Market Opportunity

With the huge explosion of video content and ever evolving video compression standards, a tremendous market opportunity exists once the challenges of achieving the consumer market features balance are met.

Looking at portable digital devices alone (digital still cameras and digital video cameras) as one key market area we serve, the volume projections are huge, as these devices have already hit the mass consumer market. H.264 will start to become the de-facto compression standard for these devices with the help of a company like Qpixel. With Qpixel’s technology, we will enable H.264 as a replacement for older and less efficient compression standards for all devices, as opposed to introducing it only as a high-end option for premium devices. Eventually, we expect virtually all of these devices will become replaced with H.264 and beyond.

The 2006 combined TAM (total available market) for consumer digital media applications such as digital video and digital still cameras (DSC/DVC) and digital home appliances is in excess of $1 billion (Source: 2006 estimates from Qpixel and various analysts). In the established markets such as the DSC/DVC markets, there are already 100M units shipped in 2006 with an expected 120M units shipping in 2010 and the market is still growing. In the emerging markets such as the IP set-top box market, the revenue is expected to increase five-fold from $5M in 2006 to $25M in 2010.

The market in standard definition is also craving the higher compression offered by H.264 Main Profile versus H.264 Baseline Profile. The right balance of features is achieved by supporting the highest video quality possible (in this case, H.264 MP, to also benefit from its higher coding efficiency) while achieving mass market price points and lowest power consumption. With Qpixel being the first to ship an H.264 Main Profile codec, we are raising the bar to a higher level of compression and video quality.

From an OEM manufacturer point of view, these consumer devices enable higher efficiency operation with H.264 MP without compromising on cost or battery life. In turn, the devices that are tied in with service provider offerings are far more enticing from a services revenue standpoint, as it opens up extra bandwidth to be able to offer more channels of video or more services. Clearly H.264 MP has become the next level of standard of choice, and with it come another huge wave of opportunity, as device manufacturers clamor to incorporate this next level of video quality.

Future Trends

The market does not stop there. The continuous cycle of improvement and downward cost spiral will continue to move these market numbers up, and consumers will adopt new paradigms and new applications for video content.

High definition video is clearly an upcoming trend that will eventually become a mass market feature. Broadcast video is the first key application for HD and currently many consumer set-top boxes support both HD and SD broadcast video content. The market challenge is now to take this leap into higher quality video and its high bandwidth requirement, and make it ubiquitous. Consumers will eventually want to do the same thing with all this HD content as they did with SD, including storing it, streaming it, streaming multiple channels of it, creating video content of their own, and making it portable.

The key difference however in its consumer mass market acceptance is the availability of HD displays and HD players and recording devices. While SD displays and DVD players/PVRs/DVRs (personal and digital video recorders) in standard definition were already ubiquitous at the time that the H.264 SD devices entered the market, even today HD displays and players are still in early stages globally. We expect it however to become a fast growing segment.

By the end of 2005 there were 19M households with HDTV sets in the US (17% of total TV households) with 11M of these watching HD broadcasts. At the same time 14% (6.7M) of TV households in Japan were HD ready. On a global basis, by the end of 2010 the number of HD ready households will reach 174M or 22% of TV households. The figure will be 59% in the US, 66% in Japan and 30% in Western Europe (Source: Screen Digest Reports 2006)

The consumer market numbers for HD DVD players are currently even less, with movie studio Warner Bros. expecting only 1.5 million devices that can play high-definition DVDs will be sold in the USA by year's end (Source: USA Today report 2006). With the ongoing battle of different HD formats (HD-DVD and Blu-ray), consumers are waiting it out before shelling out the high price for HDTVs and players.

For the time being, without HD being a commodity in the home, the movement towards H.264 HD will start out only in high end devices. Eventually as HD display costs come down and volumes go up, consumers will follow the mass market migration towards HD video content consumption. At this time, the story will follow the SD video explosion, going from HD video content consumption to HD video content creation, to the need for more bandwidth and storage, to the need for extremely advanced compression standards in all devices. The HD storm is brewing and will arrive to the mass consumer market in time.

Qpixel is poised to catch future mass consumer market opportunities. Qpixel will leverage its innovative techniques, flexibility in architecture and design, and knowledge of the consumer market timing with its strong consumer OEM customer base, in order to continue to build products that meet the perfect consumer balance required for mass market acceptance of new digital consumer devices.