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MPEG-2 and Video Services

1998-2003

a market research report

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Market Segmentation

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Telephone companies flirted with video distribution as a part of their mix in the early 1990s, but abandoned efforts as the reforms of the Telecommunications Act began. Now the same technical and market forces that are converging the telecom, entertainment, and information industries are bringing forth a new set of standards for digital information that reach across industries to facilitate the end-to-end operability of multi-vendor systems.

The Moving Pictures Experts Group-2 (MPEG2) is one such industry standard, and one that Insight believes is fundamental to delivering digital video on a network. MPEG2 substantially reduces the bandwidth required to transmit a high-quality digital video signal, and it formalizes the trade-offs between resolution and the required transmission bandwidth.

All of the industries considering digital video service distribution have to make MPEG2 part of the planning process; it is crucial in digital 
head-end, broadband distribution, network access equipment, and the associated architectures and operations. This is as true for major cable TV MSOs embracing hybrid fiber/coax as it is for incumbents and CLECs deploying digital subscriber line variants (xDSL). In a similar vein, MPEG2 should be of great interest to very large scale integration component and module manufacturers, consumer electronics firms, PC manufacturers, as well as the traditional cable TV equipment and telephony equipment vendors.

Insight’s research leaves little doubt that consumer demand for video products relying on MPEG2 is accelerating. This report provides five-year 
revenue forecasts for MPEG2 encoding and decoding products: DVD, DVD-RAM, HDTV, VCRs, PCs, Digital Camcorders, Cable and DBS Converters. Insight discusses alternative compression technologies, examines customer segments and network implications, and profiles encoder/decoder vendor competition. Our final conclusion? The acceptance of the MPEG2 standard opens a clear path to worldwide interoperability and will be a major broadband enabler in the years ahead.

 


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    Report Excerpt

    Forces Driving the Market

    US phone companies, hunkered down and squabbling with the FCC and each other for more than two and a half years to gain petty advantage in the local-long distance wars, should have heard sirens go off when AT&T completed their $55 billion merger with the cable TV giant Tele-Communications, Inc. (TCI). The merger created a one-stop shop for residential customers looking for phone service, Internet access, and cable television services. The move--followed weeks later by Comcast’s $60 billion offer for MediaOne that will create a $97 billion powerhouse with global telecommunications, programming, and Internet interests--means video is back as a key constituent in a bundled offering. Telephone companies flirted with video distribution as a part of their mix in the early 1990s, but abandoned efforts as the reforms of the Telecommunications Act of 1996 began. Now the same technical and market forces that are converging the telecommunications, entertainment, and information industries are bringing forth a new set of standards for digital information that reach across industries to facilitate the end-to-end operability of multi-vendor systems.

    The Moving Pictures Experts Group-2 (MPEG-2) is one such industry standard, and one that INSIGHT believes is fundamental to delivering digital video on a network. MPEG-2 is fundamental because it substantially reduces the bandwidth required to transmit a high-quality digital video signal, and it formalizes the trade-offs between quality (resolution) and the required transmission bandwidth. Depending on the needs of the application, MPEG codecs (coder/decoders) can deliver compression (encoding) and expansion (decoding) of the audio-visual bit stream to suit a wide variety of applications, including:

    • broadcast: used to distribute audio-visual material to many from a single source, and used by such industries as broadcast TV, cable TV, and direct broadcast satellite (DBS).
    • stored media: used either to distribute audio-visual content of packaged media to consumers or to store material for future broadcast. Standalone digital versatile disk (DVD) players and DVD modules for PCs are part of this segment; and in the future, broadcast companies are likely to use video servers as their source for pre-recorded material.
    • interactive: this application space involves transmission of audio-visual information in two directions. Unlike most broadcast and stored media applications, all the encoding for interactive applications must be done in real time and lower resolution transmissions are often acceptable.
    • production: used by directors, editors, sound technicians, and other people modifying the content of the initial audio-visual bit stream to produce a final version for distribution. Directly editing the MPEG-2 video stream is difficult at present; most of the work is done in the analog domain and then encoded or decoded in the MPEG-2 bit stream as needed.

    The MPEG-2 Standard

    The MPEG-2 standards were developed by a joint committee (Working Group 11) of the International Standards Organization (ISO) and the International Electrotechnical Commission (IEC). The recommendations were finalized in November of 1994. The International Telecommunications Union-Telecommunications Standardization Sector, ITU-T, also recognizes these standards.

    What makes MPEG somewhat unique in the annals of standards-making, is that the MPEG-2 Working Group hit on the idea of setting up a patent pool to make it easier for manufacturers to license the required intellectual property and thereby quicken their time to market. The MPEG-2 Working Group helped establish the MPEG Licensing Administrator (LA) Limited Liability Corporation in 1997, and though not all the patents essential to the practice of MPEG-2 may be licensed from MPEG LA, over 40 important patents are available in the US.

    MPEG-2 uses what are called levels and profiles for its encoding and decoding. A profile is a subset of the entire bit stream syntax. Once a profile is selected, the level constrains the parameters within the syntax by various confines, such as pixel luminance and chrominance, pixels per line, transmission bit-rate, and frame encoding.

    Different profile and level combinations have already been established for different products and for different applications of digital compression. For example, current DVDs and standard definition TVs (SDTVs) use main profile at main level, often denoted as MP@ML, which allows bit-rates up to 15 Mbit/s and a maximum resolution of 720x576 picture elements or pixels (horizontal x vertical). Higher quality images, such as those expected from high definition TV (HDTV), require additional bandwidth. HDTV proposals specify at least main profile at high level (MP@HL), up to 80 Mbit/s and 1920x1152 pixel resolution.

    By way of comparison, a typical uncompressed bit stream encoding a National Television System Committee (NTSC) or phase alternating line (PAL) analog TV signal requires 90 Mbit/s or higher bandwidth. MPEG-2 uses two techniques to lower the required bandwidth to 4 to 6 Mbit/s for standard quality:

    • spatial compression: divides a video picture into macroblocks of pixels, which are then encoded. This compression is done within a single picture.
    • temporal compression: uses motion estimation and motion compensation techniques. Macroblocks of spatially encoded pictures are predicted and compared, and the differences are stored.

    Commercial Significance of the MPEG-2 Standard

    Shipments of devices using MPEG-2, such as DVD players, DVD-read only memories (ROMs), digital televisions (DTVs), and DBS systems, will grow from about 11.8 million units in the US in 1998 to 95.5 million devices in 2003, generating nearly $35.8 million in sales revenue. Worldwide, the decoder market will grow from 19.8 million units sold in 1998 to 424 million in 2003, and will generate $115.8 billion in revenues that year. Already in 1998, leading PC vendors like Compaq, IBM, and Dell were manufacturing PCs with DVD capabilities. DVDs have even become available on high-end notebook PCs.

    This report provides forecasts for all the MPEG-2 encoding and decoding products.

    The market forecast for MPEG-2 related products is split into projections for encoder products and decoder products. For the most part, the projections show substantial growth over the period of the study from 1998 to 2003. Where data were available (such as for US DBS converters), actual sales for 1998 are given. The market projections are broken down by product or application as appropriate and forecast for both the US and worldwide. Where applicable, the report provides unit forecasts and revenue projections. The revenue projections were determined from the estimated street price of the final products sold to the end user.

    The report does not include unit forecasts or revenue projections for intermediate products, such as decoder chips, encoder chip sets, and decoder/encoder modules. It also does not include forecasts for MPEG-2 applications implemented only in software. These software-only implementations, especially for decoding, will become more important commercially as general purpose microprocessors from Advanced Micro Devices, Cyrix, and Intel meet the processing requirements of the MPEG-2 algorithms.

    All of the industries considering digital video service distribution have to make MPEG-2 part of the planning process because it is crucial in digital head-end, broadband distribution, network access equipment, and the associated architectures and operations. This is as true for major cable TV multiple system operators (MSOs) embracing hybrid fiber/coax (HFC) as it is for incumbents and competitive local exchange carriers (CLECs) deploying digital subscriber line variants (xDSL). In a similar vein, MPEG-2 should be of great interest to very large scale integration component and module manufacturers, consumer electronics firms, PC manufacturers, as well as the traditional cable TV equipment and telephony equipment vendors.

    Our research leaves little doubt that consumer demand for video products relying on MPEG-2 is accelerating. The number of DBS subscribers in the US exceeded 8.6 million by the end of 1998--and while some would argue that DBS appears to be off to a slow start--it is actually exceeding compact disk (CD) and video cassette recorder (VCR) penetration at a comparative point in their life cycles. The success of digital video as part of a broadband bundle will ultimately depend on the ability of the service providers to deliver services economically on an end-to-end basis, from content source to consumer. The acceptance of the MPEG-2 standard opens a clear path to worldwide interoperability and will be a major broadband enabler in the years ahead.


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    Market Segmentation

     

    • Encoder
    • Decoder
    • Cable
    • Converters
    • DBS
    • Converters
    • DVD Players
    • DVD Recorders
    • DVD RAM
    • DVD ROM
    • Digital Camcorders
    • PCs with DVD Capability
    • SDTVs
    • HDTVs


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    Table of Contents

     

    Chapter I
    EXECUTIVE SUMMARY

    1.1 Forces Driving the Market
    1.2 The MPEG-2 Standard
    1.3 Commercial Significance of the MPEG-2 Standard

    Chapter II
    INTRODUCTION

    2.1 Applications Using MPEG-2 Standards
    2.1.1 Context for the MPEG-2 Standard
    2.2 Digital Video and Multimedia Services
    2.3 Electronic Video Systems
    2.3.1 Interlaced or Progressive Image Displays
    2.4 Compression
    2.4.1 Digital Compression
    2.4.2 Spatial Compression
    2.4.3 Temporal Compression
    2.4.4 Audio Compression
    2.5 Multiplexing and Transporting of Multimedia
    2.6 The Digital Decoding Process
    2.7 Digital Equipment
    2.7.1 Personal Computers Are Leading Digital Display Platforms
    2.7.2 Digital Versatile Disk
    2.7.3 Recordable DVDs
    2.7.4 Digital TV Sets
    2.8 Market Opportunities
    2.8.1 Compression Products and Vendor Opportunities
    2.8.2 Consumer Market Drivers
    2.8.3 Service Provider Market Drivers

    Chapter III
    MPEG-2 STANDARD & ITS USE IN COMPRESSION

    3.1 History of MPEG-2
    3.1.1 Defining Image Quality & Bandwidth
    3.2 MPEG-2 Video Compression Process
    3.2.1 Spatial Compression
    3.2.2 Temporal Compression
    3.3 MPEG-2 Systems
    3.3.1 Program Stream
    3.3.2 Transport Stream
    3.3.3 MPEG-2 Audio
    3.4 MPEG-2 Applications
    3.5 Access to the Technology

    Chapter IV
    ALTERNATIVE VIDEO COMPRESSION TECHNOLOGIES

    4.1 Early Standards and Their Applications
    4.1.1 MPEG-1 for Video
    4.1.2 Px64 for Video-Conferencing
    4.1.3 H.320/H.324 for Video-Conferencing
    4.1.4 H.323 for Video-Conferencing Over IP Networks
    4.1.5 JPEG for Still Images
    4.2 Proprietary Video Compression Standards
    4.2.1 Indeo
    4.2.2 Cinepak
    4.2.3 Wavelets and Fractals
    4.3 Future Image Compression Standards
    4.3.1 MPEG-4
    4.3.2 MPEG-7 for Multimedia Search Engines

    Chapter V
    RELATED STANDARDS ORGANIZATIONS

    5.1 Competing HDTV Standards
    5.1.1 Advanced Television Systems Committee: the Grand Alliance
    5.1.2 The Digital Team from the PC Industry
    5.1.3 Advanced Television Enhancement Forum
    5.2 Organizations Developing Multimedia Standards
    5.2.1 ADSL Forum
    5.2.2 ATM Forum
    5.2.3 CableLabs
    5.2.4 Digital Audio-Visual Council
    5.2.5 Digital Video Broadcasting Project
    5.2.6 DVD Forum
    5.2.7 International Electrotechnical Commission
    5.2.8 International Standards Organization
    5.2.9 International Telecommunications Union
    5.2.10 Society of Cable and Telecommunications Engineers
    5.2.11 Software & Information Industry Association
    5.2.12 SONET Interoperability Forum
    5.2.13 Telcordia Technologies

    Chapter VI
    CUSTOMER SEGMENTS AND NETWORK IMPLICATIONS

    6.1 Encoder Customer Segments
    6.1.1 Customers with Real-Time Requirements
    6.1.1.1 Cable TV Multiple Systems Operators
    6.1.1.2 TV Broadcasters
    6.1.1.3 DBS Service Providers
    6.1.1.4 Telecommunications Service Providers
    6.1.2 Customers with No Real-Time Requirement
    6.1.2.1 Production Studios
    6.1.2.2 DVD Producers
    6.1.3 Distribution Networks
    6.1.3.1 HFC Distribution Network
    6.1.3.2 SDV Network Architectures
    6.2 Decoder Customer Segments
    6.2.1 Consumer Electronics Buyers
    6.2.2 PC Buyers

    Chapter VII
    VENDOR PROFILES

    7.1 Product Overview
    7.1.1 Encoders
    7.1.2 Decoders
    7.2 Offerings by MPEG-2 Encoder Vendors
    7.2.1 Encoder Vendors
    7.2.2 MPEG-2 Encoder Market Analysis
    7.3 Offerings by MPEG-2 Decoder Vendors
    7.3.1 MPEG-2 Decoder Market Analysis
    7.3.2 Vendors of Decoder Chips
    7.3.3 Vendors of Products Using MPEG-2 Decoders
    7.3.3.1 Cable Converters
    7.3.3.2 DBS Converters
    7.3.3.3 DVD Players & Recorders
    7.3.3.4 Digital Camcorders
    7.3.3.5 PCs with DVD Capability
    7.3.3.6 SDTVs and HDTVs

    Chapter VIII
    MARKET FORECASTS

    8.1 Scope of Forecasts
    8.2 Encoder Forecasts
    8.3 Decoder Product Forecasts
    8.3.1 Forecasts of Cable Converters
    8.3.2 Forecasts of DBS Converters
    8.3.3 Forecasts of DVD Players & Recorders
    8.3.4 Forecasts of Digital Camcorders
    8.3.5 Forecasts of PCs with DVD Capability
    8.3.6 Forecasts of SDTVs and HDTVs
    8.3.7 Summary of Decoder Product Forecasts

    Appendix
    GLOSSARY

    List of Abbreviations

    Table of Figures

    Chapter I
    I-1 Forecast of US and Worldwide Decoder Product Shipments, 1998-2003 (Thousands)
    I-2 Worldwide MPEG-2 Revenue from Encoders and Decoders, 1998-2003 ($Millions)

    Chapter II
    II-1 Time Line of the Development of Digital Compression, 1950-2000
    II-2 Basic Video Services Delivery Architecture
    II-3 Penetration of US Households by DBS, PCs, Cable, and Television, 1994-1998
    II-4 Sales of TVs in the US, 1992-1997 (Millions)
    II-5 US Revenue Forecast from Consumer Applications that Require Broadband Technology, 1998-2003 ($Billions)

    Chapter III
    III-1 MPEG-2 Video Compression Process
    III-2 MPEG-2 Systems Overview
    III-3 MPEG-2 Transport Structure

    Chapter IV
    IV-1 Fractal Transforms

    Chapter VI
    VI-1 Number of Basic Subscribers to the Largest Cable Companies, 1998 (Thousands)
    VI-2 Penetration of Cable into US TV Households, 1987-1998
    VI-3 US Direct-To-Home Subscribers, 1995-1999
    VI-4 TMN Management Layers
    VI-5 Virtual Paths and Circuits within a Transmission Link
    VI-6 Typical Switched Digital Video Architecture Using SONET/ATM/xDSL

    Chapter VII
    VII-1 DTV on a PC Using A Tuner Card and A Graphics Card
    VII-2 Current Generation Digital Television
    VII-3 Next Generation Digital Television

    Chapter VIII

    VIII-1 Worldwide MPEG-2 Revenue from Encoder and Decoder Products, 1998-2003 ($Millions)
    VIII-2 Worldwide MPEG-2 Encoder Unit Forecast by Number of Channels, 1998-2003 (Thousands)
    VIII-3 Worldwide MPEG-2 Encoder Unit Forecast, by Type of Encoder, 1998-2003 (Thousands)
    VIII-4 Worldwide MPEG-2 Encoder Sales Forecast, 1998-2003 ($Millions)
    VIII-5 Worldwide MPEG-2 Encoder Sales Forecast, by Encoder Type, 1998-2003 ($Millions)
    VIII-6 Worldwide DVD Recorder and DVD-RAM Encoder Market, 1999-2003
    ($Millions)
    VIII-7 US Forecast of Sales Revenue and Shipments of Encoders, 1998-2003
    VIII-8 US Forecast of Shipments of Encoders by Number of Channels, 1998-2003 (Thousands)
    VIII-9 US Forecast of Sales Revenue of Encoders by Number of Channels, 1998-2003 ($Millions)
    VIII-10 Encoder Revenue Market Share, US versus Rest of World, 1998 and 2003
    VIII-11 US and Worldwide Decoder Product Unit Shipments, 1998-2003 (Thousands)
    VIII-12 US and Worldwide Decoder Product Sales Revenue Forecast, 1998-2003 ($Millions)
    VIII-13 Worldwide Decoder Product Unit Sales and Revenue Forecast, 1998-2003
    VIII-14 US Decoder Product Unit Sales and Revenue Forecast, 1998-2003
    VIII-15 Worldwide Decoder Product Unit Distribution by Type, 1998 and 2003
    VIII-16 Worldwide Decoder Product Revenue Distribution by Type, 1998 and 2003
    VIII-17 US Cable Converter Forecast, 1998-2003
    VIII-18 Worldwide Cable Converter Forecast, 1998-2003
    VIII-19 US and Worldwide Shipments of Cable Converters (Thousands)
    VIII-20 US Market Share of Cable Converter Market, 1998 and 2003
    VIII-21 Average Price of Cable Converters, 1998-2003
    VIII-22 US DBS Converter Forecast, 1998-2003
    VIII-23 Worldwide DBS Converter Forecast, 1998-2003
    VIII-24 US and Worldwide Shipments of DBS Converters, 1998-2003 (Thousands)
    VIII-25 US Market Share of DBS Converter Market, 1998 and 2003
    VIII-26 Average Price of DBS Converters, 1998-2003
    VIII-27 US Forecast of DVD Players & Recorders, 1998-2003
    VIII-28 Worldwide Forecast of DVD Players & Recorders, 1998-2003
    VIII-29 US and Worldwide Unit Shipments of DVD Players and Recorders, 1998-2003 (Thousands)
    VIII-30 US and Worldwide Sales Revenue of DVD Players and Recorders, 1998-2003 ($Millions)
    VIII-31 US Market Share of DVD Player & Recorder Market, 1998 and 2003
    VIII-32 Price Forecast of DVD Players and Recorders, 1998-2003
    VIII-33 US Forecasts of Digital Camcorders, 1998-2003
    VIII-34 Worldwide Forecasts of Digital Camcorders, 1998-2003
    VIII-35 US and Worldwide Unit Shipments of Digital Camcorders, 1998-2003 (Thousands)
    VIII-36 US and Worldwide Sales Revenue of Digital Camcorders, 1998-2003 ($Millions)
    VIII-37 US Market Share of Digital Camcorder Market, 1998 and 2003
    VIII-38 Price Forecast of Digital Camcorders, 1998-2003
    VIII-39 US Forecast of DVD-ROMs, 1998-2003
    VIII-40 Worldwide Forecast of DVD-ROMs, 1998-2003
    VIII-41 US and Worldwide Units Shipments of DVD-ROMs, 1998-2003 (Thousands)
    VIII-42 US and Worldwide Sales Revenues of DVD-ROMs, 1998-2003 ($Millions)
    VIII-43 Market Share of DVD-ROM Market, 1998 and 2003
    VIII-44 Average Price of DVD-ROMs in the US and Worldwide, 1998-2003
    VIII-45 US Forecasts of Standard and High Definition TVs, 1998-2003
    VIII-46 Worldwide Forecasts of Standard and High Definition TVs, 1998-2003
    VIII-47 US and Worldwide Unit Shipments of Standard and High Definition TVs, 1998-2003 ($Millions)
    VIII-48 US and Worldwide Sales Revenues of Standard and High Definition TVs, 1998-2003 ($Millions)
    VIII-49 Market Share of Standard and High Definition TV Market, 1998-2003
    VIII-50 Price Forecast of Digital TVs, 1998-2003
    VIII-51 Combined US Digital Decoder Product Shipment Totals, 1998-2003 (Thousands)
    VIII-52 US Digital Decoder Product Shipments by Application, 1998-2003 (Thousands)
    VIII-53 Combined Worldwide Digital Decoder Product Shipment Totals, 1998-2003 (Thousands)
    VIII-54 Combined Worldwide Digital Decoder Product Shipments by Type, 1998-2003 (Thousands)
    VIII-55 Combined US Digital Decoder Product Revenue Totals, 1998-2003 ($Millions)
    VIII-56 Summary of US Digital Decoder Product Revenues by Type, 1998-2003 ($Millions)
    VIII-57 Combined Worldwide Digital Decoder Product Revenues by Type, 1998-2003 ($Millions)
    VIII-58 Combined Worldwide Digital Decoder Product Revenues by Type, 1998-2003 ($Millions)

    Table of Tables

    Chapter III
    III-1 Documents that Define the MPEG-2 Standard
    III-2 MPEG-2 Profiles and Levels
    III-3 MPEG-2 Pictures Defined
    III-4 Primary Audio Formats

    Chapter IV
    IV-1 Comparison of Digital Compression Standards
    IV-2 Comparison of Data Rates and Compression Rates of Motion JPEG and MPEG

    Chapter V
    V-1 ATSC Formats

    Chapter VI
    VI-1 US Direct-To-Home Subscriber Count, 1995-1999

    Chapter VII
    VII-1 Encoder Competitor Summary, 1998

    Chapter VIII
    VIII-1 Worldwide MPEG-2 Encoder Unit Forecast by Number of Channels, 1998-2003 (Thousands)
    VIII-2 Worldwide MPEG-2 Encoder Sales Forecast, 1998-2003 ($Millions)
    VIII-3 US Forecast of Sales Revenues and Shipments of Encoders by Providers, 1998-2003 (Thousands and $Millions)
    VIII-4 US and Worldwide Decoder Product Unit Shipments, 1998-2003 (Thousands)
    VIII-5 US and Worldwide Decoder Product Sales Revenue Forecast, 1998-2003 ($Millions)
    VIII-6 US and Worldwide Cable Converter Forecasts, 1998-2003
    VIII-7 US and Worldwide DBS Converter Forecast, 1998-2003
    VIII-8 US and Worldwide Forecast of DVD Players & Recorders, 1998-2003
    VIII-9 US and Worldwide Forecasts of Digital Camcorders, 1998-2003
    VIII-10 US and Worldwide Forecasts of DVD-ROMs, 1998-2003
    VIII-11 US and Worldwide Forecasts of Standard and High Definition TVs, 1998-2003
    VIII-12 Summary of US Digital Decoder Product Shipments by Type, 1998-2003 (Thousands)
    VIII-13 Summary of Worldwide Digital Decoder Product Shipments by Application, 1998-2003 (Thousands)
    VIII-14 Summary of US Digital Decoder Product Revenues by TYPE, 1998-2003 ($Millions)
    VIII-15 Summary of Worldwide Digital Decoder Product Revenues by Type, 1998-2003 ($Millions)


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