Market Insight

STB-less pay TV expands to MEA with recent CAM launches

May 02, 2014

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STB-less pay TV expands to MEA with recent CAM launches

Sub-Saharan pay DTT provider GOtv has deployed CI+ Conditional Access Modules (CAMs), enabling its channels to be viewed on compatible integrated digital TV sets without the need for a set-top box (STB). The deployment is currently limited to GOtv’s Kenyan and Ghanaian operators, but could be expanded to the remaining six countries of its pay DTT network.  Go TV’s announcement follows a similar launch in the MENA region by the satellite operator My-HD earlier this year. GOTV has branded its CAMs as ‘GOcard’, and they are being provided by French vendor Neotion. CAMs enable pay TV content to be viewed directly on a television set, without the help of a set-top box (STB) provided the TV set has a digital tuner (iDTV) and a DVB-common-interface (DVB-CI) slot, also known as PCMCIA slot.

Our take
The impact of CAMs on pay TV STB shipments has been geographically constrained to Europe, but these MEA launches could lead to further declines in EMEA STB demand. CAM modules have been eating into STB sales in Europe significantly since the introduction of the more secure CI+ standard in 2009; CAM shipments in Europe as a proportion of region’s total digital pay TV receivers grew from 2% in 2009 to 7.1% or 5.3 million in 2013. Europe is the only market currently suited to significant CAM usage because it the only market with a large installed base of CAM compatible TV sets.  This is the result of a 2002 EU mandate for the inclusion of DVB-CI slots in all TV sets with digital TV tuners and screen diagonal >30cm, which combined with the migration to DTT broadcasting drove the installed base of compatible TVs to grow from 9 million in 2002 to 412 million in 2013.

Despite strong growth between 2009 and 2012, CAM growth did start to slow down in 2013 primarily due to changing market dynamics and CAMs technical limitations. CAMs can neither route nor decrypt IP-delivered content, nor can they handle multi-stream reception. This means that features such as multi-channel DVR and almost all IP-reliant services remain unsupported. This may not have been a drawback for CAMs a decade ago, when TV was largely linear and less interactive, but markets such as Europe have since evolved. Established pay TV markets such as Western Europe have reached a stage of saturation where Pay TV providers have to rely on advanced services to stay competitive and boost ARPUs. These services include IP VoD, multiscreen, DVR and cloud-based offers. Since CAMs cannot fully support these services, operator CAM deployment remains confined to supporting the most basic experience; the delivery of linear digital channels alone.

Emerging markets such as the Middle East and Africa (MEA) are still largely focused on delivering the basic digital pay TV needs of the end user. This means that CAMs technical limitations are not yet an entry barrier for these markets. Instead, the main barrier to entry is the general lack of availability of compatible TVs. Government mandates for CAM compatibility in digital TV sets are currently absent, but would be a key driver. However, the presence of multi-national pay TV operators in MEA can also be an appeal for TV manufacturers looking to introduce CAM compatibility in their products. TV manufacturers like to produce sets that can be sold across – an entire region rather than a specific country, for production efficiency. Due to low margins on TVs, manufacturers avoid the inclusion of extra functionality like DVB-CI, as it adds to BOM costs. Therefore, it makes little or no economic sense for TV manufacturers to introduce DVB-CI to serve a single operator in a single country, but if that operator is present across an entire region sufficient scale could be achieved. The presence of multi-national operators like GOtv and MyTV in MEA potentially offers this scale. This means that if TV manufacturers launch a specific product for such an operator, it could be scaled out to multiple operations. Chinese vendor Hisense has already launched a CAM compatible TV product for GOtv in Ghana and Kenya, which also is likely to be rolled out to GOtv’s remaining 6 countries soon. MEA is also a price-competitive pay TV market – where demand for premium features such as smart TV and UHD is not generally high. Making TVs compatible with CAM can serve as a differentiator for TV manufacturers looking to stand-out in such a market.

MEA is an important market for the future growth of CAMs and also for STBs. From a STB perspective, MEA will be the third largest growth market for pay TV STB shipments after Eastern Europe and Latin America. STB makers may not currently see CAMs as a big threat in emerging markets because it is currently limited in these regions by the general lack of compatible host devices. Should a future government mandate be placed, or should pay TV CAM availability encourage TV manufacturers to introduce compatible products in the region, as many Chinese companies including TCL and Hisense are already looking to do, this threat can potentially impact STB growth as it has in Western Europe.

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