By Mark Evensen, Amino
We live in an age when technological change moves so fast that even innovators find themselves falling behind far sooner than they ever predicted. And often, the cost of keeping ahead - or even catching up - is chillingly high.
This is certainly the case across the television and video industry, where many operators now find themselves dealing with customers enticed by the possibilities of a multiscreen, multi-device, multiservice world. This fundamental transformation of the TV landscape is being driven by the explosive growth in over-the-top (OTT) services: figures from industry intelligence provider Digital TV Research indicate a 25% surge in OTT revenues globally between 2015 and 2016, and a 75% rise projected over the following five years - to $65 billion in 2021.
Clearly, consumers are buying into IPTV as the future of visual entertainment and want the sophisticated services this entails - subscription video on demand (SVOD), multiscreen UX, 4K/UltraHD video, Android capabilities, cloud-based personal recording, third-party OTT TV, and more.
The trouble for too many TV operators is they have already made major investments in set-top boxes that cannot support all these services. The set-top is playing a central role in the rapid evolution of the multi-faceted TV viewer experience, and yet many operators are looking at massive spend on hardware to keep up with consumer expectations.
The $30 billion IP obstacle
The costs of full set-top replacement are staggering. Data from global analyst IHS shows that there were roughly 300 million IP-enabled set-tops shipped globally between 2009 and 2014. A huge proportion of these devices are still in the field but not equipped for the next wave of OTT and UltraHD services. Even if just 50% were to be marked for upgrade at a very conservative ballpark cost of $200 for a fully loaded set-top installation, the global total would come in at roughly $30 billion - the barrier to IP nirvana facing the entire global TV and video value chain.
Hardware replacement cost is just the obvious expense. There are also other, hidden costs - starting with physically going out to do installations. Based on a survey by the Technology Service Industry Association, each truck roll costs close to $1,300 per day - factoring vehicle, technician, spares and disposal costs - and fleets would have to be extended for a full set-top replacement program.
Behind the scenes, other expenses related to hardware replacement can include the licensing and change management costs of upgrading software, and integrating legacy middleware and security components can equate to hundreds of man-hours - assuming that IPTV integration skills are readily available, which in many markets they are not. It all adds to the total.
The numbers vary depending on what country or region an operator is in, but the true cost of the set-top hardware is likely to be even higher than most operators project.
'Upcycling' to an IP future
So what does an operator looking to gain an edge on competitors do then?
Through set-top virtualisation technology, individual operators can "upcycle" set-tops, dramatically extending the life of each while avoiding hardware replacement costs that can run into the tens of millions. They do this by employing a pure software solution. This enables operators to transform legacy set-tops into state-of-the-art devices by using software that virtualizes underlying hardware, providing portability of video applications across both old and new devices - thus empowering them to also build a unified user interface across their customer base.
Indeed, early implementations through Amino suggest that the virtual set-top box is the way forward for operators looking to control spend, with first adopters seeing cost savings of up to 80%, along with subscriber growth in excess of 200% - and they "upcycle" in a quarter of the time a full replacement takes.
The result is a relatively painless transition to a more competitive future.
Mark Evensen is the chief technology officer at Amino.
