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Summary

According to Ovum's ICT Enterprise Insights survey 2015/16, more than one-quarter (28%) of premium content owners (broadcasters, Internet streaming TV and video, pure-play OTT, cable TV, satellite TV, and telecom-operated OTT platforms) report that developing omnichannel quality of service (QoS) and quality of experience (QoE) is a core business priority for the next 18 months (2017–18). In a highly fragmented multiscreen video services market, QoS and QoE are fast becoming primary customer retention and lifetime engagement factors. As device and channel fragmentation increases, offering a seamlessly integrated high-definition user experience and service delivery demands a robust automated digital testing ecosystem. Thus, migration from manual to comprehensive (encompassing real-time test scripts on devices, video, audio, resolution, frame rate, and bit depth), efficient, and reliable automated digital testing is essential to enhance competitive advantage. Eurofins Digital Testing, a horizontally integrated digital testing provider, acquired Labatus from Zenterio in August 2016. Ovum believes the acquisition will not only help Eurofins to significantly expand its footprint in the Nordics but also provide a nearshore QoS-based value proposition (via "lab-as-a-service") and a referenceable tier-1 regional customer portfolio.

Nearshore "lab-as-a-service" will be a vital differentiator in the multiscreen TV and video market

Media enterprises, especially premium content owners, have traditionally followed a highly conservative in-house services approach by building their own infrastructure leveraging best-in-class solutions, services, and human capital (i.e. software engineers). As operating costs rise due to increasing content acquisition and production expenses, these margin-pressed enterprises are moving toward managed services offerings for their next-generation multiscreen TV and video platforms. Furthermore, as local content becomes mainstream, the offshore model is becoming insufficient due to the need for continuous add-on knowledge transfer and administration costs, inadequate end-to-end local testing services (non-English) support, and ongoing customized quality assurance (QA) functionality for unique devices across multiple markets (such as HBBTV in Europe and Australia and New Zealand). These challenges faced by today's premium content owners have paved the way for Eurofins to purchase Labatus to further its core business strategy, which is focused on "nearshore-lab-as-a-service." Labatus's core competencies include the following:

  • The company complements Eurofins' horizontally integrated test planning, tool implementation, development, and automation framework for connected TVs, set-top boxes, smartphones, tablets, and applications across iOS, Chromecast, and Android.
  • It recorded a strong operating margin of 12% in 2015.
  • It has a recurring tier-1 referenceable customer base in the Nordics that includes Tivo on Com Hem and Conax.
  • Its primary go-to-market strategy is direct sales, which aligns with Eurofins' growth roadmap.
  • It has flexible third-party integration and a long-running legacy in the digital service provider space, especially cable TV and IPTV.

Because diversification and localization of content, user experience, and service delivery will be pivotal in the competitive multiscreen TV and video services landscape, there will be strong demand for nearshore automated digital testing through outsourced labs or managed services in the next two to three years. Although Eurofins' purchase of Labatus will extend its value in terms of QoS, expanding automated digital testing capabilities for QoE (i.e. network, security) will also be essential to enable premium content owners to overcome their digital user engagement challenges in the IoT era.

Appendix

Author

Kedar Mohite, Senior Analyst, Media & Broadcast Technology Services

kedar.mohite@ovum.com

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