The latest Worldwide Media Box report by Futuresource Consulting explores the future prospects for the media streamer and set-top box (STBs) market, as consumer demand gradually shifts away from traditional Pay-TV toward more flexible SVoD services.
“With combined media box shipment growth of just 1.1% in 2019 and the set-top box market flat, Pay-TV operators are increasingly feeling the pressure to innovate and devise a more collaborative approach to retain their customer base,” says Matthew Rubin, Senior Market Analyst at Futuresource Consulting. “Many are utilising a hybrid model, combining traditional broadcast with IP, while others are adopting the more drastic approach of utilising Android.”
Across the entire media box landscape, one of the biggest challenges is the requirement for a reliable broadband infrastructure for faster, high-quality video streaming. This report highlights the requirement for different strategic approaches for both mature and developing economies.
Streamers Battle to Broaden Reach
The global market for media streamers has been dominated by North America and Western Europe, comprising 69% of the streamer market in 2019 and 17% of the total media box market. SVoD continues to be the biggest driver of growth for media streamers, with more local language content, particularly in Spanish, helping to increase interest in developing regions like Latin America.
Disruption Continues for Pay-TV
The streaming video market has caused obvious disruption to the future direction of Pay-TV, contributing to global consumer spend falling by 2.5% in 2019. As ‘cord-cutting’ becomes more prominent in a highly competitive content market Pay-TV operators are evolving their offering by merging video streaming content into their services, encouraging consumers to move towards hybrid STB’s that deliver content via IP, with the latest codec developments able to vastly improve connectivity and screen resolution.
“The concept of hybrid STB’s is still reliant on developed Western markets, and so the speed at which this upgrade cycle to IP will happen on a global level remains uncertain,” states Carl Hibbert, Associate Director of Consumer Media & Tech at Futuresource Consulting. “In the meantime, lower-cost STB products will be targeted at developing countries, as many low-income households look to get their first Pay-TV subscription – albeit with a relatively basic, limited functionality STB.”
Android TV Drives New Opportunities
Android TV Operator Tier is the latest example of how the content consumption market is evolving. The devices offer a fast-track white label option for Pay-TV operators to create their own OTT service, or for others to create a “Pay-TV lite” offering. While Futuresource estimates its STB shipments market share below 5% for 2019, Google has announced it was working with more than 140 operators in 2019 in more than 60 markets - up from just 8 operators in 2016 - though most of these are expected to be small in scale.
In terms of compatibility, operators can simply choose from an existing array of apps that already work seamlessly, all the while creating the illusion of a bespoke system with a branded consumer fascia layered over the user experience.
While there is a lack of control over the future development of the operating system, the most important benefit is that it reduces costs significantly – in terms of initial set up development time (down from potentially years to a matter of months) – as well as ongoing maintenance. Essentially, it is much cheaper to use Android Operator Tier than to develop a bespoke system.
Key Challenges for Home Entertainment
Maintaining total control for operators is becoming an increasingly tricky proposition, as co-operation with third party platforms, such as SVoD services, continues to offer a better user experience – but effectively pushes consumers to other providers. Improvements to smart TV operating systems is adding another challenge during the forecast period, as content platforms increasingly take the form of a device agnostic app.
“Media streamer vendors such as Google, Amazon and Roku are taking note by improving their footprint across all media device types,” explains Rubin. “But with vested interests in keeping control over the STB ecosystem, it will take time to change course for the major Pay-TV operators.”