Will Shrinking Revenues Prompt the Set-Top Box Industry to Change?

The set-top box may have been ubiquitous in our living rooms for some time now, but in a quickly changing landscape, its dominance is being challenged. Whether it’s Apple TV, popularity of online streaming on mobiles, tablets, and laptops, or the ever-dynamic cloud business, consumers today a plethora of options to consume their favourite content.

The Threat from Cloud 

Industry analysts are of the opinion that cloud is one of the biggest challengers to the set-top box industry at the moment, resulting into a decline of annual revenues in 2014. The shrinking revenues has prompted many players to act, with two major players combining to become a behemoth entity. The upcoming acquisition of Pace plc by Arris, worth over $2 billion, is expected to change the dynamics of the industry. Also, Cisco selling its digital assets unit to Technicolor can also have a big impact on the competitive landscape in general.

It Still is a Multi-Billion Dollar Industry 

Although the global set-top box market is witnessing a period of slowdown, it still is a multi-billion dollar industry. In the next five years, global market revenues are poised to increase at a low single-digit CAGR.

The key factors fuelling demand for set-top market globally include wide number of HD channels and popularity of smart TVs, especially in the populous countries of China and India.

The collaboration between set-top box manufacturers and operators is further expected to boost demand during the forecast period. Also, increasing spate of regulations on part of government is also expected to drive the adoption of set-top boxes, especially in rural areas. As disposable income increases in emerging nations, adoption of luxury and entertainment products is also anticipated to increase.

Improvement in signal transmission is also expected to provide a much-needed impetus to the global set-top box market. Additional features offered by set-top box manufacturers, such as live streaming and recording is also anticipated to curb some of the challenges posed by the internet and cloud.

The types of set-top boxes available in the market can be broadly categorised into internet protocol television (IPTV), digital terrestrial transmission (DTT), and satellite direct-to-home (DTH). Currently, demand for IPTV set-top boxes is high owing to the wide range of internet options available on the internet.

N. America and Western Europe Key Regions 

Geographically, North America and Western Europe remain lucrative markets, primarily due to the profit margin through rentals and subscriptions. Emerging markets of Asia Pacific and Latin America on the other hand, represent high volume landscapes – profit margin is lesser, however, the sheer volume of set-top boxes sold in these regions make for a lucrative business scenario.

Currently, there is a big debate on opening the market to third-party service providers. The set-top box industry has shown reluctance to such a move, as it can impact their profit-margins. However, considering the overall transformation in content production and consumption, it can be said that opening up the sector can prove to be immensely beneficial to the consumer. It can mean low rental and wide range of content to watch. Like, other industries, the set-top box sector also needs to adapt to change.