Huawei Analyst Summit 2017: Expanded Video Focus, and Velocity

Erik Keith – Principal Analyst, Fixed Access Infrastructure

Summary Bullets:

• Huawei’s 2017 Analyst Summit showcased the company’s clear progress in the video market on multiple levels, from the integration of video into Huawei’s strategic vision to the hiring of an ex-AT&T video marketing director as CMO for Video Products.

• While Huawei has made clear, tangible progress in the video space, there is still room for improvement, evidenced by its more acute focus on telecom/IPTV operators, at the expense of substantial opportunities with cable operators.

Huawei’s Addressable Video Markets, and Monetization: On day one of the 2017 Analyst Summit, Huawei’s keynote speakers highlighted the company’s heightened commitment to video. This includes Huawei’s segmentation of the video market into three key market segments: the $650 billion entertainment video sector, the $350 billion industry video sector and the $18 billion communication video sector. Entertainment video encompasses live and linear TV, VoD, OTT video and even user-generated content (UGC), Industry video includes telemedicine, remote education and “safe city” applications (supporting a network of public safety cameras, including HD feeds) and Communications video is video conferencing and video calls.

In terms of monetizing video, Huawei seeks to do so in three areas: the ecosystem, ‘experience’ and broadband.

• Ecosystem monetization will come from advertising, AR/VR, UGC/Social/Cloud and gaming, shopping, education and health.

• ‘Experience’ monetization will come from multi-screen, video calling, 4K/premium content, short videos, and (for businesses) 4KTV in bars/hotels and monitoring.

• Broadband monetization will be derived from linear TV and VoD (including mobile versions), IPTV and OTT aggregation, and OTT disruption and cooperation.Huawei has made clear, real progress in terms of its video strategy, demonstrated by enhanced perception and segmentation of the video market and its related opportunities.

Video Velocity: Two years ago, Huawei was pushing “video as a basic service,” which we called out as needing refinement; suggested alternatives to “basic” were fundamental, core and primary. Huawei then moved to Video Everywhere and Big Video propositions in 2016. While these were steps in the right direction, at the 2017 Analyst Summit, video was given its highest profile yet by Huawei, exemplified by the “Video Powers New Growth” session on day one, with video an underlying, pervasive topic throughout its keynotes and other presentation sessions.

Huawei even touted video as the new voice, specifically as the telecom operators’ core service and revenue source. This reflects Huawei’s focus on telecom service providers vs. cable operators, whose core services/revenues have always been TV/video-centric. Huawei’s focus on video at the summit skewed toward high-level highlights; for example, video traffic forecasts of 70%-80% in the coming years, and the related network impacts of the transition from current HDTV to 4K/UHD resolutions. The impact of video traffic, including the pending implementations of ultra-high-res content, are on par with other well-known forecasts such as Cisco’s annual Visual Networking Index (VNI).

New Sheriff in Town…But is Huawei Aiming for the Right Targets?: Huawei recently hired Lee Chow, the former Director of IP Video Product Management (i.e., the U-verse service) at AT&T, as the Chief Marketing Officer (CMO) for Video Products. This is a very strong move for Huawei, showcasing its commitment to hire top, proven marketing executives in order to grow its presence in the global TV/video market. In our meeting with Ms. Chow, she highlighted Huawei’s customer and market traction, as well as the anchor components of Huawei’s video portfolio and related service enablers.

Specifics include 110 video/IPTV customers worldwide – with Deutsche Telekom being its most prominent customer outside of China – as well as its number one market share in IPTV, with ~74 million live end users. In terms of Huawei’s video solution set, the company offers a modular portfolio, with three key components: 1) the Content Distribution Network CDN) platform; 2) middleware platform and 3) set-top boxes (STBs). Huawei’s global CDN has eight nodes located in the following countries: China, Hungary, Mexico, Dubai (U.A.E.), Malaysia, Russia, Egypt and the Netherlands.

There is no doubt that Huawei has clearly made progress in terms of both its video products and solutions marketing, evidenced by its elevation and incorporation of video into its high-level, strategic initiatives. But Huawei still has room for improvement. As mentioned above, the company seems overly focused on telecom/IPTV operators, not cable operators, which account for a massive number of pay-TV subscribers worldwide. The number of global cable TV subscribers dwarfs that of IPTV subscribers; i.e., the top two cable operators worldwide, Comcast and Liberty Global, together account for almost 50 million pay-TV subscribers. As Huawei aims to monetize its expanded focus on video, more overtly and aggressively targeting the cable operator market, at least in countries/regions outside the U.S., makes sense.

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