IPTV set-top market already overcrowded.

It may be early in the IPTV game, but the playing field is already too crowded, according to The Diffusion Group.

According to Herve Utheza, director of IPTV research at TDG, 50 IPTV set-top vendors are already vying for business, with more expected to enter the market this year.

“This abundance of IPTV STB vendors is not sustainable in the long term. In fact, many of these vendors will exit the market by choice or simply cease to exist within a very short period of time,” Utheza stated in a TDG report. He attributes the rapid expansion of the IPTV market to the fact that there are already Digital Signal Processor-based reference boards from multiple vendors, including Texas Instruments, Sigma Designs, IBM, Intel and others, which, when combined with the open Linux standard create an easier environment in which to create an IPTV set-top box than exists today in either the cable or satellite field.

As a result, Utheza said, IPTV set-top manufacturers cannot simply offer a reference design – those who succeed must complete the much more complex task of integrating their set-top box into a telco TV network. “Given the excessive demands of STB integration processes, offering up a simple STB reference design is not enough to build a viable long-term strategy - service operators will demand much more from STB vendors,” Utheza states. “Determining which companies will survive this inevitable consolidation boils down to two deceivingly simple considerations: subscriber volume for the IPTV service operator and STB volume for the IPTV STB manufacturer. STB vendors that are able to execute contracts with operators who are committed to aggressive service rollouts will no doubt have the early advantage.”

The current abundance of set-top box manufacturers has led to premature commoditization of the product segment which produced “razor-thin margins,” the analyst said.

“Successful STB manufacturers will need to reach annual shipment levels of at least one million units in order to recoup the investment in manufacturing,” he stated. “Such volume cannot be sustained with 50 vendors competing for market share. Consequently, TDG expects a high exit or failure rate and rapid consolidation among IPTV STB vendors - global IPTV volume simply cannot support this many players.”