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Pace Profits From Pay TV Growth

by David Mercer | Mar 03, 2009

Pace, the UK-based set-top box manufacturer and third largest in the world, announced its 2008 financial results today. The company’s revenues rose to a record £745m and profits reached £28.5m. Comparison with previous years is difficult for two reasons: The company made a major acquisition of Philips’ set-top box business in 2008, and also changed its financial year. Pace’s CEO Neil Gaydon told us that he expects the pay TV business to be more resistant to the impact of the recession than many other sectors. The global market for set-top boxes continues to grow as new pay TV customers sign up for the first time and existing customers upgrade to more advanced services (HD, PVR). A key driver at the moment is the process of analogue switch-over which is taking place in many countries, and is encouraging some customers to switch to set-top box-based services for the first time. According to Gaydon, the structure of the set-top box industry is dictated by the unique and precise requirements of the multiple pay television operators in different parts of the world. These needs make it very difficult for smaller vendors to build the economies of scale that are traditionally associated with consumer technology markets. Pace’s strategy has focused not on becoming the number one supplier in the market, but on winning new service provider customers and maintaining profit margins. While it has clearly performed well recently, Pace’s long term future is inevitably dependent on the impact of the transformation of the television industry by broadband and connected TV devices. Gaydon is probably right to say that there is no imminent threat to the set-top box for the large majority of couch potato TV viewers. As I said recently, the fact that Sky still outbids its rivals for live football rights is a good sign for pay TV, as long as unauthorised broadband distribution of live football does not get out of control. But as we move through the next decade the landscape will surely begin to evolve towards new models of video delivery and Pace will need to demonstrate flexibility and innovation in order to keep pace (sorry) with those changes. Twitter: twitter.com/dmercer15 Client Reading: Western Europe Digital Television Forecast: 1H'09 Add to Technorati Favorites submit to reddit
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