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Factors Influencing Growth of HEVC in the Media and Entertainment Industry

  • January 2014
  • 8 pages
  • Frost & Sullivan
Report ID: 1963443

Summary

Table of Contents

Overview

High-efficiency Video Coding (HEVC) is a new standard that has been developed to handle compression for the next generation of high-resolution and ubiquitous video applications. While AVC is the de-facto standard for video across the board today, network congestion is already a looming issue. It will only get worse as the number of consumers and the amount of video accessed over broadband and wireless connections increases, even as Pay TV service providers seek to push resolution boundaries past high definition (HD) to 4K and beyond.

Since the standard was finalized early this year, industry shows and trade magazines have been awash with announcements of products, pilot services, proofs of concepts, and forward-looking predictions. Certainly, there have been significant steps forward in terms of encoding and transcoding products and cores supporting HEVC. Codec vendors, such as ITTIAM, Fraunhofer, NTT DoCoMo, Rovi, and Vanguard, are among those who are shipping first-generation encoding cores for HEVC compression. Most of these are presently software-based, although they may leverage silicon resources for acceleration. All-silicon encoder cores are likely to take at least a year to develop, given the complexity of HEVC encoding, the nascent stage of the technology, as well as the ongoing flux in certain aspects of the standard. In terms of encoder products, professional equipment vendors, such as ATEME, Ericsson and Envivio, as well as desktop vendors, such as Cyberlink, have developed their own H.265 cores. Elemental has successfully powered real time HEVC encoding for video in 4K resolution. The density that can be achieved for HEVC encoders is of course orders of magnitude lower than comparable AVC densities and its power consumption per channel is today much higher, but progress will continue to be made. Sales in 2013 have been limited to a few channels purchased by major service providers and content owners for internal evaluations and proofs of concept. However, market interest is expected to continue to grow in 2014 and beyond.

Progress, on the decoder side has been less extensive than on the encoder side, although it is gaining momentum. Software-based clients have been shipped with select consumer electronic models, such as Samsung's HEVC-enabled 4K television which shipped earlier this year and several upcoming devices powered by chipsets from Broadcom and Qualcomm. Panasonic recently announced a licensing arrangement for HEVC-enabled Blu-ray chipsets with Rovi, although a release date for the product has not been announced. Open-source participant, VLC, recently announced support for HEVC. The open H.265 project has also won backing from vendors, such as Telestream.
The question facing service providers and consumer electronics (CE) device vendors is how quickly—or not—HEVC will evolve from an experimental novelty to a commercially significantly format. In this insight, we examine the various factors that drive and restrain the adoption of HEVC. Our focus here is primarily the media and entertainment market, which includes segments, such as contribution, primary and secondary distribution, and multi-screen, rather than enterprise applications of HEVC, such as video conferencing.

Factors Driving Adoption of and Investment in HEVC

In the short term, the following are the most important drivers for HEVC technology:

- Quest for Greater Compression Efficiency: Video accounts for over % of Internet traffic during prime time in the United States. Moreover, this level is reached with less than % of broadband subscribers watching. With online video consumption predicted to more than double over the next five years and bandwidth limitations cited as one of the most important restraints to growth of over the top (OTT) video, raising the bar on video compression is a hugely enticing proposition. Other benefits of better compression include the ability to improve the quality of video that is delivered over restricted bandwidths (for example HD video to tablets through 4G or 4G LTE networks), reduce video transmission costs, and increase video storage capability (for example on camcorders or professional video servers). While the compression efficiency of AVC is growing, with modern, best-of-breed AVC encoders offering 2x compression benefits over first generation products, HEVC will eventually mature to a point where it can outperform AVC.

- Technology Push for Commoditized Video Market: The market for video encoders is struggling, owing to significant price erosion caused by commoditization. Where AVC
HD encoders once sold at over USD per channel, today, growing density and silicon-based cores have pushed prices down, with some models selling for under $ per HD channel. Furthermore, differentiation between encoder vendors is becoming increasingly difficult, particularly outside the top tier of industry vendors. HEVC offers the opportunity for innovators to stand out and to differentiate themselves from other vendors again, while also restoring a far more sustainable price point. For example 4K
HEVC encoders are presently fetching as much as $ per channel. This is expected to come down to approximately $ in 2014. Nevertheless, it is still significantly higher than existing AVC price points. This type of disruption also encourages faster upgrades of equipment, further boosting sales.

- Cost savings in closed-loop applications: Closed loop applications are those where the encoding hardware, decoding applications, and intermediate servers and routers are all provided by a single company and purchased by a single client. These occur most often in the enterprise segment—for example, in unified communication systems or remote collaboration systems. HEVC offers clear return on investment (ROI) by improving operating expenditure (OPEX) and quality of experience. Closed loop systems are also seen in several white-label video on demand (VOD) platforms that provide transcoding, transmission, and playback of content. In these cases, investment from vendors into HEVC is accelerating and is expected to achieve faster uptake by enterprise clients and service providers.

In the – year time frame, the following will be the most important drivers for HEVC technology:

- Growing resolutions, even on portable devices: As portable devices, such as tablets and high end smart phones, achieve HD display resolutions and as fixed screens migrate gradually towards 2K and 4K resolutions, consumers' demands for visually appealing video is increasing. There is a growing need to deliver the highest possible video quality to consumers—both in terms of resolution and in terms of smoothness of delivery—to maximize the competitive advantage for service providers. Superior compression is critical to achieving this scenario, particularly on portable devices over wireless connections. While benefits would theoretically be immediate, it will take time for the end-to-end workflow for these use cases to be available and deployed. Accordingly, whilethe prospect of high-resolution delivery to portable devices is fueling innovation in HEVC, it will take – years before the market is mature enough to support widespread deployment for these use cases.

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