The number of IPTV set-top manufacturers in Europe, North America and Asia far exceed the opportunity, making it a sector ripe for vendor exodus and consolidation, predicted The Diffusion Group.
TDG has identified 50 IPTV set-top makers, and expects that figure to grow in the next 12 months. "Many of these vendors will exit the market by choice or simply cease to exist within a very short period of time," wrote Herve Utheza, director of IPTV Research at TGD.
Such occurrences are not uncommon, and are in fact natural in new technology markets. The DOCSIS sector, for example, witnessed a flood of vendors in the early part of the decade, but shrinking unit margins caused companies like 3Com and Ericsson to bug out of the cable modem market, while others, such as Com21 and HighSpeed Surfing, went out of business completely.
Like it was with DOCSIS, volume will be the key to success in the IPTV set-top sector.
"In an environment doomed to premature commoditization and razor-thin margins, successful STB manufacturers will need to reach annual shipment levels of at least one million units in order to recoup the investment in manufacturing. Such volume cannot be sustained with 50 vendors competing for market share," Utheza noted. "STB vendors that are able to execute contracts with operators who are committed to aggressive service rollouts will no doubt have the early advantage," Utheza noted.
Although small IPTV set-top makers dominated early deployments by smaller telcos, the larger phone companies are putting more stock in larger vendors with longer track records. The latest example of this was SBC Communications, which just announced the selection of Motorola Inc. and Scientific-Atlanta as the primary suppliers of IPTV set-tops for the RBOC's planned "U-verse" video service.