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Summary:

With the proliferation of new broadband-connected TV sets and Blu-ray players ready to take the world by storm, the demand for standalone Internet set-top boxes will be limited. That’s one takeaway from new research released today by The Diffusion Group, which estimates that Internet set-top boxes […]

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With the proliferation of new broadband-connected TV sets and Blu-ray players ready to take the world by storm, the demand for standalone Internet set-top boxes will be limited. That’s one takeaway from new research released today by The Diffusion Group, which estimates that Internet set-top boxes like the Roku Player, the upcoming Boxee Box, and the Popcorn Hour devices will account for just a fraction of all broadband-connected consumer electronics sold.

That’s not to say that the market will be nonexistent. By 2014, there will be about 30 million standalone Internet set-top boxes sold worldwide, said TDG senior partner Colin Dixon. But that 30 million represents just 3 percent of all broadband-enabled consumer electronics devices that consumers will buy in the next five years.

So where’s the growth in connected devices going to come from? Over the next five years, Dixon believes, Blu-ray players and gaming consoles will be big sellers. “Blu-ray will probably outsell Internet set-top boxes by about 10-1,” Dixon said in an interview with NewTeeVee. “I don’t see Hollywood moving away from packaged media anytime soon.”

Perhaps more importantly, Dixon said Blu-ray players are moving away from being just a device for viewing optical media, and becoming broadband media devices themselves, with consumer electronics companies such as LG, Samsung, and Sony adding services like Netflix and Amazon.com’s video-on-demand service to their Blu-ray players. Over the next few years, the addition of broadband video services to Blu-ray players, coupled with lower prices, should make the devices a good value for consumers, compared with broadband-enabled TVs, which are still relatively big-ticket items.

While Internet set-tops will have limited growth over the next five years, they’re not the only standalone devices that will be eclipsed by consumer electronics that have multiple capabilities. Due to the existence of new standards like UPnP and DLNA that exist in multiple consumer electronics devices, TDG estimates that digital media adaptors, which sought to bring content stored on user PCs and other devices to their TVs, will become virtually nonexistent by 2014.

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  1. Re: I don’t see Hollywood moving away from packaged media anytime soon.”
    My response: I don’t care whether or not Hollywood wants to move away from packaged media. I already have. I can’t remember the last time I bought a DVD. If Hollywood wants my business, they can follow me into the realm of digital media. Or not. Their loss.

    1. Here! Here!

  2. I’m sorry, is there something wrong with 30 million viewers?

    1. I believe consumers think a box is a box (granted the box audience is more savvy) – IPTV or OTT I don’t think really matters, as long as “the box” delivers the content in which they are interested and is affordable.

  3. Encrypted cable signals inside the home artificially suppress this market. To be fair you should include all of the leased cable boxes.

    I’m hoping these new FCC actions pry open the set top box. If signal encryption was dropped sales of these Internet boxes would 10x since they’d be able to add the cable channels to their menus.

  4. As a minor counterpoint, I recently bought a Roku box, even though I have a new Samsung TV with the “connected” features. The TV’s interactive features are painful to navigate and use, the promised Amazon streaming only worked for a few days before becoming “temporarily unavailable” a couple months ago, and Netflix streaming is nowhere to be found. The Roku box is responsive, easy to use, and delivers what they promise with a minimum of fuss.

    It’s unfortunate that the TV manufacturers really skimp on the hardware and software, even on pricey high-end TVs. I haven’t used any of the Internet-enabled Blu-ray players, so maybe those work better than the TVs. I suppose eventually consumers will get frustrated with “box creep” as their entertainment centers begin to look like equipment racks.

  5. I wouldn’t necessarily disagree with the title of the article and it’s overall suggestion that “the proliferation of new broadband-connected TV sets and Blu-ray players ready to take the world by storm….” as there can be no doubt that the convergence of the Internet and television is moving at a rapid pace. Of course what isn’t known is what the final convergence will look like and which player(s) will survive the shake out. I think that Roku is in a good position to be a leader in this burgeoning market; however, the key will be how many more premium (e.g. Netflix, Amazon, Pandora, mlb) content providers can they bring on board in the near future. Ultimately, I think they will need to strike some deals with major content providers like NBC, CBS, ABC, Showtime, Disney, etc.

    1. I agree. Roku needs more REAL video content.Most of the free stuff on their now is barely watchable.They throw names around like, MSNBC,CNET and such, but when you go to them its a one liner text. Some free shows are full length. But only about 3 percent.I tried loading Rachael Maddow which is full length, but kept getting error-ed out
      As an example of how ridiculous the content is, they have a calender channel , that shows a calender.Great to know if your living in a cave for a month at a time.

  6. Analysts: Blah blah Internet TV boxes are blah blah a dead end | Products & Tech News Thursday, December 10, 2009

    [...] add Internet content to heretofore unconnected TVs. That’s a good thing. However, analysts at the Diffusion Group believe that the devices will eventually peter out to be replaced by Blu-Ray devices. I [...]

  7. Roku: 500,000 Units Sold, Raising Capital, Eyeing IPO Wednesday, January 27, 2010

    [...] services is expected to be limited, with some analyst forecasting that broadband set-top boxes will make up just 3 percent of connected devices by 2014. That could leave Roku with a limited window for establishing a business before the major [...]

  8. Internet Set-tops May Have a Limited Shelf Life – TDG in the News Monday, February 15, 2010

    [...] Internet Set-tops May Have a Limited Shelf Life Ryan Lawler | NewTeeVee | December 8, 2009 Only published comments… Dec 08 2009, 05:15 PM by The Diffusion Group [...]

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