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Wednesday, 20 August 2008

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Game, set top box and match?

Wednesday, 06 August 2008

Mixed views on the future prospects for STBs…

A new report from Futuresource Consulting Ltd paints a rosy picture of the future TV set top box market, with a 40% growth in numbers predicted over the next four years. But is there a threat from integrated Digital TV (iDTV) sets? IMS Research thinks so.

According to a new ‘Industry Update Report’ from Futuresource global shipments of pay-TV set top boxes (STBs) are on track to grow by nearly 40% by 2012. This represents an increase of 38mn units, with growth resulting from new subscribers and consumers trading up to STBs with Personal Video Recording (PVR) functionality and High Definition (HD) capability. “Pay-TV operators around the world continue to use STBs to drive digital services, increase ARPU and reduce subscriber churn,” ventures Futuresource Consulting analyst Carl Hibbert, “with innovations such as High Definition, PVR, VoD and home networking.”

Futuresource reckons this competitive ‘technology push’ from the pay-TV industry and the continued importance of content security will maintain the stability of the STB industry for at least the next two to three years, despite the wider availability of TVs with open interfaces such as CableCARD and CI+, and increasing trends towards CE product connectivity into pay-TV networks.

“Consumer desire for higher spec and higher value products is providing the market with buoyancy,” continues Hibbert, “but as features such as HDD and MPEG-4 continue to move mainstream, competition will bring down prices and reduce future margins. The next five years will see further consolidation in the STB industry, with smaller vendors being absorbed or pushed out, especially as China ’s major OEMs and brands increase their drive on export markets. And in a commoditising market, the long haul survivors will be the ones with solid account relationships, competitive economies of scale and/or unique competencies in software or end-to-end network solutions.”

Futuresource also thinks the next five years will see a geographical shift in demand for STBs. The company’s research suggests that EMEA accounted for the largest proportion of demand in 2007, generated through rapid subscriber adoption across both cable and satellite, with Analogue Switch Off generating additional traction for DTT boxes. By the latter part of the forecast period, Asia Pacific will become the dominant territory, accounting for nearly 50% of global demand. India and China will account for the majority of this, though both have witnessed slow uptake of multi-channel TV to date, due to price and technology limitations. As costs reduce, both countries will generate phenomenal growth. Futuresource believes the Americas will lose share of the overall market over the forecast period.

Set top meets match?
Likewise running the rule over the STB sector, but reaching a somewhat different conclusion, is IMS Research. That company is forecasting that shipments of integrated digital TVs (iDTVs) will grow to 143mn in 2013, up from and estimated 52mn in 2007. IMS notes that that Samsung, LG, Sony, and Funai have signed on to make tru2way™ certified iDTVs for the US and Korean cable markets, and that every iDTV sold in the EU must support a conditional access module interface for pay TV, and wonders whether the days of the set-top box numbered.

“In Japan , iDTVs already displace about 1.7mn satellite set-top box shipments each year, having reduced that market from 2mn unit shipments in 2003 to just 0.3mn in 2007,” points out IMS analyst Stephen Froehlich. “While the conditions in Japan that allow this are unique, it is clear that US cable operators are working towards the creation of an even more compelling situation in the hopes of eliminating most of the US$200 cost of a DVR.”

Froehlich does acknowledge findings by the US National Cable & Telecommunications Association (NCTA) that, despite the fact that CableCARD iDTVs have been available since 2004, at most 372,000 cable set top boxes (out of an estimated installed base of 55mn) have been displaced by iDTVs as of June 2008. He also says results have been similar in Europe , where every iDTV includes a similar DVB-CI interface per an EU mandate.

However IMS argues that forthcoming tru2way iDTVs are likely to change this situation. “The fact that the same level of interactivity is available on Japanese satellite boxes and iDTVs is a significant contributor to the iDTV’s success in Japan ,” reasons Froehlich. “Forthcoming tru2way iDTVs will be designed specifically to add interactive functions, presenting a real risk of reduced cable set-top box volumes in the US . In addition, parallel efforts are under way to deploy the same technologies in Europe , specifically iDTVs with support for MHP or MHEG-based interactivity and improved CI+ content security.”
John Williamson