipments. Sixty-eight million units are forecasted to ship in 2009, growing to 71.5 million shipments in 2012 which will serve as its peak. The growth will come primarily from emerging DTV markets such as India and Africa.

The digital cable platform is estimated to ship units in the tens of millions with constant year-over-year growth throughout the forecasted period. DTC expects nearly 41 million units to ship in 2009 growing to 44 million in 2013. Expansion of digital cable services in China and plans for populating hybrid analog/digital cable systems with DtA converters in the U.S., are the primary catalysts for growth.

Lastly, Internet Protocol Television (IPTV), the most infant Pay TV platform is proving to be the fastest growing in the Pay TV world. IPTV is forecasted to realize a CAGR from 2008-2013 of 13%, and is the only Pay TV platform to experience a double digit CAGR over that time. DTC estimates that IPTV receiver shipments will reach18.5 million in 2009 and grow to 25 million by 2013. With the technology expected to improve and adoption expected to increase IPTV receiver shipments should realize growth for years to come.

If you would like to learn more about the DTV receiver landscape, please visitdtcreports.com/report_stb.aspx. A new report with the above referenced data and much more is now available.

Digital Cable Receiver Shipments Up, But Profit May Be More Elusive

Monday, February 9, 2009 – Antonette Goroch

The economic meltdown may be wreaking havoc on the consumer electronics industry, but the global market for digital cable receivers is surprisingly healthy. The worldwide upsurge in demand, however, is more for low-cost receivers vs. the more full-featured high-cost STBs that have dominated the market in recent years.

Indeed, DTC’s most recent analysis of the market shows stronger than expected unit shipments in 2008, surpassing 45 million units compared to our previous expectations of just 39 million. Two things are driving this bright spot—exceptionally strong growth in the Chinese digital cable market and U.S. cable operators needing to clear analog transmissions off their systems to make room for more HD programs.

Chinese digital cable subscriptions grew substantially in 2008, propelled by the Olympics and a favorable regulatory environment for operators. According to government figures, digital cable subscribers in China rose from 24 million in 2007 to 44.5 million in 2008 generating high growth in digital cable receiver shipments.

Comcast, meanwhile, the largest U.S./worldwide digital cable operator, began what is sure to be a trend among cable operators, placing large orders for low-cost digital-to-analog (DtA) converters that will be placed in homes that still have analog service. Many cable operators who still deliver analog programming want to free up bandwidth by delivering only digital programming to the home. In order to accommodate their customers who don’t want to purchase the digital service, cable operators will use these low-cost, small footprint DtA converters that allow subscribers to view the programming on analog TVs. Millions of the devices will likely ship into the market in the near future continuing to help boost digital cable receiver sales during severe economic conditions.

Despite these favorable shipment numbers, the market may be less lucrative for receiver vendors than it appears. A large portion of these units—those going to China, India and the U.S. DtA market—are bare bones, low-cost models. For example, Comcast reports it is paying just $35 per DtA unit. It’s unlikely there’s much margin for the converter makers, but given the current conditions, they’re probably glad to get the orders.

DTV transition/MediaFLO

Monday February 2, 2009 - Stewart Wolpin

By the end of this week the deadline for ceasing analog TV transmissions will likely have changed to June 12.

Sanity reigns.

According to Nielsen, more than 6.5 million U.S. households, or 5.7% of all homes, aren't ready for the upcoming transition.

There are those who say that this is too small a percentage of the population to stall such an expensive and extensive transition. But how many unprepared households are too many to delay the analog turnoff? I would argue that one is too many. That may not be possible, but all reasonable precaution should be taken toward reaching that goal.

The bill to extend the deadline is headed to becoming law this week if the House passes the legislation (Senate already has) and President Obama signs the bill.

The bill will, unfortunately, permit individual stations to voluntarily turn their analog broadcasts at anytime after Feb. 17.

The change will likely pose little trouble for the consumer electronics business. There may be a small increase in overall converter box sales with the extension, although DTC’s converter box study forecasts that box makers will likely realize only about a 6% increase in overall sales with a June extension. DTC forecasts that an estimated 37 million boxes will ship into the marketplace through the life of the program if the shut off is extended.

Companies that have purchased the right to use the spectrum that will be vacated by terrestrial broadcasters, such as Qualcomm, will likely be the biggest losers. On Feb. 18, Qualcomm was due to launch its MediaFLO mobile TV service in 12 new markets. Qualcomm says it will have access to an additional 40 million potential customers through the use of the vacated spectrum. According to Qualcomm, millions of dollars have been spent in preparation for a Feb. 18 launch of MediaFLO services in these new markets.

Qualcomm’s CEO Paul Jacobs wrote, "[W]e believe that it would be unfair, unjust and inappropriate to delay the DTV transition beyond Feb. 17, 2009."

No company, including Qualcomm, having banked, literally and figuratively on the Feb. 17 turnoff date, deserves to be penalized by the delay. But as Clint Eastwood's William Munny growled to Gene Hackman's Sheriff Little Bill Daggett before blasting him in the face with a shotgun at the end of Unforgiven: "Deserve's got nothin' to do with it."

But obviously the government thinks the ability of 6.5 million households to be able to receive TV signals to be more deserving.