Just this month, I am proud to say we hit another major milestone that reflects as much on the entire digital video industry, as it does on Verimatrix. We celebrated reaching 500+ pay-TV operator customers and securing more than 20 million screens. (For additional milestones, read about our global number one ranking in Content Protection/DRM in MRG’s IPTV Market Leader report – for 5 1/2 consecutive  years!)

A large part of our tremendous growth has been due to the pay-TV planets colliding. Back in 2006, virtually all of our customers were delivering green field IPTV services over managed networks. Fast forward six years, our heritage in IP-based security techniques has placed Verimatrix in the center of this collision.

Cable and satellite providers are taking advantage of IP networks for two-way communication – over both managed and unmanaged (OTT) networks.  IPTV operators are also turning to Internet-based OTT video to enable a compelling multi-screen experience. And we are finding that increasingly even “pure play” OTT video providers need to meet the same content security requirements for premium video as the traditional operators do (see our latest white paper, Content Security Requirements for Multi-Screen Video Services.) Of course, there remain tens of thousands of analog operators that are still transitioning to digital (India’s Phase I digitization this year presents a wealth of opportunities.)

Our cable and satellite (DVB) customer base increased 100% in 2011, and we’ve had a 500% growth in secure OTT video services. Based on feedback from customers, particularly our DVB customers, they feel more confident that our VCAS solutions will help them extend into multi-network, multi-screen video services more efficiently.

Additional proof of our position in the market can be found in our 3-Dimensional Security approach, which we introduced more than three years ago: Flexible layers of protection techniques that address evolving business needs and revenue threats. In other words, any screen over any network to meet any threat. This clearly still rings true today.

Since celebrating this milestone was so much fun, everyone is focused on reaching the next one!

As part of its Awards coverage, Digital TV Europe asked Tom to reflect on his accomplishments in 2011, and provide his vision for 2012. Here is an excerpt of the interview.

1. What for you were the professional highlights of the last year?

We delivered a number of multi-network, multi-screen projects to our customers, and we completed the acquisition of an excellent technology company (Comvenient, a DVB conditional access specialist based in Munich). Plus, our company passed an important milestone as we added our 500th operator customer.

2. What was the year’s most significant wider industry development in your opinion?

The embrace of multi-screen delivery by pay-TV operators.  It’s hard to believe that the iPad was launched less than two years ago, when it seems that every pay-TV operator is now racing to support tablets along with mobile phones, Blu-ray players and connected TVs.

3. What are your goals for next year?

The complexity of multi-network, multi-screen systems poses a huge challenge for pay-TV operators. We have a great solution to abstract away much of the complexity and related cost. In 2012, our plan is to take a leading market position for these rollouts.

4. What do you think are the main challenges and opportunities facing the industry over the next year?

Challenges are global economic concerns and the complexity of multi-screen systems. Opportunities are the half-completed transition from analog to digital networks, and the fact that pay-TV will be ascendant as the legacy advertising model erodes.

5. What would have been your career of choice if you had not worked in the digital TV/media industry?

There are other industries?  I’m very intrigued by biotech and the medical advances that are being driven by an aging population and new genetic advances.

6. Which individual in the public eye do you most admire and why?

Well, I certainly appreciate the unique entrepreneurial spirit of Steve Jobs.  To start a business in the garage and make it the most valuable company in the world, to return from exile, create a powerful culture and brand – that’s quite a life story.

#1.  Our CEO, Tom Munro, was shortlisted in the Technology Leader category for his contributions to the pay-TV industry as a whole.

#2.  Mario Pino, Marketing Launch Director for our customer Etisalat, was shortlisted in the Marketer of the Year category.

We are enormously gratified to receive this recognition; 2011 has been an incredibly productive and successful year on many fronts for us here at Verimatrix.  As our CEO, Tom is the visionary responsible for Verimatrix’s technical and commercial momentum in multi-network revenue security.  With a growing list of multi-screen deployments around the globe, this momentum is hard to ignore.

And we would also like to extend our sincerest congratulations to Mario.  It is an honor to be recognized alongside a partner, especially one as hard-working and innovative as Mario.  It’s Mario’s job to ensure that Etisalat lives up to its marketing message of ‘Get ready to be amazed’. Since Etisalat developed its vision as a leader in digital media delivery network over any network, any screen, at any time, the progress has been exponential.

In 2011 alone Mario played an instrumental role in launching the IPTV 2.0 service called eLife TV, Etisalat xGames, as well eLife OnWeb and eLife OnDemand on LG Smart TVs and LG Smart Upgraders. More information about these deployments can be found on Mario’s blog. He has achieved many accomplishments this year, and we wish him continued success in 2012.

Congratulations, Tom and Mario!

We laid out our product roadmap to show how we are meeting the needs of both our DVB and IPTV customers that are broadening their services to hybrid DVB-IP and multi-screen delivery. We haven’t received an RFP in the last 12 months that didn’t include some multi-network, multi-screen component. Even if customers are not ready to make that type of network transition now, they certainly want to understand their future options.

The Summit also provided a valuable forum to exchange views with experts and industry peers on the state of revenue security, potential threats and the piracy scene, and what’s next in the pay-TV marketplace.

We brought in two guest speakers to provide a broader view: Alan Constant and Steve Bjuvgard of Imediaco, a firm that provides technical and strategic consulting services across the entire range of media distribution technologies with particular expertise in video security. Alan offered an insightful perspective on the next 10 years of pay TV, by examining the previous 10 years. His convergence prediction is that DTH will be initially replaced by some form of hybrid network and then OTT on unmanaged networks.

Steve dug deep into piracy issues with some regional case study examples. He deftly broke down the status of piracy, along with the regulatory and legal enforcement environments in Asia and the Middle East. For example, in some Middle Eastern countries, it is estimated that up to 40% of urban households accessing pay-TV signals are unauthorized – meaning non-paying users.

Fresh from IBC, I also had some reflections to share. The most obvious was the lack of 3D “noise” on the show floor when compared to 2010. We saw only modest advancements in the positioning and development of 3D solutions and services. The 3D hype was soundly replaced by multi-screen services – although definitions differ, it is clearly the evolution of network convergence and it is no longer considered “new and mysterious” as it has been in years past. And it is worth pointing out that the falling prices of DVB set-tops are opening new markets, particularly in emerging regions.

Of course, operators are making decisions on the best ways to secure assets on these different delivery networks. As a validation of the software-based security approach, we saw even the legacy smartcard providers announce their software-based, multi-screen solutions. Of course, the other piece to the multi-network, multi-screen puzzle is content rights, which we find are dragging out these next-generation implementations.

We are working on some ground-breaking research regarding content rights across different networks and devices, so stay tuned.

All in all, the attendees at the EMEA Autumn Summit were a very interesting and dynamic group, representing both technical and business disciplines, with very ambitious and advanced business plans.  The speakers shared the difficulties of combatting piracy, not only through technical means but also through judicial, commercial, and creative mechanisms.

Of course, fun was had by all during our “extracurricular activities,” such as the visit to the Erdinger brewery with an extended tour of its facilities, where we learned everything worth knowing about beer making, and the Oktoberfest event itself, which was a totally OTT event (pun intended).

We look forward to hosting more events in 2012. We would love to get your input on what you’d like to hear from Verimatrix. Leave a comment and let us know.

But we would like to underscore the rationale, with all the current industry hype around OTT video and TV Everywhere, for why the leading IP revenue security company would be investing in DVB broadcast conditional access?

The answer is found in the global perspective we have gained in working with many different types of network operators and system integration partners around the globe. Today’s digital TV global landscape is still dominated by DVB broadcast systems – but these broadcast only networks of today are certainly the hybrid networks of the future.

Based on compiling a number of industry metrics and reports, we’ve identified 700+ operators, today with more than 160M subscribers, will switch the technology base of their network over the next couple of years – perhaps from analog to digital, or from MPEG2 to MPEG4 digital technologies. Operators that fit this description will grow to 220M subscribers in the same time frame.

And we feel all of these networks will use the transition point to consider new CA/DRM solutions that enable cost optimization and position the network service to grow into IP service delivery of one sort or another in the medium term.

Even during the next transitionary few years, the subscriber base of virtually all of these operators may well be dominated by broadcast-only technologies. But at the same time as adding a number of premium IP-based service options, operators will almost certainly want to explore a range of client options including cost-effective cardless security.

Therefore they will see a flexible DVB broadcast solution as a major component of an overall growth trajectory that includes broadcast, hybrid, and Internet network delivery. And that they will want to manage the rights for content across all these networks in a holistic manner.

Think of it this way: the operators that “only” need broadcast DVB security now, will need VCAS 3 later in their deployment. With this acquisition, not only do we maintain our focus as digital TV security specialists, but we can now offer a full security migration plan for DVB operators that want to move to a hybrid network – all under a single security architecture.

By adding Comvenient’s deep DVB expertise and hard-earned reputation for secure and reliable products, which are very complementary to Verimatrix’s, we will reach our goal to be the most successful and innovative CA/DRM company in the market.

To put a finer point on it, here is how our company profile has been enhanced with this acquisition:

Founded: 2000

Scope: Content and Revenue Security for multi-network, multi-screen applications: IPTV, DVB, hybrid & over-the-top to STBs, PCs, connected TVs, web tablets & mobile devices

Locations: San Diego, California, with European HQ in Munich, Germany; Sales offices in The Netherlands, France, Russia, China, Singapore and Argentina

Customers: 450+ operator customers in 50 countries, including 20 Tier 1s and 2s – protecting more than 18M screens for IPTV, DVB, PCs and other devices

Partners: More than 110 ecosystem channel & integration partners Ericsson, Huawei, Nokia Siemens Networks, Technicolor and ZTE

Investors: Goldman Sachs, Mission Ventures, Crescendo Ventures, Cipio Partners, JK&B Capital and SunAmerica Ventures

NAB is a great opportunity for us to continue to discuss the benefits of our broadened DVB capabilities. You will see the Verimatrix booth (#SU6207) and the Comvenient booth (SU3024) adopt the new “Expect More” messaging and an emphasis on combining smart card and cardless security, DVB migration strategies and multi-network/multi-device security options.

Please come by to hear more.

Several of the booths were astonishingly large and expensive. At Microsoft, an entire segment was devoted to the new Kinect controller for the Xbox 360. I paced off the Samsung booth, starting at cell phones and ending at Internet-connected washing machines. It measured 110 paces by 55 paces, or approximately the size of some of the CES keynote speakers’ egos.

Tablets

No booth was complete without a full lineup of iPad clones. There are tablets with cameras, 3D tablets, tablets with videophones, tablets that convert into notebooks and game platforms. If nobody else makes a killing on tablets, then Corning certainly will, as they are the sole provider of the special “gorilla glass” used on all of the touch surfaces.

3D

Last year’s show was all about 3D. The subject continues to be hot this year, particularly in the quest for solutions that don’t require the dreaded “dork glasses.” As before, the lack of standards and the lack of content are impediments to success, although the video game world is going 3D at full throttle.

Microsoft

Beyond the very strong presence for Xbox Kinect, there was a strong push for the Windows Mobile platform. Rumor is that the new OS has little market support, and that Microsoft is contemplating acquisitions including some handset vendors in order to catch up to the Apple and Google smartphone successes.

The MediaRoom demo was essentially unchanged from 2009, 2008, and earlier. It is reported that the entire MediaRoom business is now reorganized under the Xbox business unit.

Prior to the show, there was much anticipation a new Microsoft OTT box that would be based on the Xbox platform. Either the press was wrong, or the truck didn’t arrive in time – no OTT box on display.

Google TV #Fail

Prior to CES, Google had publicly requested their partners to defer GoogleTV announcements. Poor industry reviews, poor sales, and a very negative reception by content owners have sent the team back to the labs for more work. They are very smart guys, and they will get it right eventually.

Gesture systems

PrimeSense is the Israeli chipset vendor that powers the gesture recognition features of the Kinect. One TV vendor was showing gesture based navigation, eliminating the remote control. A wrist flick left or right changed channels; other motions would mute or adjust volume.  Rude gestures switched the set from CNN to Fox News.

Cool Toys

The Wired magazine booth featured this transforming electric motorcycle. It operates as a Segway-style device at low speeds, but extends the front wheel to conventional motorcycle format for the open road. No mention of their need for DRM…

Even in off years, CES gives companies something to talk about. Please see other interesting CES insights from Kurt Scherf of Parks Associates and the gang at TechCrunch.

We would love to know your thoughts from the show.

We are very proud of our continued growth in IPTV. We feel we have been able to keep this top spot for several reasons. 1) We have built a very strong partner ecosystem that includes global and regional system integrators, which allows each vendor to focus on what they do best 2) We offer effective security solutions that address changing business needs and gives operators the freedom and flexibility to growth their businesses.

Since launching VCAS 3, what we’re calling the next generation of digital TV security solutions, we have received tremendous response on how we support operators’ “cash registers” that enable them to grow their subscriber base and add revenue streams. We are able to create value for our customers by understanding the complex business issues for multi-screen video delivery and delivering solutions way beyond content protection. 

You can see some examples of this from our library of white papers and other resources.

This recognition also reflects the dedication of our customer care team to respond to the unique needs of our customers. 

Thanks to everyone that has contributed to this noteworthy feat!

Without dwelling on the negative impression given by statistics, Mark underscored the promise of a more comprehensive transition to digital distribution where operators across the region can recapture a significant revenue base. The potential is even more dramatic when the new opportunity for Internet distribution makes content available to those subscribers who live away from their home country.

This hits a trend that we’ve been observing– Internet video is completely changing the way expats consume pay TV. Operators see an opportunity to broadcast local programming to expats all over the world. As you can imagine, this is both a huge revenue opportunity and potentially a devastating piracy challenge.

While some of these operators are rebroadcasting signals illegally, legitimate operators have the opportunity to enhance the subscriber experience with better quality and better selections of content. Asian operators have a special opportunity to service migrant populations and communities of temporary workers.

To reinforce another point in the article, Asia represents a lucrative market for content security providers. Cost is clearly an issue in this often low ARPU region; however technology and rising awareness of service theft are changing security dynamics. Operators upgrading to digital have a more compelling desire to protect their programming assets, and more advanced layered security approaches are making revenue protection way more cost effective.

Software-based content security is catching the attention of operators that are weary of the millions of cloned smart cards in the region. Software provides the flexibility to stay ahead of the hackers with renewable security and layered techniques like watermarking or fingerprinting. Even legacy smart card vendors are getting serious about software-based security.

We are certainly excited about the opportunities in Asia as hybrid networks, enabled by IP technologies, are on the agenda of most major operators.

Read Mark’s article where he breaks out some figures on piracy type and estimated costs per country.

Operators didn’t want to get stuck with the last MPEG-2 only set-top box. They were waiting to see how Microsoft’s VC-1 was going to compete with the H.264/MPEG-4 AVC standard. Cablevision and its plans for network DVRs were embroiled in legal battles with film studios and television networks (their latest victory appears to be the final word). And telcos wanted to be sure that software-based content security would deliver on its promise of scalability, performance and cost-effectiveness. 

Now the majority of these outstanding issues have been largely resolved, which frees operators to make solid investment decisions and launch exciting, new services. I call this a “mainstreaming” of the most viable concepts. For operators, the future clearly includes HD, MPEG-4 broadcasts with time and place shifting capabilities, which really have become the standard. 

A contributing factor of this type of standardization is the activity and changes within each technology vendor category. Consolidation and market conditions have produced some obvious winners along the entire development platform. There is generally a handful of established players and a lot less, yet innovative, companies that are offering disruptive technologies.

The irony is that despite the current market conditions, service providers are actually operating on more solid ground. Outstanding issues have been resolved, technologies have caught up with the hype and research suggests people are finding more time to watch TV.

Our VCAS 3.0 release is a good example. We have extended its functionality and focus to secure new revenue streams from content portability (such as supporting adaptive rate streaming for three screens and securing content over unmanaged networks).

Because we have proven software-based security in large IPTV deployments and have executed on our technology roadmap, we are engaged with major TV operators with complex issues. We have been able to mainstream our approach to content security to effectively address issues well beyond IP-based networks.  

Customers have a better understanding of their challenges and know what they want in order to launch their new services.

Fast forward to today, there’s no question that IPTV is here to stay. And depending on who you talk to, the growth prospects look good at nearly every corner of the globe: Asia, Europe and Americas.

Now we are seeing video service operators of all kinds embrace the technologies that have enabled the growth of IPTV. The current analog to digital transition is fueling major upgrades as operators see the upside potential of extending their reach and services. IP-based technologies are becoming the essential framework that underpins these competing, converged pay-TV services.

The intent of our blog is to share our experiences, insights and opinions about how pay-TV is changing on a global basis. We conduct business with operators in the hottest digital TV markets on the globe across many different networks – IPTV, cable, satellite, DVB hybrid, etc. We participate in many industry conversations – customers, partners, organizations, conferences – and we are known to have strong opinions! We feel this provides us with a unique perspective that we’d like to share with you.

You can read more about our bloggers here and visit our website for more information on Verimatrix.

We encourage you to post comments and look forward to new interesting conversations!

-Tom Munro, CEO