Will Cisco Make an IPTV Middleware Move?
Cisco’s acquisition of the VOD player Arroyo Video Solutions Inc. , announced Tuesday, is one indicator of its plans. (See Cisco Snatches VOD Vendor Arroyo.) VOD (video on demand) is an increasingly popular part of commercial video services, so some say Cisco's move is another incremental step toward piecing together an end-to-end IPTV distribution system of its own.
Another meaningful strategic move by Cisco is its investment in the video content management company Widevine Technologies Inc. , announced in April. The digital rights management (DRM) piece is of central importance to video distribution because it protects the content and controls its monetization. Seattle-based Widevine has strong ties to the Hollywood content community and has emerged as one of the leading content management players in the IPTV space. (See Cisco Fertilizes Widevine.)
“When you start getting into the DRM integration with the middleware, that’s when it starts getting really interesting,” says Heavy Reading senior analyst Rick Thompson. That integration would give Cisco a way to manage video rights and security from the headend all the way to the set-top box in the subscriber’s living room.
Widevine CEO Brian Baker declined comment for this story.
IPTV middleware has been called the central nervous system of the IPTV distribution system. It is the software brain that orchestrates the interaction of network elements from the headend through to the set-top box.
“The large incumbents are all putting together an end-to-end IPTV story,” Thompson says. “Cisco and Alcatel are the two main ones.”
Thompson points to several good reasons for Cisco to own a middleware product.
With an IPTV middleware platform of its own, Cisco could in time pose a credible threat to the Microsoft Corp. (Nasdaq: MSFT) / Alcatel (NYSE: ALA; Paris: CGEP:PA) IPTV partnership. Microsoft and Alcatel have virtually run the table on large telcos hoping to come out of the gates quickly with mass-market video services. (See Microsoft Wins IPTV Deal at DT.)
“It’s not critical to have middleware as part of that solution, but there are some advantages when it comes to integration, especially if you are acquiring the set-top boxes,” Thompson says. “If you can control the integration time needed to make all the pieces of the food chain work together, you can control the time needed for the carrier customer to turn up profitable services."
Thompson points out that IPTV middleware is not the most profit-rich piece of the IPTV distribution chain. But once installed, it can “pull through” sales of more expensive items like encoders and VOD servers, not to mention Cisco's own networking gear.
Several sources report hearing the "Cisco middleware" rumor. “I would not be surprised at all if that’s the case,” says Harmonic Inc. (Nasdaq: HLIT) VP of solutions and strategy Nimrod Ben-Natan. “One of the key arguments we’ve heard from Cisco is that they want to be a big player in IPTV.
“They acquired Scientific-Atlanta, but after about two months they realized they had a lot going on in cable but had very little going on in the IPTV space.” Ben-Natan points out that the only major telco TV deployment in which Scientific-Atlanta Inc. is engaged is AT&T Inc. (NYSE: T). “So I wouldn’t be surprised if they are going after an additional component,” he says.
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