The end of Set-Top Boxes is not yet nigh
With the rapid change in consumers’ video viewing habits, especially due to streaming, the advent of set-top boxes (STB) supplied by ISPs and telcos would seem to be in the firing line. Despite which, users’ demand for a unified customer experience, secured access to content and new smart home features, is helping make the demise of STBs a still distant prospect.
An STB market bound up with the evolution of pay-TV
The STB market was worth 16 billion EUR in 2018, with average annual growth expected to stand at 3.5% between 2018 and 2025. This growth is being fuelled largely by evolving consumption habits and technologies (HD, 4K, storage, hybrid boxes…).
But the situation does differ from region to region. While Asia is a major driving force (especially China and India thanks to regulatory schemes), growth in the United States and Europe is proving more moderate.
The STB market is closely bound up with the fate of pay-TV: a number of operators are feeling the effects of increasingly popular OTT video services and of cord-cutting, especially in the United States. Subscriptions to streaming services (Netflix, Amazon, Disney) and the use of free, ad-funded streaming sites (YouTube, Facebook Watch) are fierce competition for operators.
Slow growth for the STB market
STB market growth worldwide
New entrants upsetting the value chain
STB equipment suppliers’ business have evolved since the advent of digital TV in the 2000s, in terms of both components and hardware. After a wave of mergers and acquisitions that saw France’s Technicolor acquire American firm Cisco’s STB and modems division in 2015, and US company Arris take control of the UK’s Pace in 2016, the arrival of new entrant equipment suppliers such as Apple, Google and Roku is shaking up the sector, while also reducing the level of market concentration.
On the middleware and software side of things, we are also seeing a shift in the once heavily proprietary landscape (telcos’ proprietary OS and applications in the 2000s) to one that is more open to third-party applications (OS Linux, Android, third-party apps).
Another major shift is the growing number of available apps and the softwarisation of STBs.
New entrants putting pressure on the STB value chain
Evolution of STB value chain players since the 2000s
Telcos mounting the resistance
In a highly competitive market populated by a growing number of OTT offers, telcos are having to devise a strategic response.
Alongside a vertical integration strategy that consists of offering exclusive video content, for which they have paid top price (e.g. broadcasting rights to prestige sporting events), another option is to build their own OTT content platform, to avoid being cut out of the loop. More and more operators are also offering access to Netflix and Android TV.
Amidst this profusion of content, the quality of the user experience (QoE) becomes key to remaining competitive, which can include smart recommendations (one of Netflix and YouTube’s real assets) and adding voice command features.
Lastly, operators are gradually diversifying into smart home solutions, marketing a growing number of home security and automation packs.
Netflix has access to more than 300 million households
Number of pay-TV subscribers worldwide with access to Netflix via their STB
STBs going green
Naturally STBs need to be mindful of the growing environmental awareness.
In October 2019, in France, carrier Orange launched its Livebox 5, a marriage of performance (2 Gbit/s downstream) and eco-friendliness thanks to a carbon footprint reduced to 29% (100% recycled and recyclable outer casing, and 17% more energy efficient).
American heavyweights AT&T and Comcast, which signed the “Set-Top Box Voluntary Agreement” in 2013 (renewed in 2018) are also on board. This agreement helped to reduce US STBs’ annual energy consumption by 39% over six years (according to an independent auditor), which translates into 5 billion USD in savings on energy bills, and a 28.6 million tonne decrease in CO2 emissions.