What Will Become of Connected Set-Top Boxes?


Competition continues to heat up in the connected consumer electronics space, as a slew of devices fight for a cozy spot in the digital living room. Full-featured products like smart TVs, game consoles, and Blu-ray players continue to attract more customers. Even mobile devices like tablets and smartphones have become integral pieces of this digital living room, with the ability to control multiple entertainment and control options.

But what about dedicated devices like the smart STB (set-top box)? We have seen major players like Logitech, www.logitech.com, drop out of the market in recent years, while others like Roku, www.roku.com, continue to make a strong go at it in the market.

Even Apple, which shipped 4 million Apple TV units through the fiscal year, referred to its box as a “hobby” during its latest earnings conference call, proving that smart STBs remain a niche category. However, Apple TV outsold Xbox 360 during the most recent quarter, so all-in-all, it cannot be that small of a niche.

However, according to a new report from ABI Research, www.abiresearch.com, connected set-top boxes may have an opportunity to finally gain traction in the developing consumer electronics space. In fact, ABI expects connected STBs to reach 57 million shipments by 2017.

Specifically, new device categories, like MHL (mobile high-definition link), could help advance the connected STB market, ABI reports. Google, for instance, is seeing growing interest among Chinese consumers for both of these form factors.

According to Sam Rosen, practice director of TV & video at ABI, portable USB and MHL devices and Android-based STBs offer consumers similar services and features found on popular mobile devices. “Both of these devices expand the presence of Google Play but also could work well as a companion device for Android-based mobile devices,” Rosen explains, adding this gives consumers a more affordable alternative to the upcoming Nexus Q steaming media device.

Meanwhile, Google is also working on launching its second generation of Google TV platforms, including the much-hyped VIZIO Co-Star, which has been praised for its affordability and impressive specifications.

ABI senior analyst Michael Inouye believes regardless of the form factor, it will be critical for smart STBs to integrate mobile devices into the user experience, a strategy already being used in many connected TVs and gaming consoles. “The future of connected (consumer electronics) will ultimately work together with mobile devices and not against them,” Inouye says.

The key will be for smart STB providers—like Apple, Rovu, and Google—to build their content relationships and create a stronger ecosystem. ABI thinks Android-based STBs could do just that for Google, but only time will tell if consumers agree.

“Dedicated devices have traditionally had a difficult go in the market,” Inouye says. “The changing consumer landscape, however, could present a window of opportunity for smart set-top boxes as more consumers allocate entertainment budget, both monetary and time, to streaming media.”

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