July 2009, selected from the global-growth consulting firm Frost & Sullivan
No manufacturer in the global market has achieved the status of absolute advantage in IPTV middleware market by the first quarter of 2009. Microsoft, Thomson, ZTE, Alcatel-Lucent, and UTstarcom are the Top 5 providers (calculated in accordance with the Subscriber License), and their market share totaled near 50%.
Frost & Sullivan forecasts that the global IPTV market is expected to maintain high growth rate for the future three years. The number of global IPTV subscribers is expected to reach almost 140 million by the end of 2012, at a compound annual growth rate of 45% from 2008 to 2012.
With the rapid growth of the global IPTV market, the Top 5 manufacturers are expected to expand their market share. Top 5’s market share totaled 55.8% by the end of 2008, and is likely to grow over 60% by the end of 2012. Among them, Microsoft, ZTE and Alcatel have stonger competitive power in the whole and will grow faster than others. On the other hand, Thomson’s and UTstarcom’s influences is likely to be limited in certain regional markets and will grow at a slower rate than the former three. To sum up, Microsoft has greatest influence in high-end market of North America and Western Europe, and ZTE has highest growth rate based on influence in emerging market of Asia and South America.
IPTV Market Development Analysis
Global IPTV subscriber base has been growing rapidly since 2005, at an average annual growth rate of 78%. Even during the global economic slowdown in 2008, IPTV’s subscriber base recorded a large increase. Global IPTV subscriber base reached 21.84 million by the end of 2008, and the year-on-year growth rate was 63.7%.
As a major source of IPTV subscriber, Western Europe accounted for about half of the total market in 2008. The other major regions were North America, South and East Asia, and Asia Pacific, holding 17.6, 16.6, and 14.1% of the market, respectively. The remaining regions East Europe, Latin America, and Africa, had not occupied any major share in the global IPTV service market.
With respect to regional IPTV subscriber growth from 2007 to 2008, as seen in Figure 1, based on a large scale of subscriber, Western Europe grew at a lower rate of 47.4%, lower than the global average growth rate. North America and South and East Asia experienced a rapid expansion with the growth rate of around 100%. Asia Pacific had a lower growth rate of 40.1%.
Competition Analysis of Top 5 Providers of IPTV Middleware
In general, there are many IPTV middleware providers and more than 10 active competitors. As seen in Table 1, by Q1 2009, due to its influence in North America and Europe, Microsoft was ranked first with 12.4% share in the world middleware market (calculated in accordance with the License subscriber). Thomson benefited from development of FT’s IPTV business and ranked second with 11.6% share. ZTE surpassed Alcatel-Lucent and ranked third with 9.1% share, through its active market exploration in Asia, South America and other emerging markets. Alcatel-Lucent and UTstarcom were ranked fourth and fifth, with the market share of 8.9 and 7.8% respectively. Top 5 providers together held about 50% market share in the world, but none of them had gained overwhelming leadership the global market.
Based on the in-depth cooperation with FT, Thomson gained the largest share in Europe. Alcatel-Lucent took over Telefonica’s IPTV service and had an in-depth cooperation with Telecom Italia. Microsoft’s key client in Europe included BT and DT.
Most of mainstream carriers in North America adopted Microsoft’s middleware solutions. Other providers in North America mainly cooperate with tier 2 or tier 3 carriers.
Based on leading advantage in technology and user experience, ZTE and UTstarcom became the mainstream providers in the Chinese market. Besides the Chinese market, ZTE attained significant share in the South and East Asian markets. For example, ZTE cooperated with VNPT, which is the largest carrier in Vietnam, and established an IPTV plan with subscriber capability of 60,000. Thus, ZTE is the leader in the Asian market. Cascade ranked third due to its cooperation with PCCW. Microsoft implemented its high-end strategy in Asia and attained IPTV application in Chunghwa Telecom and was ranked fourth. Besides, it attained relationship with SingTel and Reliance, which have great potential in IPTV business.
In addition, ZTE and Alcatel-Lucent have great influence in other markets, such as South America and Middle East. For example, ZTE attained application in CANTV, which is the largest carrier in Venezuela, which made ZTE the mainstream provider in South America.
Overall, most of the global mainstream IPTV carriers are in rapid-growth stage, and the Top 5 providers have greater influence in relevant regional markets. Therefore, Top 5 providers are expected to expand their market share. Microsoft’s strategy of positioning in the high-end market has begun to gain favorable return. ZTE and UTstarcom have technical advantage and have more influence in emerging market of Asia and South America. Hence, these three have stronger overall competitive power and are expected to grow faster than others. On the other hand, although Thomson and Alcatel-Lucent are expected to increase market share, their influence seem to be limited in regional markets. Accordingly, Thomson and UTstarcom are expected to grow lower than the other three. To sum up, Microsoft has greatest influence in high-end market, and ZTE has highest growth rate based on influence in emerging market of Asia and South America.
IPTV Market Trend Forecasts and Opportunity Analysis
Frost & Sullivan forecasts that the global IPTV market is likely to maintain high growth rate in future three years. The global IPTV subscriber base is to reach almost 140 million by the end of 2012, with CAGR of 45% from 2008 to 2012, as seen in Figure 2.
With respect to regional distribution, Frost & Sullivan forecasts that the overall market share of Asia is expected to increase from 30.7% in 2008 to 39.3% in 2012. Then Asia is expected to become the world’s largest regional IPTV market. The market share of Western Europe is likely to fall from 47.6% in 2008 to 26.7% in 2012, while that of North America and Asia Pacific will rise to 24.0% and 23.2% respectively, in 2012 (see Figure 3).
As seen in Figure 4, in IPTV middleware market, the mainstream providers, such as Microsoft, ZTE, and Alcatel-Lucent, are likely to expand their market shares quickly and enhance market concentration, and regional providers are likely to be restricted in certain market and grow at a relatively slower rate. On the other hand, small and medium providers, such as Netgem, are not likely to grow at a significant rate.