Monday March 9, 2009 – Antonette Goroch
Excitement about the application of Internet connectivity in STBs has grown immensely over the past year, leading to several important standalone product announcements in 2008, as well as stronger than expected shipments for the period. According to DTC’s most recent estimates, more than 1.1 million units of standalone Internet STBs shipped in 2008, nearly five times the roughly 200K that shipped in 2007. This jump in shipments was largely due to the success of the Netflix box by Roku, which achieved a compelling mix of low cost ($99) with an existing online content consuming base (Netflix subs), though Apple TV also performed slightly better than expected.
This strength has led to a flurry of activity for the category, including both new products and expanded functionality for devices. The most notable of these is Blockbuster's recent entry into the market, challenging Netflix with a STB manufactured by 2Wire, now available free with purchase of $99 worth of rentals ($1.99 thereafter). Other notable announcements include Roku's expansion beyond just Netflix content into other sources, including the Amazon Unbox library, as well as a large expansion of VUDUs HD content library.
But despite this relatively strong year, DTC believes standalone Internet STBs will ultimately be a small, early adopter/hobbyist product category. Indeed, while we believe that the next two years will see continued success from both the Netflix and Blockbuster offerings, for the long term, DTC expects the bulk of Web delivered TV content going to integrated devices, such as pay TV STBs, game boxes or Blu-ray players. These products will play an important role in the near term however, by establishing the viability of Internet-to-TV content delivery, and the conditions necessary for its success.
