A flurry of stories erupted yesterday surrounding the announcement that Sony Electronics had signed an agreement with a group of cable operators to adopt the java-based Tru2Way standard that should facilitate faster development of interactive TV services. This pact could also ultimately allow consumers to access interactive TV functions without the need for a stand-alone set-top box.
But a quick scan of the articles and blog posts would leave an uninitiated reader to believe that as a result of the deal, consumers can soon dump their set-top boxes. The headlines and articles all seemed to imply that cable TV set-tops will soon be a thing of the past.
Would that it were. Although cable set-tops, like most consumer electronics peripherals, will probably disappear someday as technological advances make it possible to incorporate their functions into TV sets, no one should expect that these devices will go away any time soon. For better or worse, set-tops are with us for years and years to come.
There are a lot of reasons why we're stuck with set-tops. Here are just a few of them.
1. TV Sets Last Foreover and There are 300 Million Existing Sets in the U.S. Alone: There are almost 300 million TV sets in use in the U.S. and if you haven't noticed, TV sets are durable devices...they take years and years to wear out. Even with the impending digital TV transition, it's going to take a long time for the installed base of TV sets to turn over, meaning that most if not all of the legacy TV sets in use will need some form of digital set-top to get most advanced digital TV services.
Even assuming that 10% of these sets (or 30 million) of these sets get replaced every year, a generous assumption given that the Consumer Electronics Association expects that 32 million TV sets will be sold in the U.S. during 2008, a peak year for sales, it will take at least 10 years to replace all of these sets with TV sets that have built-in Tru2Way technology. (Most other TV makers are studying or planning to sign the same deal as Sony).
2. The Initial Tru2Way Sets Will Take a Few Years to Arrive and Will Cost A Lot, Ensuring Slow-Adoption: Just as "cable-ready" TV sets (which were also touted as not needing a set-top box) carried a premium price when first introduced into the market, Tru2Way TV sets will be a lot more expensive that ordinary digital or HD sets. People hate set-tops, but how many folks will be willing to pay more for a TV just to get rid of a set-top box that they've gotten used to anyway? Probably not a lot and therefore the take-rate for these sets will be low, at least initially. In any event, it's going to take a few years for set makers to gear up on the design, manufacturing and distribution of Tru2Way sets. Don't look for these under your Christmas tree until 2010, at the earliest.
3. Moore's Law (or Something Like It) Will No Doubt Make Early Tru2Way TVs Obsolete Pretty Quickly: Set-top boxes these days are nothing more than stripped-down computers that feature chip-sets and sometimes even hard drives (DVR-enabled boxes). Tru2Way sets will simply incorporate this kind of PC-like configuration into TV sets. As interactive TV applications evolve and the memory and processing speed needed to make advanced applications work increase, it's likely that early Tru2Way TV sets will cease to run whiz-bang new applications very well, necessitating...a set-top box capable of running the latest applications or a new TV set with upgraded circuitry. Most consumers might wait for a while before buying Tru2Way TVs or they might just skip buying them altogether and stay with their set-tops.
4. Set-Top Makers Motorola and Cisco Will Do Everything They Can to Keep the Set-Top Business Going: The two major suppliers of cable TV set-tops, Motorola and Cisco (Scientific Atlanta) aren't going to sit back and watch a huge chunk of their profits swing to TV set makers. You'd better believe that they'll develop more and more features at lower and lower prices to keep their box businesses going.
There are a lot of other reasons that set-tops are here to stay. Although yesterday's deal involves six big cable operators (Comcast, Time Warner Cable, Cox, Charter, Cablevision and Bright House Networks) that pass well over 90% of U.S. homes, a lot of small operators (Insight, Mediacom, CableOne and so forth) aren't part of the Tru2Way pact yet.
And it's not clear that the sets will feature built-in hard drives needed for DVR. If not, then customers are still going to need add-on TiVo or equivalent boxes, so why get rid of set-tops in the first place? And will Tru2Way technology get built into all TV models, even small sets? Or just the big devices?
The bottom-line: it's very cool that a big TV set maker has taken steps to incorporate a technology that leads to a world where set-tops won't be needed. But that's far down the road. Set-tops, it seems to me, aren't going anywhere.
Posted by Cynthia Brumfield at 12:16 PM | Print | Comments (0)
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