Northern Sky Research

Reality Check on MPEG-2

Nov 13th, 2013 by Jose Del Rosario   More from this Analyst | Profile

UltraHD TV and HECV encoding have been getting a lot of attention in recent months as the satellite industry tries to understand how, and how fast, we will get to this exciting new future of carrying big fat channels over satellite transponder capacity. It is indeed a subject worthy of attention, nevertheless it is NSR’s view that the industry also needs a reality check on where we stand today in terms of encoding standards for carriage of the current crop of SD and HD, as well as 3D, channels.

For over a decade, NSR has tabulated end-of-year data for the number of satellite channels carried on each operational satellite and transponder as part of its regular market research process. Starting in 2012, NSR also began to collect information on the encoding standard employed for each channel, segmenting its SD, HD and 3D channel counts between channels encoded in MPEG-2 and similar generation formats (e.g. Conax, Nagravision) from MPEG-4 encoding. The results of this effort shed some light on what is truly begin done in the broadcast markets today.

Source NSR

Of the 23,182 SD channels NSR attributed to the global satellite market as of the end of 2012, fully 73% were still broadcast in MPEG-2 or another similar format. This includes all channels carried for C/Ku-band distribution, FTA, DTT, DTH and other related broadcast services. Interestingly, one can also see that on a regional basis, the markets one tends to think as the “most developed” such as North America or Western Europe, actually have the greatest number of SD channels still being broadcast in the older MPEG-2 and related formats. Fully 80% of SD channels in North America and a staggering 90% in Western Europe used the older encoding technology compared to regions like Sub-Saharan Africa or South Asia where about half of the current crop of SD channels were being carried in MPEG-4.

Source NSR

However, the story is completely inversed when it comes to HD and 3D channels. Of the 3,836 HD/3D channels carried globally, no less than 86% were broadcast using MPEG-4 encoding at the end of 2012. Nearly all regions were well over 80%, if not effectively 100%, MPEG-4 for HD/3D content. Of course, this is not too surprising as it is the more efficient MPEG-4 encoding standard that makes HD/3D content economically viable for the video markets.

Overall, the results of this assessment indicate something most in the satellite market “instinctively” understand. New technology standards generally do not kill markets, but drive new market opportunities. The arrival of MPEG-2 digital broadcast led to a quantum leap in the diversity of channels by making satellite broadcasting so much more cost effective. The same is true for HD/3D channel growth being directly linked to the adoption of MPEG-4, and the industry will almost certainly see a repeat of the same with UltraHD’s ultimate success being directly linked to adoption rates of the HEVC encoding standard.

Bottom Line

Yet, NSR’s detailed analysis of the breakout in carriage of SD, HD and 3D channels between the different standards still raises a number of issues that lead to challenges/opportunities that media markets will face in the coming years. These include:

  • Despite the widespread availability of MPEG-4, why are so many SD channels still broadcast in MPEG-2? Granted, much of this is related to the dynamics of individual regional markets as well as the sunk cost in installed bases of MPEG-2 consumer set-top boxes and IRDs in teleports and headends. But this begs the question, is there a market opportunity to force a faster transition to MPEG-4 for SD content? Or is it better to jump straight to HEVC? And depending on which route the SD channel encoding migration follows, how much of the freed up transponder capacity can be used to support carriage of even more content without launching new transponder supply?
  • Similarly, is there an opportunity to move more HD content to MPEG-4 in a few specific regional markets, notably North America, East Asia, and South America? And most especially for South America, what impact would an HD migration to MPEG-4 have on the currently tight capacity situations at the main cable distribution hot spots?
  • Finally, most industry experts agree that UltraHD is still quite a few years into the future and the benefits of UltraHD, especially in terms of capacity leasing, probably won’t have a substantial impact on operator bottom lines until the end of the decade. As such, is there not a much more significant market opportunity at least in the short- to mid-term in teasing out the transition from MPEG-2 to MPEG-4? (Especially for the huge bulk of SD channels that still account for the biggest part of capacity leasing in media markets today.)

In short, yes, UltraHD is great for the satellite market, and HEVC is certainly a key to success here. However, instead of focusing so much market energy on opportunities that are the better part of a decade into the future, why not put some of that effort into opportunities already available today?

Information for this article was extracted from NSR's report: Global Assessment of Satellite Supply and Demand, 10th Edition.