Digital TV
Key strategic decisions
Kudelski Group was quick to recognize the revolution that would be sparked by digital convergence. We prepared for this by adopting a medium- and long-term strategy. Our approach is built on a firm foundation that reflects the time and patience that went into laying it.
1. Leadership
When we entered digital TV, we quickly became a leading player in the segment. We understood that this position was fundamental in an industry just beginning to expand – the cards were being re-dealt, and we intended to get the best hand possible. We were positioned to take advantage of new opportunities and to help define the industry's future through our technological and marketing innovations.
Our leadership also guided us in our strategic decisions at the operational level, in terms of product development, organization, management, growth and investment strategy, as well as industrial, human and financial resources.
2. Solutions for the entire ecosystem
Digital convergence implies increasing complexity and new infrastructures, which in turn generate new needs among operators. Chief among these is the need for partners that can develop global technological solutions that are easy to deploy and operate.
For years, our growth strategy has been built around this concept. We offer integrated end-to-end solutions that meet the entire range of needs in the digital TV ecosystem: security, content management, applications and interactivity. We develop turnkey platforms, which enable operators to provide their subscribers with the best of today's technology for maximum value.
3. Open-architecture, convergence-ready solutions
Our platforms all have an open architecture, meaning that they can integrate with technologies developed by other suppliers. This is part of our core philosophy.
This approach paid off early on with traditional digital TV, as it gave operators greater latitude in designing and implementing their infrastructures. It has now given us a major strategic edge in the world of digital convergence, where interoperability among highly diverse technologies is required to achieve multi-content and multi-network platforms.
The open architecture of our solutions was critical in the field of mobile TV, for example, where we were a true forerunner. It enabled us to transfer our expertise and solutions to this new environment with reduced costs and time-to-market and to become the global leader in this sector.
4. Major investments in innovation
One of the fundamental values of the Kudelski Group is innovation. Innovation means developing new technology as well as new business models. We commit significant resources to this effort and have spent more than one billion Swiss francs on research and development over the past five years. This policy is constantly proving its value. The Group's competitive position is reinforced year after year by an ever-expanding range of solutions and services that are often considered benchmarks by the market for their quality and state-of-the-art technology.
Innovation also forms the backbone of the Group's approach to security solutions. This is important because, in addition to new opportunities, convergence creates new threats. By building bridges between families of digital products, convergence opens up new routes of attack at a time when piracy is becoming ever more sophisticated. Kudelski Group's latest generation of security solutions takes into account the problems arising from this phenomenon. It introduces differentiated hardware- and software-based security mechanisms that can be adapted to specific types of use and types of device. Many specialists consider these to be the most robust security solutions ever developed.
In 2009, we opened an R&D center in Beijing. We are expanding our ability to innovate so that we can respond as effectively as possible to expectations in emerging-market countries in general – and China in particular. This new research center will help us keep up with these fast-growing markets.
5. Business model based on converging interests
In 2009, we completed a gradual, multiple-year changeover from sale to service mode for our main clients. This new business model is one of the most ambitious strategic developments we have ever undertaken. With the service mode, operators pay a monthly or annual fee to use one of our global solutions. The fee is based on the number of smartcards or modules used by the operators' subscribers. Our clients also benefit from our long-term technical support and system upgrades.
The service mode offers a number of advantages to the Group. First, it makes us less dependent on the process of selling new systems. The fee system generates steady, stable revenues that are less affected by economic changes. It also allows us to optimize exchange rate management.
The transition to the service mode lasted several years, during which the significant investment required and the short-term impact on our top line temporarily weighed on our financials. The new business model is now starting to pay off, however, with improved profitability. It has also redefined our relationship with operators: our interests now dovetail with theirs, and this has set in motion a positive dynamic and strengthened our relationships with clients.
6. Worldwide presence
The Kudelski Group played a pioneering role in the development of the first digital pay-TV markets. Thanks to the expertise we built up and the privileged market position we occupied, we kept pace with this technology and established a strong position in emerging markets.
The Group is well established in the major western European countries and North America, where the markets are seeking higher value-added solutions. As the digital TV sector has expanded, we have achieved some major successes in the other economic regions. This includes Asia – especially China – along with Eastern Europe and Latin America. All these markets, some of which are among the most populous countries in the world, represent major growth potential for the Kudelski Group. In addition, the technological advances that we regularly roll out are often most appreciated by those who are new to digital TV.
A new frontier: digital television 2.0
Web 2.0 refers to the second generation of the internet, which is characterized by an increasing focus on social networks and on applications that allow users to personalize their virtual environment. Likewise, experts in the digital TV sector talk about TV 2.0, which refers to the new era that television is preparing to enter.
New televisions come with an internet connection that enables operators to launch a range of innovative services that combine the advantages of the web with those of television, all in the comfort of the home.
User behavior and content consumption are about to be revolutionized as TVs integrate web-based content, micro applications called widgets, social networks, and a myriad of features allowing users to customize their viewing experience. In anticipation of these trends, Kudelski Group launched a widget platform in 2009 that has already been implemented by some operators.
Radical change is coming to the television advertising industry as well. As is true on the internet, advertisements are taking the form of increasingly personalized messages that are more interactive and more tailored to such variables as context, behavior and social-regional profiles. Another advantage of this type of advertising is that it is easier to measure its effectiveness. These imminent changes could not be more timely for operators, whose advertising revenues are being eroded by the internet. The economic stakes are therefore enormous.
A new frontier is opening up for digital TV, and new opportunities are emerging. the Kudelski Group has positioned itself to meet operators' current and future needs and to help them take full advantage of these highly promising developments.