Nathan Taylor, GM of technology/OTT & fixed content, Intigral, tells DPME about the latest trends, challenges and opportunities surrounding set top boxes (STBs).
DPME: How important are Set Top Boxes for broadcasters?
Very important. There is often talk about the “death of the STB” when in actual fact, in most markets, sales of STBs have increased in the last 2 years. The initial thought behind the death of the STB was due to the CE manufacturers all developing Connect TV platforms. Using these Connected TV platforms was appealing to Telco’s, Pay-TV providers and Broadcasters because it was seen as a path to offer interactive On-Demand services without the cost of developing and managing their own hardware, which can be particularly painful and costly.
Unfortunately this has not worked out, due to a number of factors including:
• Low Connectivity rates of these Devices; typically less than 30% in most markets
• In Home Distribution challenges; most TV’s only have Ethernet integrated which is not convenient, those that have Wi-Fi do don’t typically have adequate performance
• Divergent technology between CE vendors; an application built for one CE manufacturer won’t work on another CE manufacturer’s device without significant modification, which is costly to maintain
• Many different models and variants to support; TV manufacturers typically release 3+ different models of TV each year, and the performance of these can vary significantly. In addition the performance of a 2014 model TV can vary significantly from a 2013 model. This matrix of devices make it very costly to maintain
• Variance in user input devices; All TV manufacturers have different remote controls. This makes it very complicated to design a consistent way for customers to interact with a service and often forces the design down to the lowest common denominator
• Hard limitation of CE Development cycles; Manufacturers launch new TV sets every year. The launch of the devices has very hard deadlines that does not tolerate variance. This can be extremely difficult to align with complicated IPTV service development
Because of these challenges, TV’s continue to be mainly used as rendering devices. The role of the STB has begun to diverge. Pay TV providers are going for high end media gateway STB’s that act as a central point (In-Home Cloud) within the household, and are capable of complicated functions like transcoding content into formats that can be viewed on companion devices like Tablets, Mobile Phones and PC’s.
Telco’s are going in the opposite direction. They are moving capabilities like recording and transcoding into the Cloud. This is allowing them to strip down the components of the STB into a low cost, small form factor device. It is likely that within 2 years this device will be a HDMI stick, which is slightly bigger than a USB thumb drive that will cost less than USD $50 for customers to buy.
Broadcasters are behind and are still experimenting with technology such as HbbTV which uses information embedded within the Broadcast stream to activate applications which are embedded within Connected TV’s. This approach will run into the same issues that Telco’s and Pay-TV providers have faced with the Connected TV Platforms and also tend to be very limited in terms of the functionality that the applications can provide.
DPME: What security issues should broadcasters be aware of and address with respect to STBs?
Broadcasters have traditionally only transmitted live programming to the customer. This content was not protected using encryption as the programming was supported by an advertising business model and the re-transmission of this content would have been expensive for a 3rd party. The internet is a serious threat to this model for two reasons:
• The retransmission of their live content is much more feasible over the internet than over traditional means (Satellite and Terrestrial) due to the low setup cost for illegitimate parties who use technologies like P2P to scale the distribution, and overlay their own interactive video advertising for commercial gains
• Consumers are shifting their behavior to consuming more on-demand content. Today the average consumer is watching 80% Live content, 20% On Demand. By 2020 the likes of Cisco and Ericsson are predicting that this behavior will be 50% Live, 50% On Demand.
By its nature, On Demand content must be available for an extended period of time (depending on the rights of the content, but typically 2+ weeks for most content), rather than a point in time like Live content, it is necessary to use encryption to protect this content so that other third parties cannot deep link to the content source and use it for illegal monetization.
On Demand content must be protected by DRM (Digital Rights Management) technologies. This area is very complex and is outside the skillset of traditional broadcasters. It requires a tight integration between the head-end and the end device.
In many ways, security has often been mentioned as one of the key reasons STBs continue to prosper. Compared to the new and trendy OTT players out there, a STB allows the satellite operator or Telco to have a direct line of sight with the end customer. Speaking from experience, content owners are nervous when control of the end user, or the end user device is not present.
DPME: Are STBs both a threat and an opportunity to more traditional broadcasters?
The shift in consumer’s consumption habits towards On-Demand content is a huge threat to the broadcasters’ traditional business model. This change in consumptions habit will accelerate due to two main factors:
• The improved reliability in broadband bandwidth due to the deployment of Fibre networks and 4G LTE mobile broadband networks
• The evolution of the STB to a low cost platform will significantly increase the size of the footprint of devices that Telco’s and OTT Streaming device manufacturers (e.g. Roku, Amazon, Google, and Apple) control. These devices allow customers to easily access On-Demand content on their TV screen.
These drivers threaten to completely change the value of the TV advertising slots and as a result will redefine the operating model of traditional broadcasting.
DPME: How can traditional broadcasters maximize the benefits of STBs?
Broadcasters must adapt to succeed in the On-Demand world. They must find a partner who is not looking to compete with their advertising business model and has assets and skills that complement the broadcasters’ weaknesses.
Telco’s are an ideal partner as:
• They are likely to have a very large footprint of devices as they can bundle the sale of a low cost STB with customer’s broadband services. The larger the footprint of devices, the larger the value of advertising on this platform
• They have a billing relationship with the customer which could provide valuable personalized information about the customer which can significantly increase the cost of advertising slots. This would allow the broadcaster to leverage the existing billing relationship to experiment with paid business models for their content
• Telco’s have not traditionally been successful with advertising based business models and hence not reliant on them. They are more likely than Pay-TV providers or OTT Streaming device manufacturers to cede control of this revenue opportunity to the broadcaster as part of the partnership.
• The Telco has significant cloud and network assets which could help limit the cost of On Demand distribution for the broadcaster
• In many markets there is already a strong business relationship between broadcasters and Telco’s due to services that the Telco’s often provides for the broadcasters’ contribution and distribution networks