Future of set-top boxes

March 25, 2012 7:45 pm

By Mark Wembridge

Behind the array of new technology and optimism on show at last week’s Internet Protocol TV world forum in London, an underlying air of apprehension was perceptible.

The potential concern for the TV set-top box makers at the convention was all around them, albeit in a wireless form: the internet.

As the variety of TV content available over the internet expands, the future market for makers of TV set-top boxes – such as Virgin Media’s TiVo and Sky’s Plus – has been called into question.

Why would a consumer pay for a subscription to use a set-top box when “smart TVs” allow direct access to internet content, known as over the top (OTT), for free?

The market is being squeezed as consumers shift to downloading TV programmes and videos over the internet from companies such as LoveFilm, Google and Netflix, whilst free content is available from services including the BBC’s iPlayer, Channel Four’s OnDemand and the ITV Player.

Furthermore, BBC’s iPlayer on-demand TV service recently became available on all the UK’s major gaming platforms, including Microsoft’s Xbox360.

The internet TV trend has been touted as a potential killer of set-top box makers, which include Yorkshire-based Pace, the world’s biggest maker of TV set-top boxes by shipments, and Aim-traded Amino Technologies.

Such concerns took concrete form in January when IP Vision, maker of the Fetch box for viewing internet video on a TV, went into administration.

Although much smaller than Pace, Cambridge-based Amino has the advantage of being backed by chip maker Intel, and the group used the IPTV forum for the UK launch of its latest box, the Freedom Live Media Gateway.

“Set-top boxes are still the best way to improve functionality and ensure security,” says Donald McGarva, the new chief executive of Amino.

“It’s still quite a youthful environment for these boxes and OTT – it’s not going to be a binary outcome where one wins and the other loses.”

Such confidence is echoed by Mike Pulli, chief executive of Pace: “OTT is just another mechanism to deliver content. We see [internet TV] as a complementary service rather than a replacement service.”

According to Andrew Darley, a technology analyst at Finncap: “The key to understanding TV consumption is to differentiate between TV as a service and a TV as a product.

“As a product, you buy the TV of the moment; but for content you still choose the service provider – in the UK, public service (BBC) or a private service provider (Sky or Virgin).”

The other challenge facing set-top box manufacturers is the use of “the cloud” – where content is accessed over the internet.

“The OTT services might lack content but they have shown up pay-TV in terms of the user interface and experience,” says Giles Cottle, principal analyst at Informa.

“Moving to the cloud can enable operators to compete more effectively in these areas.”

With the forthcoming launch of the YouView box – the long awaited internet-television service that is in effect an upgraded Freeview box with on-demand and iPlayer-like services – competition for TV services is getting hotter.

Consumers are demanding higher-quality content in various formats (TV, mobile, PC and tablet), and the latest set-top boxes such as those from Amino combine broadcast, on-demand and open internet services.

“I don’t have a crystal ball, I don’t know what will happen in 20 years’ time,” says Amino’s Mr McGarva. “But set-top boxes have been predicted to die many times now. So far, they’re still going strong.”