The impending death of the set-top may be overstated, but increasing interest in cloud-based services is driving faster growth in video network infrastructure than in client-side hardware and software.
According to Synergy Research Group, total video infrastructure revenues topped $10 billion in the first three months of the year, marking the fourth quarter in a row that revenues have exceeded that threshold. The sector grew 7% on a year-over-year basis, but the network hardware segment grew 10%, while network software was up a dramatic 17%. Overall, network hardware and software made up 51% of market revenues, with client-side hardware and software accounting for 44% of the whole. The last 5% came from earnings related to content security solutions.
Synergy's chief analyst and research director, John Dinsdale, didn't want to over-emphasize the shift away from set-top spending, stating in a note that "the market for set-top boxes and associated hardware & software remains huge, but network hardware & software continue to increase their share of the video infrastructure revenue pie."
On the client side, vendors in the service provider market are starting to focus on high-end gateways that combine multiple functions including video, higher-speed data, WiFi and smart home services. (See Comcast Readies D3.1 & RDK-B.)
However, the Synergy report shows that the highest revenue growth in client-side hardware and software is coming from lower-end media streaming devices. Dinsdale confirmed that the report covers not only traditional set-top companies, but also makers of retail devices including Amazon.com Inc. (Nasdaq: AMZN) and Google (Nasdaq: GOOG).
Meanwhile, on the network side of the video infrastructure business, the largest revenue increases in the first quarter came from TV Everywhere, cloud DVR software and content discovery solutions, along with CCAP hardware and media data centers. Each of those categories has plenty of room for continuing growth as well. Data from Parks Associates, for example, suggests that the number of cloud DVR subscribers will quintuple by 2018. (See Cloud DVR Is a Killer App... Just Not in 2015.)
CCAP hardware is still in the early stages of deployment. The first integrated CCAP chassis hit the field only in the last few months, while Cisco Systems Inc. (Nasdaq: CSCO), the largest network hardware vendor, just debuted its CCAP solution in May. (See TWC Delivers First QAM Video Over CCAP and Cisco Rolls Out New CCAP Chassis.)
Aside from Cisco, which leads all vendors in video infrastructure hardware and software, the top video hardware companies, according to Synergy, are Arris Group Inc. (Nasdaq: ARRS), Pace plc and Technicolor (Euronext Paris: TCH; NYSE: TCH), with Arris planning to acquire Pace before the end of the year. (See Arris to Acquire Pace for $2.1B.)
— Mari Silbey, Senior Editor, Cable/Video, Light Reading