IPTV is like the new kid on the block. It may not be a fully fledged competitor in the pay-TV market, yet. But the predictions are promising. According to most industry analysts, the IPTV market only accounts for about four or five percent of the global pay-TV market today. This amounts to about 15 million households in total. But the numbers are increasing and they are starting to be significant.

NDS VideoGuard conditional access and digital rights management (DRM) solutions now secure content in hundreds of thousands of IP-enabled set-top boxes (STBs) worldwide – with and without smart cards. This places NDS among the top IPTV content security providers. In fact, two independent research organisations have recently declared NDS to be market leader in this area.

Current Analysis: NDS Leads in IPTV Content Protection

Based in Washington, DC and Paris, Current Analysis conducts research on the telecommunications, networking, and business software markets. On July 22 they issued a report on independent content security companies:

“Content security solutions are increasingly becoming critical components for enabling business model flexibility, in addition to securing content and revenue streams. This flexibility comprises three key elements: network, integration, and cost…NDS, by virtue of its dominant footprint and capability to deliver an integrated end-to-end offering, captures the top spot in terms of influencing the overall IP video and IPTV content security market.” said Yoav Schreiber, Senior Analyst, Digital Media Infrastructure at Current Analysis.

Why are these elements so important? Current Analysis explains: "First, operators seek flexibility to distribute content across multiple network systems. This maximises subscriber choice for receiving content as well as optimises network efficiency from the operator's perspective. Second, operators seek streamlined integration of their content security solutions across their digital media architectures, including headend, middleware and content delivery systems. Third, operators are looking to reduce the total cost of ownership (TCO) for their content security components, including deployment, support costs and countermeasures to combat content piracy.”

“Operators are increasingly leveraging IP technology to expand their consumer video service offerings with functionality such as interactive services and non-linear content. This puts increased demand on content security vendors for enabling operator business model flexibility to provide differentiated services," continued Schreiber.

ABI Research Ranks NDS Number One

Current Analysis is not alone in putting NDS at the top of the IPTV leader board. NDS has also been ranked IPTV DRM leader in the latest Vendor Matrix released by ABI Research. The Vendor Matrix is an analytical tool developed by ABI to provide a clear understanding of vendors’ positions in specific markets.

“NDS took top honours mainly on account of its larger market share,” says Zippy Aima, industry analyst for ABI Research. “On the basis of longevity in the market and number of customers, NDS has to be considered the market leader.”

This leading position is hardly surprising considering that NDS is a world leader in supplying open end-to-end digital technology and services to pay-TV platform operators and content providers. This includes some of the world’s most successful satellite and cable service providers such as BSkyB (UK), DIRECTV (US) and Premiere (Germany).

In the IPTV market NDS customers include: Arcor (Germany), BBTV (Japan), Cyta (Cyprus), KT (Korea), SES Americom (US), Sistema Mass Media (Russia), Telekom Austria and Viasat (Scandinavia).

What is significant is that with so many customer deployments around the world, NDS products are mature, “road-tested” and able to meet the needs of this growing sector.

Where is IPTV market headed?

The main market demand for IPTV solutions comes from major telcos that see it as a new offering in addition to their current data and voice services. Research firms are predicting high penetration worldwide. Various analysts suggest that by 2011, IPTV households will grow to more than 30 million, close to 10% of the total projected pay-TV market worldwide.

What is important to bear in mind is that even if the analysts’ predictions are overly optimistic and IPTV penetration takes longer than they expect, it will happen eventually. And it will be major.

Critical factors for success

The current trends indicate that there are a number of factors that will significantly contribute to the long term mass adoption of IPTV:

Improved quality of service: In order to support IPTV, the physical telco network needs to be upgraded to support the quality of service (QoS) that is required for reliable TV delivery, both linear and on-demand. In addition, many telcos have not yet made sufficient investment in premium content or the applications to drive IPTV forward.

Robust, secure content protection: What will pave the way for the success of IPTV? Without great content, subscribers will stay with their current TV service provider. Without content security, operators won’t have this great content to offer in the first place. At present some nascent IPTV operators seem unperturbed by the threats from piracy. But they are advised to look at the experiences of the pay-TV world. When they perceive that the potential spoils are big enough, the pirates will do more than take notice. It’s only a matter of time before IPTV providers realise they need robust security. Some, undoubtedly, will realise this too late, after revenues have leaked away due to piracy.

Making convergence easier: This is another key factor that leads to a quality user experience on all services: TVs, PCs, mobile devices. IPTV will come into its own when it can offer cross promotions on different devices and include multi-platform offerings. This means, for example, that a subscriber could purchase Batman on VOD and then can download it free to a mobile device to finish watching on the train to work.

Given this background, telcos have a unique opportunity to offer a multi-screen experience. But they won’t be able to do this until the critical factors are in place.

DRM is one of the critical elements that will enable telcos to offer IPTV. But of course there are others. As the Current Analysis report suggests, telcos will have to include content security that supports flexible business models. If they don’t offer differentiating services such as VOD, DVRs and high definition broadcasting it’s unlikely that prospective subscribers will switch from their current service provider.

The brave new world of convergence

In most markets the hype surrounding the brave new world of IPTV has been just that - hype. There still isn’t sufficient infrastructure to support the required network reliability and there is a lack of compelling content and applications. These factors will have to be resolved in order for emerging IPTV providers to compete with incumbent pay-TV operators and/or to increase their fee paying subscriber base.

The truth is IPTV is not just about delivering TV over an IP pipe. It requires an integrated marketing strategy for content acquisition, packaging, distribution and security.

While telcos can leverage their ability to deliver convergence to TVs, PCs and mobile devices, this is just the beginning. The bottom line is that in order to succeed in the IPTV market, they will have to offer more than the competition: the established satellite and cable operators. They will need to offer true convergence between TVs, PCs and mobile devices. And, critically, they need to generate revenue while doing so.

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