The market moves toward TV connected devices
In the new white paper Owning Input 1: The Future of the Pay TV Set-Top Box and Software makes it clear that the environment in which an operator set-top box (STB) exists within a consumer’s home has fundamentally changed. Just a few years ago, the only source for live video and broadcast content on television for most people was through their pay television STB. To a very real extent, the operator owned the experience of television for all its customers.
Those days are most certainly over. In the US today 64% of consumers have at least one subscription video on-demand (SVOD) service. Though somewhat behind the US in penetration, Europe is heading in the same direction. 1 in 4 UK homes have a subscription to Netflix.
The preferred screen for viewing SVOD services is the television. Ericsson talked to consumers across 20 markets, and found that 75% of SVOD users used a television with access to the Internet, versus 47% of non-SVOD users. 23% used Google’s Chromecast, versus 10% of non-SVOD users.
Pay TV operators adapt
Operators are acutely aware of these shifts. The external reaction to these market movements includes:
Providing skinny bundle products such as Sling TV
Giving subscribers direct access to SVOD services from pay TV set-top boxes
Launching SVOD services of their own, like NowTV and Shomi.
However, the consumer’s comfort level and increasing embrace of TV connected devices is having a more fundamental impact on the technical underpinnings of pay TV services and in the way operators view the set-top box. There is now a realistic opportunity for a pay TV operator to jettison the set-top box completely. And that prospect is creating a schism within the industry.
Operators split on necessity of the STB
Operators now fall broadly into two camps: those that would stop providing a set-top boxes tomorrow if they could, and those that cannot conceive of their service without it. Aside from the enormous technical shift giving up the set-top box represents for operators, it represents an even bigger psychological shift. Pay TV operators have defined the television experience for their customers for decades. In other words, when the television is turned on it is to their services to which a consumer is tuned. The operator, in a very real sense, owns input 1 on the television.
Letting go of the set-top box means ceding control of input 1. And for some that is a bridge too far. For example, nScreenMedia asked an engineering executive at a tier 1 European operator if he would consider using a Roku rather than a company STB. Here’s what he had to say:
“If it booted into my UX and my branding, but certainly not while Netflix is the number 1 icon in the interface.”
Operators that are ready to dump the STB are also ready to cede control of input 1 on the television to the STB or television provider.
The question over who controls input 1 will be a defining difference between operators going forward. How they answer that question has enormous ramifications for the business of pay TV, and the technical underpinnings of the industry.