Irdeto CEO Sees Growth Opportunities In Asia

[Satellite News – 1-22-08] Irdeto Access believes Asia will be a strong market for its conditional access and middleware services. Such is its determination to drive revenues from Asia, CEO Graham Kill relocated to the company’s Beijing office in December. 
    “This is our Asia-Pacific focal point,” Kill said. “We want to create a dual headquarters approach in which we balance our organization between the East and the West. We have seen this region as very fast growing and expect that to continue. We expect Asia to generate ever-increasing revenues for us. In some years time, we see a balance between generating revenues from the East and the West. It entirely makes sense for us to balance our organization appropriately as well.”
    While Kill says his move is not just about China, he admits that China is an “intriguing” market, particularly in terms of television and the delivery of content. “The interesting thing about a market like China, is that you have all these things springing up (mobile TV, satellite, cable etc) at the same time,” Kill said. “Some of them are small, but there are a lot of them. In aggregate they are very significant. The will is there from the country and the government to stimulate these things, although the country struggles with the challenge of its central approach and how to balance local initiatives with the desire to centralize things particularly when it comes to entertainment content.”
    Irdeto, like most conditional access and middleware vendors, generates healthy revenues from satellite pay-TV operators, but Kill believes the regulatory situation in China is slowing down the development of satellite pay-TV services. “Although there is satellite pay-TV services to cable headends, there isn’t mainstream commercial offerings of satellite pay-TV,” he said. “I see things developing fairly slowly. It has been a long road to date, but it will happen. The Chinese government is absolutely committed to making sure that services are rolled out to the whole country and that everyone has the opportunity to partake in digital services. For a country of this nature, the only practical way to do it on a national basis is by satellite. Will it happen? I am convinced it will, but I think it will take more time.”
    Direct-to-home (DTH) services also are starting up in other emerging markets such as Ukraine, Romania, India and Africa. “I am not surprised that a number of DTH platforms have sprung up in emerging markets, as these markets are increasing their wealth and their middle class, and so the addressable market is increasing,” Kill said. “Because they are in countries that are not well served in terms of other infrastructures, satellite becomes a very good choice. Contrary to popular belief, that wealth creation is not just in urban areas. There are other places around the country that are ideal for satellite services. That general economic improvement, and the improvement in disposable incomes creates a target market for entertainment services which can be delivered by satellite. That creates an addressable market for operators, regardless of how they want to deliver those services.”
    However, while Kill is not surprised that satellite is being used to target new pay-TV customers, he is surprised just how many players seem to be jumping aboard the DTH bandwagon in these territories.
    “There seems to be an over proliferation of players in certain markets,” Kill said. “Places like Romania and India come to mind, where relatively speaking there are a large number of satellite platforms on air, planned, etc. Generally speaking, in terms of pay-TV satellite, the market dynamics support the fact that modest market sizes can only support one player, and even in the largest markets, two to three players. I think it is inevitable that consolidation will happen.”
    As well as working with a number of satellite pay-TV operators, Irdeto also works with mobile TV pioneer TU Media in Korea, which bases its services on the satellite–digital multimedia broadcasting standard. While there is interest in both the provider and consumer side of the market, Kill believes companies should be more cautious in jumping in this market.
    “I think the mobile TV market, regardless of the technology, is still very much in a nascent stage,” Kill said. “As such, putting a satellite up and making a significant investment for this is a risk. The upfront costs of satellite installation are higher, even if you get the payback later. I don’t think people are going to readily make that investment while the market is so nascent and they don’t understand the business models regarding mobile TV.”
    Among the challenges satellite players must overcome in the mobile TV market are solving the question of how mobile operators and broadcasters will work together to deliver service as well as issues around shared revenues and roaming. But Kill believes satellite will eventually play a role, even if it is more in a hybrid way.
    “Satellite will probably come later rather than sooner,” Kill said. “Once people are used to the entertainment, they will want it wherever they are. Satellite will be the best way to serve entire territories, but I do think it will be more of a hybrid approach with terrestrial-based networks supplementing satellite in high-density urban areas. People will start off with populating urban areas with terrestrial networks, and once it is proven that the business model works, then the business case for satellite will become apparent to address a wider territory.”