"Digital transitions are taking longer than initially planned, and the market is experiencing significant downward pressure on set-top box pricing," said Sam Rosen, managing director and vice president at ABI. "Hardware revenues will fall, but value through software and services remains an opportunity. Providers should be looking to take on logistics and lifecycle challenges, in addition to testing and integration, to help the overall market flourish as well as focusing on 4K and HDR color set-top boxes in the years ahead."
Set-top box providers are increasing in scale due to recent mergers and acquisitions, including ARRIS (NASDAQ:ARRS) taking over Pace and Technicolor acquiring Cisco's (NASDAQ:CSCO) set-top box unit. Additionally, Huawei, at just more than $1 billion in revenues, leaped ahead of a number of vendors that faced a difficult year with drops of 25% to 40% in revenues, including EchoStar and Humax.
Regionally, China, which overtook the United States as the largest set-top box market by units in 2010, remains in the lead. India beat out the United States just last year as a failed digital cable transition spurred large satellite set-top box shipments. Given market circumstances, ABI predicts India will continue to grow its set-top box shipments and likely surpass China as shipment leader in 2018 or 2019.
"Significant market consolidation already occurred," said Rosen. "Operators worldwide are now carefully considering new opportunities to deliver video services, specifically through the use of streaming media adapters and adaptive bitrate, better known as ABR, IP-based protocols. It is important to note that satellite broadcast remains a significant factor in pay TV distribution while terrestrial platforms, augmented by set-top boxes with some storage and advanced IP services, are becoming important for select telco operators who are backing away from licensing content."