As Cord-Cutting Flourishes, Pay-TV Providers Adapt

Smart TV’s impact less than expected
Publish date:
Social count:
Smart TV’s impact less than expected

London — As consumers increasingly flock to over-the-top video solutions in an effort to save money and “cut the cord,” traditional pay-TV providers are adapting their strategies to keep their share of the pie.

Global shipments of over-the-top set-top boxes (OTT STBs) sold at retail, such as Apple TV, Google Chromecast and Roku boxes, will overtake shipments of IP TV STBs provided by telecommunications, cable companies and Internet providers for pay-TV services in 2015, according to a new report from IHS Technology.

This year, 31 million retail OTT STBs will be shipped, compared with 30 million IPTV STBs shipped by telcos.

“OTT STBs were initially written off as a temporary measure for consumers to bring OTT video to TV screens,” said Daniel Simmons, director of connected-home research at IHS. “It was assumed that smart TVs, Blu-Ray Disc players and gaming consoles would eventually take the place of STB devices; however, while consumer adoption of smart devices has grown considerably, OTT STBs have still managed to flourish.”

Based on the latest information from the “Set-Top Box Market Monitor” report from IHS, the success of OTT STBs can be attributed to the content strategies of their respective vendors. Apple, Google and Roku have been much more aggressive in adding new content sources and apps to their STBs than TV and gaming console vendors have to their devices. “Ultimately, buying a dedicated box enables viewers to choose the OTT services they watch on their TV, rather than simply living with the pre-installed options,” Simmons said.

But that doesn't mean pay-TV providers are going away.

Pay-TV operators have embraced OTT by deploying their own Internet-connectable STBs and OTT services designed to compete with OTT video providers. Operators are increasingly relying on OTT capabilities in their STBs to enable “catch-up TV” or “binge viewing,” larger video-on-demand libraries, as well as search, recommendation and other content discovery features. This level of functionality has become a consumer expectation for pay-TV services. Some pay-TV providers, such as Belgacom, Dish Network and Virgin Media, have even started providing access to Netflix and other OTT video providers’ services.

Total shipments of connectable pay-TV STBs, which include IPTV STBs, as well as cable TV STBs and digital terrestrial television satellite STBs, have far outpaced shipments of OTT STBs.

In 2018, connectable pay-TV STB shipments will grow to 169 million units, compared with 38 million retail OTT STB shipments.

 As global pay-TV markets trend toward saturation, total pay-TV STB shipments will decline 5 percent to 197 million units shipped between 2014 and 2018, “Connectable pay-TV STBs will provide an important opportunity for STB vendors to grow their business, despite this overall decline,” Simmons said.

“Pay-TV operators have a strong incentive to be the primary content aggregator in the household,” Simmons continued. “Given the rate at which pay-TV operators are integrating OTT services alongside traditional pay-TV features on their STBS, it’s likely that pay-TV STBs will prove to be a bigger threat than smart TVs to the retail OTT STB market.”


Related Articles