iSuppli: Set-top Box Shipments Spurred by the Increasing IPTV Subscribers

Shipments of set-top boxes will continue to rise during the next few years as consumer viewing patterns shift and as television content delivered via the Internet becomes more popular, setting the stage for providers to acquire new revenue in the ferocious battle for the digital home, according to iSuppli.

A total of 147.8 million set-top boxes will ship worldwide in 2010, up 11.5 percent from 132.6 million units last year. Shipments will continue to rise in the next few years and reach 193.9 million units by 2014.

The continued growth of set-top boxes coincides with projections for a big boost in worldwide subscribers to IP TV (IPTV), or digital television delivered through the Internet and a broadband network, according to Jagdish Rebello, iSuppli Senior Director and Principal Analyst for Wireless Research. Global IPTV subscribers will increase to more than 123 million units by 2014, up from about 33 million at the end of 2009, rising at a Compound Annual Growth Rate (CAGR) of almost 30 percent.

"The rise in numbers in both set-top boxes and IPTV subscribers bears profound implications for consumers and OEMs, signaling a major paradigm shift in TV viewing," Rebello said. "With IPTV, consumers are able to watch what they want at the time and place of their own choosing, and the set-top box—currently the device that brings TV content from an external signal source—will continue to be the consumer device for delivering such material."

Given the radical change in the way consumers watch and handle video content, the set-top box sits at the critical junction of what industry participants call the broadband residential gateway, noted Jordan Selburn, iSuppli Principal Analyst for Consumer Platforms.

Because of this, providers as diverse as telephone companies, cable operators and satellite dish companies are realizing that the gateway will be the means through which they can extend their networks into the digital home and in the process gain control of the distribution of data, voice and video.

Furthermore, by charging for value-added services like video on demand, music, interactive gaming and peer-to-peer content sharing, providers can acquire new streams of revenue to augment declining or stagnating income in other parts of their business, such as voice revenues in the case of telephone companies.
"Residential gateways will incorporate services for digital home management, becoming the critical battleground among various players and serving as the beachhead within the home to launch new offerings and "suites" of services," Selburn said. "And if the residential gateway is successfully integrated into a consumer electronics device such as a set-top box that the customer values, the service provider will be difficult to dislodge."

To this end, set-top boxes must be considered the leading candidate for residential gateway systems not only providing a bridge from the house to the outside world but also serving as a conduit within the home among network-attached appliances, including telephones, digital video recorders, PCs, game consoles, storage devices and security systems, Selburn noted.

For their part, service providers realize that the company that controls the residential gateway to the home will be in the best position to manage, and monetize, not only the home network but also content distribution within the home.

Already, the integration of residential capabilities into set-top boxes has begun. Service providers like Iliad in France have launched a commercial product called the AliceBox, a single device that integrates a TV set-top box and a broadband modem.

Other than the set-top box, however, iSuppli does not see in the immediate future any other consumer electronic device integrating the residential gateway function. Video game consoles and PCs could evolve to support the role of content servers, but these devices will not include the critical bridge action that is required to fulfill gateway operations—at least, not during the forecast period.

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