The Future of the Set Top Box
The future of television will be heavily influenced by today’s broadband consumer. Today’s Internet experience, with interactive applications and very rich content, plus the blending of voice (Skype, Vonage) and video (YouTube, Video On Demand) serves as the baseline for tomorrow’s digital television expectation.
Already, more than 60% of broadband consumers want to experience their own pictures, movies and music on a home AV system. Many products are positioning to meet this demand, some directly, some tangentially, many incompletely.
Gaming systems take an early lead
Consider that Xbox360 allows users to download and watch media from XboxLive, and with add on componets gaming enthusiasts can watch HDDVD movies. Not wanting to be left behind, Sony’s PS3 will support a digital TV tuner in 2008. Overshadowing all of this, Microsoft-based media center PCs, despite their un-inspiring interface and form-factor, continue to sell.
Set Top is better positioned
Right now, the greatest opportunity to successfully capture broadband consumer expectations and demand for interactive television (and, of course, associated TV commerce and advertising revenue) lies with the promise of an advanced set top box (STB). I believe this for a number of reasons, most importantly being scale and convenience. The cable set top box market places tens of millions of broadband devices in consumers consumers living rooms, connected to their AV stack and high-definition television. What other systems struggle against and spend tremendous sums overcoming the set top box already has: consumer training and expectation of placement and use.
No clear winner
Nevertheless, future STBs have a long way to go to meet their promise. It’s also uncertain that they will win the race. It’s difficult to envision how present and planned OCAP-based systems will offer any significant feature advantages over last year’s Motorola and Scientific Atlanta HD-DVRs.
Today, when broadband consumers watch TV their wishes for interactivity and content must be suspended with the power button. Features and services that enhance their TV-watching experience, such as high-definition, TV recording and trick-play (pause, FF, Rewind) are available on systems today for $12.99 per month.
Demand for interactivity
However, there exists huge pent-up demand for real-time information and PC-based digital media in the living room. Going forward, content producers and product managers must prepare the blending of broadcase television with commerce, personalization and the integration of online services, such as Ebay auctions, Amazon shopping, OpenTable reservations, Google calendars and Wikipedia references; all will find wider acceptance and expectation among broadband, high-definition consumers. The set top must, and will eventually transforme into a home media center platform.
The market for set-top boxes is poised for steady growth through the end of the decade, a new report said, as service upgrades and new technology drive the pay-TV audience to new levels. According to a new study from ABI Research, three main factors will propel the STB market in the next few years: advanced features, interactivity offered by hybrid boxes, and the uncertain development of a retail set-top market.
Accelerating sales of HDTV sets and the popularity of PVR functions are igniting customer demand for set-tops that support the advanced features. The trend will create a temporary market for upgraded boxes. However, beginning in 2010 many existing customers will have completed their upgrades, and demand will begin to decline.
FCC creating a retail market?
As of July 1, 2007, the US Federal Communications Commission mandate, requiring that cable operators must support CableCard or downloadable security (DCAS) mechanisms. Coupled with Cable’s desire to get out of the billion dollar STB leasing business, may lead to the development of a legitimate retail environment for third party set top boxes.
Watch the CableLabs certification rounds for interesting news on this front.
References
- My own research & opinions
- Various Jupiter reports
- Sony PlayStation 3 tuner to provide digital video recorder