Transcoder Revenue Growth Hits a Bump

The following post comes from Kagan, a media research group within S&P Global Market Intelligence. To learn more about this research, please request a call. 

Due to fewer TV Everywhere service launches, a reduction in the number of profiles required for OTT distribution, and market maturity, annual transcoder revenue growth slowed to just 4.2%, to reach $341.9 million in 2016. However, Kagan, a media research group within S&P Global Market Intelligence, expects transcoder revenue growth to resume as new technologies, such as AV1, come to market. By 2021, Kagan forecasts worldwide transcoder revenue will grow to $534 million.

Before video content is distributed to viewers on the many devices available today, it is often transcoded into a number of adaptive bit rate, or ABR, profiles for delivery. Additionally, in the production arena, content may arrive in one of a large number of codec formats that needs to be transcoded into another for distribution or archiving. Prior to 2016, the transcoding market grew rapidly as multiscreen services took off.

In terms of cloud transcoding, if content is going to be distributed via a public content delivery network, or CDN, a broadcaster or programmer with one or a few channels is more likely to use the cloud. However, while many vendors offer customers the option of transcoding in the public cloud, the percentage of revenue from public cloud transcoding is still expected to be just 20% of total revenue in 2017.

And while we expect cloud transcoding as a percentage of total revenues to increase during the forecast period, linear transcoding for a large number of 24/7 channels does not yet make economic sense. The costs for transferring content to the cloud and the cloud processing are too high. Therefore, we expect that public cloud transcoding will account for 40% of transcoding revenue in 2021, but almost all of it will be file transcoding.

Already a client? Read the full report here.