nScreenMedia OTT multiscreen media analysis

Cutting set top box cost key to pay TV profitability?

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Maintaining profit margins is becoming increasingly difficult as content providers continue to demand, and get, big increases in license fees. Two options, one from ActiveVideo Networks and the other from Roku, could help reduce set top box costs and restore some of that lost profitability.

ActiveVideo Networks (AVN) announced today that data center capex costs for its virtual set-top box (STB) solution have been reduced to just $1 per sub. The company is achieving this dramatic saving by leveraging Intel’s new Quick Sync Video (QSV) technology to off-load CPU intensive video transcoding and video rendering to the Graphics Processor Unit (GPU.)

Unlike the traditional pay TV model, where guide and VOD software runs on the STB, AVN’s CloudTV solution moves all that into the operator’s headend. Applications like the TV guide and VOD app run on a virtual STB, software emulating what the STB does, on a server in the pay TV headend. The virtual STB’s video output is rendered to a simple video stream (like a TV channel) for delivery to the customer’s home. This allows the operator to use a very basic STB in the home, or eliminate it altogether by using a smart TV. (To understand more about the AVN virtual STB approach download the free white paper “Taming the Device Fragmentation Problem.”)

New server products from companies like Kontron and QuickFire are built around Intel processors incorporating the QSV technology. CloudTV exploits the additional GPU horsepower to dramatically lower the load on the CPU generated by the virtual STB. This allows many more virtual STBs to run on a single rackmount server.

The company says it can handle 4x the number of sessions, 1 million virtual STBs, than it could before on a single data center rack.  That means AVNs biggest customer, CableVision, could server all its subscribers from just three data center racks.

YouTube TV

UPC could reduce the cost of delivering YouTube with AVN’s new QSV-enabled CloudTV

The other big saving Intel QSV brings is in video transcoding. For example, UPC in Hungary is bringing its customers YouTube over the existing QAM cable network using AVN’s Cloud TV. YouTube delivers its videos in MPEG4 format. To be delivered to set-top boxes in the home this video needs to be converted to MPEG2. Using the new Intel QSV servers, CloudTV can realize a 10x increase in real-time video transcoding converting from MPEG4 to MPEG2. Were UPC to move to deploying QSV servers, the company would need considerably fewer of them than they currently use.

For operators looking to move to broadband delivery, Roku could be a very cost-effective option. The company just announced that it is making the white label Roku Powered program available to all. Operators can license the platform to create a branded player to combine its services with any other IP based video it wants to bring to its customers. Sky in the UK released the first branded version of a Roku STB last year to make it easier for customers to put the company’s Internet-based Now TV service on televisions. The operator charges just $15 for the box

Both the AVN and Roku approaches can help operators dramatically reduce subscriber acquisition costs (SAC,) since the STB is a substantial part of that cost. This is critical for operators as rising fees for content continues to erode pay-TV profit margins.

Why it matters

Options to help operators reduce the cost of the STB in the home can help reduce subscriber acquisition cost.

AVN’s virtual set-top box approach can now leverage Intel QSV technology in servers to dramatically lower data capex costs.

The Roku Powered program can provide a great alternative to customer STBs for operators delivering in broadband environments.

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