Thinking 'Outside the Set-Top Box,' Pioneer Allies with DiviCom , Canal+
09/07/98
DV Business
(c) 1998 Phillips Business Information, Inc.
Pioneer Electronic's [PIO] alliance with Canal +, C - Cube Microsystems [CUBE] and its subsidiary DiviCom , announced Aug. 24, is the company's latest effort to reach across international borders to strategically position itself as a one-stop digital cable solution for the American market.
Pioneer, a Japanese-based consumer electronics firm, is better known for its car stereo and laserdisc products. But it's also the third largest supplier of set-top boxes in the U.S., behind General Instruments [GIC] and Scientific-Atlanta [SFA], and it has an agreement to supply digital set-top boxes for Time Warner's [TW] ambitious Pegasus digital cable project.
The agreement calls for Pioneer to build Open Cable-compliant set-tops, which will integrate an evaluation board from C - Cube that includes an integrated MPEG-2 decoder, graphics co-processor and a host-CPU.
DiviCom will supply the MPEG-2 encoders and a network management system, while France's Canal+ will adapt its Mediahighway middleware and Mediaguard conditional access systems to the U.S. market. Pioneer will market the end-to-end system through Pioneer New Media Technologies, Inc., a division set up in 1996 to develop technology for cable television. Expect to see the first products, which will be Pegasus-compliant, by December 1999.
At a time when GI and Scientific Atlanta are battling it out for the lucrative digital set-top market in the U.S., Pioneer's collaboration with Canal+, which holds a dominant position in the European digital marketplace, provides a competitive alternative for American cable systems.
The initiative is also part of Pioneer's plan to revive lagging sales. The company saw its latest quarterly net income slide almost 83 percent due to weak sales in Asia and South America, as well as increased competition in the consumer electronics market. Pioneer officials recently announced a re-organization plan aimed at doubling sales by 2005 by concentrating on HDTV, DVD and digital home networks.
Beyond the Set-Top
A major consideration driving this alliance was Pioneer's realization that it had to look beyond just providing a set-top box.
"The scope [of this project] is not limited to just the set- top," says Jim Slade, VP for New Business Development for Pioneer New Media Technologies. "We want to deliver an end-to-end solution to the industry."
Although Pioneer already supplies satellite set-tops for Canal+'s European market to the tune of "hundreds of thousands" per year, according to Slade, the focus of this initiative will start with the U.S. market.
The FCC's recent decision to open the way for the retail sale of set-tops also furthers Pioneer's strategy, since the company intends to market the devices through retail channels as well as traditional routes.
Slade estimates that, based on projections of the set-top markets in various countries, Pioneer hopes to capture a 30 percent share within the next three years.
Chip Makers Target Cable
With this alliance, C - Cube is building on a relationship it has had with Canal+ for several years. The chip maker, a dominant supplier of MPEG chipsets to the broadcast industry, began supplying Canal+ with decoder chips through Sony [SNE] set-tops three years ago. Canal+ was also one of the original financiers for DiviCom 's start-up.
And despite its dominance in the MPEG chip market, C - Cube is also targeting the European DVB standard.
"We're very committed to DVB, which is a dominant technology worldwide," says Chris Adams, VP for Marketing in C - Cube 's Consumer Networks Products Division. "Outside the U.S., we're dominant in the DVB-RC (return-channel) market," Adams said, adding that the company will reveal its latest strategy on European digital cable deployment at IBC in Amsterdam this week.
The agreement also marks C - Cube and Divicom 's first high-volume production opportunity in the U.S. cable market and is a sign of the growing influence of chip makers in the cable industry.
"As the cable industry moves into the digital realm and as standards start to move, the market will be moving from the service provider to the retail market," says Jon Cassell, senior analyst with industry watcher Dataquest, an IT market research group based in San Jose.
"This shows the influence the chip guys have and validates C-Cube 's purchase of DiviCom ," Cassell says. " C-Cube is a smart player and this is going to be a big year for their expansion into the set- top market."
(Pioneer, Jim Slade, 201/236-4182; C - Cube , Chris Adams, 408/490- 8000; Dataquest, Jon Cassell, 408/468-8195)&
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