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Originally featured on BroadcastEngineering.com
May 31

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5/31/2013 9:38 AM  RssIcon

Far from being threatened by the Internet, set-top boxes are growing fat on it with margins being sustained or even increased.

Only a year ago, analysts were almost evenly divided over whether broadband connection would favor emerging so-called smart TVs, or pay-TV ecosystems built around the connected set-top box or gateway. Now, that debate is over for the time being, as the connected set-top has emerged as run-away winner.

There is fast accumulating evidence for this assertion, with the latest coming in the FutureMedia 2013 quarterly review of key evolutionary trends, innovations and events in TV from UK digital media analyst group Decipher. The latest survey examined comparative rates of usage by consumers who have both a connected set-top box and a Smart TV in the same home installation. While usage rates varied between service providers given varying levels of functionality and access on the respective boxes, on average, 73 percent favored the STB.

Level of STB "player" use was highest in the case of the hybrid YouView box, with 28 percent of users here saying they regularly use the BBC iPlayer catch up service. In the case of pay-TV operator Virgin Media, 20 percent of customers with the TiVo hybrid connected box option surveyed said they regular used it, while in the case of BSkyB, only 8 percent of connected customers were doing this.

Decipher’s managing director Nigel Walley explained the findings, “the smart TVs haven’t made any effort to integrate on-demand with broadcast in their interfaces. The STBs have a much more UK-centric view of the market, and recognize that they need to work with the broadcasters to keep the consumer in the STB environment.”

Where a consumer had both a STB and a Smart TV, then use of the connected screens was confined to popular apps not supported by the STBs, such as YouTube in some cases, although that is available in Virgin Media’s version of TiVo.

However, this does not mean STB makers can sit on their laurels or rely on captive markets for ever. Even Walley, who has long scorned attempts to write off the STB or traditional ecosystems for content and ad delivery, concedes that, eventually, apps may win out, but not just yet. Decipher’s latest survey does hold out a glimmer of hope for smart TV makers. While a year ago, there was no evidence of cord cutting or shaving in pay-TV homes that have Smart TVs, now about 4 percent of pay-TV customers have reduced or cancelled pay-TV subs after purchasing a Smart TV.  Decipher suggested that, at last, pay OTT apps were having some impact.

So, there is a dichotomy here in that, on the one hand, mainstream sentiment has swung against smart TVs and toward the connected or hybrid STB. However, at the same time, a low-level cord cutting trend has set in, at least within some leading markets. Smart-TV makers should perhaps be playing a long game and learn from their early mistakes, as there are signs of them so doing, for example with Samsung’s support for hardware upgradeability  through evolution kits. The price will have to come down though.

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