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Set-top boxes

Set-Top Revenues Droop in Q2

Despite growing demand for digital set-top boxes in emerging markets, set-top revenues for equipment suppliers fell in the second quarter, particularly for cable STB vendors.

In its latest report, Infonetics Research Inc. found that global STB revenues slipped to $4.3 billion in the second quarter, down 3 percent from $4.4 billion in the first quarter and down 9 percent from the year-ago total. The first quarter figure was also down from the same period in 2012. (See Cable STBs Buck the Trend.)

Cable set-tops fared particularly poorly in the spring quarter after starting off the year well, Infonetics reported. Cable STB revenues plummeted 14 percent from the first quarter even as unit sales held their own, coming in flat.

Infonetics said cable STB revenues fell even though unit sales stayed even because there were more single-tuner standard-definition boxes shipped to such emerging markets as China, India, and Latin America as those formerly analog TV markets embrace digitization. At the same time, there were fewer more advanced digital set-tops sent to North America and Western Europe, which have already gone nearly all-digital.

Jeff Heynen, principal analyst for broadband services and pay TV at Infonetics, said researchers are "seeing the market bifurcate along geographic lines." He argued that North American and Western European service providers are now entering "a post-STB market," where a saturated pay TV business is prompting providers to switch from traditional set-tops to new video gateways in search of fresh growth.

Heynen said:

    The STB market is in the midst of a series of significant technology shifts, and these changes are resulting in ebbs and flows in shipments on a global scale, with individual markets swinging each quarter's performance. There are real unit shipment declines occurring in North American and Western Europe that won't be offset by growth in Asia Pacific and Latin America until 2014.

In the closely watched vendor sweepstakes, Pace plc surged to the top in market share in the second quarter, leapfrogging well over Cisco Systems Inc. (Nasdaq: CSCO). While Pace's STB revenues soared, Cisco saw its revenue fall sharply from the first quarter, when it hit a record high, according to Infonetics. Arris Group Inc. (Nasdaq: ARRS) took over third place, boosted by its acquisition of Motorola Home earlier this year.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

David Dines 11/7/2013 | 6:56:50 PM
Re: Post-STB Market? Good question Alan.  I have been in the camp of predicting the future of TV will be STB-less. It seems to me that the economics of eliminating the STB are sufficiently compelling (and speed and agility in service offering should also improve) that the service providers will be incentivized to change.

Having said that, I do not think that STBs will go away that quickly. I say this based on observing other technology transitions*. Pundits like myself always seem overly optimistic on how fast new technology will be adopted (probably because our analysis and case studies show a great ROI).

To net it out, I see that STBs will still be around in 5 years, but will not have a monopoly on video delivery to the home, worldwide volumes will likely be flat (mostly on growth in emerging economies offsetting declines in mature economies), ASPs will be down, and the market will split towards both the high and low ends.  Beyond 5 years, I see an inexorable decline.

Any other opinions out there?

*It took years for competitive long distance providers to gain significant market share from AT&T, and we still have lots of legacy STBs / SD TVs, analog phones / landlines, and 2G networks / feature phones.
albreznick 11/6/2013 | 4:58:11 PM
Re: Post-STB Market? Nimble is the key word, Liz. As the incumbent pay TV providers, can cable companies still be as nimble as the OTT upstarts, or at least nuimble enough to stay in the game? That's a really critical question as we ,ove into the video future.
Liz Greenberg 11/5/2013 | 7:57:29 PM
Re: Post-STB Market? That makes sense in so many ways...especially with the even newer TVs - 3D, 4K, geewhiz, and whizbang (yep I am naming undeveloped and unreleased technologies for the future).   Give the OTT products as well as just regular competition that cable companies are going to have to find a way to be more nimble with the average customer.
albreznick 11/5/2013 | 4:28:14 PM
Re: Post-STB Market? Funny thing, Liz. The trend lines are going in both directions at the same time. Some folks are getting more powerful, complicated STBs that can do many things, while others are getting simpler, dumber boxes or moving away from STBs altogether. So there's no one general rule. All we can say for sure is that the old legacy boxes will probably not suffice anymore. 
Liz Greenberg 11/4/2013 | 9:45:05 PM
Re: Post-STB Market? Al do you know if cablecards are included in these trends?  I haven't upgraded my TV in a while but one has to wonder if internet/WiFi enabled TVs are allowing folks to "cut the cable" out and just use services such as Hulu etc.  What about Tivo etc?  In other words is the trend towards more elaborate STBs or just away from any STB?
albreznick 11/4/2013 | 8:40:19 PM
Post-STB Market? Are we really entering the post-STB market in North America and Western Europe? Infonetics seems to think so. So that would mean that most of the new boxes going into pay TV homes will be gateways, uber boxes that connect directly to TVs or much smaller, thinner boxes near the TVs. I'm not so sure.  I think regular set-tops, including new set-tops, will still be with us a long time. What do y'all think out there?   
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