In the beginning there was the dumb set-top box (STB). Its sole function was to unscramble 30-40 channels of analog cable TV signals to be watched on a single TV set.
Eventually, the category grew as content offerings enlarged, and more rooms needed STBs to deliver signals to additional TV screens. Once satellite and cable STB manufacturers realized that these devices could include elements of a home PC, such as a processor and hard drive to record and store digital content, the dumb box on the TV was on its way to becoming the "New Home Hub" or "New Home Gateway."
This metamorphosis is progressing to the point where some now predict the STB will surpass the PC as the nerve center of the home. Ultimately, they will be distributed by the nation's consumer electronics dealers, and in most instances and to a lesser degree, by the agents of cable, satellite and telephony service providers.
These super STBs will not only run the TV monitors all around the average house, but the refrigerator, the stereo, the DVD, home lighting, security and even the computer.
Notes Brad Beale, DirecTV's senior VP for advanced products and new media (and also DirecTV's in-house guru of new technologies), "As my boss, Larry Chapman, often notes, there will eventually be a digital furnace in the home, placed in the closet, with a terrabyte of information storage available. This will be the new STB."
Beale goes on to note, "The DVR (Digital Video Recorder) is just the amoeba of what will be … five, 10 years down the road."
Merger or not, both DirecTV and its DBS suitor EchoStar are working on STB innovations, potentially loaded with applications to generate incremental revenue sources. That money will either come in the form of actual STB sales (possibly even one day including profits on those sales), or in the form of ARPU (Average Revenue Per Unit), emanating from subscriber purchases of enhanced content and specialized features or devices.
The STB will soon take its new "Home Hub" role. Expect the cable companies to begin highlighting new features, as well, in an effort to reward their most loyal and highest-paying subscribers.
Significant obstacles still remain, however. The two largest involve selecting universal standards that will allow STBs to proliferate throughout the house, and clearly defining copyright and digital rights management concerns.
Both continue to be hashed out in inter-industry working groups, but still appear to be a long ways from a finding a uniform solution. Once addressed, manufacturers and service providers will have to offer prices that can sustain a mass-market distribution model — the true measure of success for CE technology.
Within a few years, it's likely that some form of networkable STB for new over-the-air broadcasting services will be featured as standalone or integrated offerings. This is good news for CE dealers because they will be the primary sellers of that technology to consumers.
Will we soon be walking into CE retail stores to find a whole room, or an entire wall displaying STBs of various configurations? I would say: quite probably. In fact, savvy CE accounts will benefit from a chance to sell not only the STBs, but also a host of ancillary devices and content services. In fact, the ability of CE retailers to communicate and sell the benefits of these new systems (as well as arrange for their installation) will ultimately determine their success.
Concludes DirecTV's Beale, "Satellite operators, for now, are not necessarily the leaders in this Home Hub development. We're waiting for the technologies and the pricing. But be sure, we want to skate to the puck, because there is an opportunity there."
Get ready CE dealers — the ensuing slapshot will ultimately be yours.