Video Transcoding Market Growing 20%, SaaS & Cloud Based Offerings 3x That

Frost and Sullivan has just released its comprehensive analysis of the media and entertainment video transcoders market and not surprisingly, one of the key findings is that software and the cloud are quickly reshaping future design choices in this once hardware-centric industry. Cloud considerations are playing a strong role in influencing product roadmaps and investment decisions for vendors and customers alike.

This is a significant shift in an industry that was once very much hardware-centric, and where even software has only recently gained widespread market trust. While cloud-based transcoding has traditionally been the domain of smaller start-ups and focused on lower value media such as user generated content, the past two years have seen a surge of professional-grade, high-reliability applications. This has been driven by operator need to cope with exploding content volumes and growing QoE expectations on the one hand, and vendor ability to deliver falling costs coupled with improved automation and reliability on the other. (see our quantitative findings here)

The overall M&E video transcoding market is forecast to grow at a healthy 20% CAGR, but revenues derived from SaaS and cloud-based offerings are expected to grow at more than thrice this rate. Accordingly, transcoder vendors who have not done so already urgently need to build, buy or partner to add credible and competitive cloud-based aspects to their product lines.

Accordingly, we have seen a number of quiet deals made in recent months. Harmonic, a leading vendor in the space who won much of their early advantage on the strength of hardware appliances, was the lead investor in Encoding.com’s recently announced $3.5M Series B round. Other recent significant transactions include:

• Haivision acquired Kulabyte, lending a much-needed cloud angle to their traditionally hardware-based business
• Brightcove acquired Zencoder at an ambitious valuation, emphasizing the importance of the role cloud-based transcoding plays in OTT video
• Wowza acquired Camfoo and leveraged this to release a cloud-based transcoder plug-in to an enthusiastic client base
• Verizon acquired Uplynk who brought considerable experience and expertise in cloud-based workflows to the table
• Microsoft is closely partnered with iStreamPlanet, who provides – among other components – high density cloud-based transcoding capability
• Ericsson partnered with Elemental to offer a broader choice across software and cloud form factors to its customers

Many other key vendors have diversified organically into the cloud. Envivio has been a long-time provider of cloud-based live transcoding functionality which complements its encoding and transcoding appliances. Digital Rapids (acquired by Imagine Communications earlier this year) built their cloud-based automated workflow platform Kayak in anticipation of a shift away from hardware and fixed components towards reconfigurable and software-defined architectures. Imagine Communications, the re-imagined (no pun intended) Harris Broadcast, has been a highly vocal proponent of software and cloud-based workflows in the past year, aggressively moving away from a siloed hardware approach towards a far more open, and far more future-proof, architecture. Elemental announced a cloud-based product this year, and Telestream is facilitating hybrid and cloud-based deployments of its enterprise-grade workflow platform.

While the M&E community has been more aggressively growing on the cloud front, the enterprise community is slowly but surely catching up as well. Longtime market leader VBrick has made several forays into the cloud this year, and Haivision is aggressively embracing cloud as part of its global growth strategy. Preliminary results from our upcoming analysis of the Enterprise Video Encoders and Transcoders Market are currently available to subscribers; the full study is scheduled for publication in December. The rate of adoption of the cloud (whether in private data centers, via Infrastructure as a Service or through Software as a Service) is lower on the enterprise side than on the media and entertainment side, but is is poised to grow steadily nonetheless.

For additional details on Frost & Sullivan’s multiple reports on the video transcoding market, you can contact Avni Rambhia, the lead analyst on the reports.