Luxsat Expects Major Growth From Satellite Operators

By | March 15, 2004 | Feature

Luxsat hopes to revolutionize Video-on-Demand (VOD) markets across Europe. The company, based in Luxembourg, aims to help satellite, cable and terrestrial players to bring a rich VOD service to consumers. Its patented IP-DVB (Internet Protocol – Digital Video Broadcasting) end-to-end home media platform will enable instant access to movies and TV programs as well as video games and music tracks. The company uses the satellite platform of fellow Luxembourg company, satellite operator SES Astra.

Luxsat will generate revenues from its own operations in Belgium and Luxembourg, and by licensing its technology to pay-TV operators across Europe. Thierry Maman, CEO of Luxsat, told Satellite News his company expects its subscriber-base total to grow to more than 2.4 million in 2008. The subscriber gains should come mainly from Luxsat’s licensees, and not from its direct operations in Luxembourg and Belgium, he added.

Satellite Growth

Pay-TV satellite operators could prove willing adopters of the service. Maman believes growth on the satellite side could outstrip such other sectors as cable and DSL. He commented, “The satellite market for us is probably the fastest-growing market in terms of the technology because Luxsat is today the only VOD service that can be used over satellite. We already have a strong partnership with SES Astra and SES Global, which was also one of the reasons why we are based in Luxembourg. With SES Global we can reach any region in the world, except for the Middle East where we use Nilesat. Satellite is probably going to be the major direct or indirect carrier for our VOD service.”

He continued, “In emerging regions, such as India or Brazil, there is nothing there in terms of VOD. For the high-end of the population, there is a real strong interest in cinema. The only way you can cover globally this kind of region is definitely satellite.”

Luxsat hopes to reach the breakeven point in 2006. The company currently is in the middle of negotiating deals with European operators to start using the technology, and it hopes to announce a series of deals imminently that could kick start VOD across Europe. Maman believes the operator has bought costs down sufficiently to make VOD a real proposition.

He said, “The only problem of VOD over the last five to 10 years was the costs of the infrastructure to bring VOD to the end-user. Why Luxsat? We have developed a worldwide patented end-to-end VOD platform that brings to the market cost-effective, true on-demand entertainment services without network infrastructure limitations. Our technology is based on push multicasting, a technology that allows for streams of data to be sent simultaneously from one to many destinations. Instead of setting up separate unicast sessions for each destination, multicast sends a single copy of a data file, reaching any number of possible receivers.”

Maman continued, “The push multicast technique consists then of simultaneously sending data to all subscribers at the same time to store it in their set-top boxes hard drive; the downlink speed is thereby totally independent from the number of end users. We are compatible with any broadcast network. It can be satellite, cable, digital terrestrial, even DSL.”

Consumer Behavior

Luxsat also has done its research into such areas as consumer behavior. Company officials believe the time is right, and they have learned lessons from the past. Maman added, “In terms of consumer behavior, our research, focus groups and customer feedback really confirmed our thoughts.” According to Maman, the technical usage of the service was a bit scary for new customers at first, but it appears that the technical stuff no longer is an issue. Rather, all their questions now are based on content. “They want quality content,” he said. “That is one of the major mistakes of other VOD services in the past. People don’t want to have a thousand movies at one time. They want quality and not quantity.”

Maman believes the VOD market could be about to explode. He said, “If you look at the potential growth of VOD in the market, all the studies are showing that the growth of VOD is coming now. If you look at some of the research, Durlacher Research predicted that the revenues coming from VOD globally will rise from $3.7 billion in 2003 to $16.2 billion in 2007.”

The operator now is in a race against time to secure deals with TV operators across Europe to exploit its competitive advantage in this area. Maman said, “We need to start two or three license deals in the next 12 months to expand our international business, especially because time to market is crucial for us. We have a unique technology. We are the only company doing push multicast VOD services, but that might not last long. We consider we have a two-year advance compared to any potential competitors using the same techniques. Within the next two years, we need to get the maximum market share we can.”

While Luxsat is keen to do deals with operators, the company also needs to secure its financial future. It hopes to attract some financial partners, which will enable it to have the funds it needs to reach profitability — one of the other main challenges facing the company.

“We need to find strong strategic partners, not only financially but also commercially and industrially. We are starting a $24.6 million round of financing right now,” Maman said. “We want strong strategic partners that will support us in our expansion in this new market. We need to have one or two strong partners in our shareholder base to help us expand as fast as we expect.”

–Mark Holmes

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