Set-Top Box Market To Continue Shrinking Through 2018, Says IHS

Pay-TV operators bought $15.3 billion worth of set-top boxes last year, a decline of $600 million, the first contraction in the STB market since 2002, said IHS Monday. Shipments of pay-TV STBs inched ahead nearly 1 percent during the period to 204.7 million units, but the modest shipment growth “failed to compensate for the effects of price erosion” in the competitive market, said IHS. Pay-TV STB vendors had a “great run” since 2002 on growth in pay TV, cable digitization mandates, DVRs, HDTV and IPTV, said Daniel Simmons, IHS head-connected home research. “The industry is now at an inflection point.” Mature pay-TV markets are saturated with “high-value, advanced boxes," setting up shipment declines there, while operators in emerging markets “aren’t transitioning to advanced boxes fast enough to increase overall industry value,” he said. Consolidations in the first half of the year foreshadowed a declining market, said IHS, with South Korean STB vendor Woojeon & Handan exiting the market and Swiss vendor Advanced Digital Broadcast delisted from the SIX Swiss Exchange. TiVo and U.K.-based Amino have acquired pay-TV software companies, while market leader Arris announced plans to acquire Pace, it said. IHS predicts the market will shrink further this year, to $15.1 billion, and will continue dropping to $13.2 billion in 2018 before stabilizing in 2019. Industry value will decline “across nearly all segments,” except for satellite pay-TV STBs, said IHS. Most satellite operators aren't ISPs, “so they cannot virtualize traditional STB functionality, such as DVR, into the cloud as readily,” said Simmons. Satellite operators will need to invest in STB hardware to enable advanced services that can compete with those offered by cable and IPTV operators, he said. Continued pay-TV growth in Africa and the Middle East, as well as in South and Central America, also will provide STB opportunities over the forecast period, said IHS.