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Set-Top-Box Industry Consolidation Continues with Technicolor-Cisco Deal

Set-Top-Box Market Analysis and Commentary

27 Jul 2015 - According to the latest 'Worldwide Set Top Box' report and 'Perspectives' market snapshot from Futuresource Consulting, the recent €550 million ($600 million) acquisition by Technicolor of the Cisco set-top box and related home broadband equipment business, reflects a common trend in a shrinking, yet substantial, $20 billion global STB market place, claiming (at least) 13% of the global STB market place and a combined share of about 30% in the key North American market.

"At $600 million, Technicolor seems to be getting a good deal – an incremental $1.2 billion in STB sales and access to key North American cable and IPTV accounts, bringing its worldwide share up to 13% (15% of Pay-TV)," commented Jack Wetherill, Senior Market Analyst, Home Electronics, Futuresource Consulting. "It also gets Cisco's Cable Modem business to complement its own Broadband CPE unit, lifting its worldwide share up to about 15%."

Cisco's total connected device sales are expected to total $1.6 billion in fiscal 2015, which will effectively double Technicolor's Connected Home business in a full year, when it will ship over 60 million devices worth about $3.3 billion. Technicolor says it already sees synergies of €100 million in the business to improve operating performance.

The Futuresource reports state that a clear picture of the current landscape will be established if/when the pending deal between Arris and Pace gains regulatory approval, potentially establishing a 23% leadership position and share of the market. This recent consolidation between the top 4 vendors clearly strengthens their positions through economies of scale and market share, putting even more pressure on the smaller players.

The Futuresource report reviewed worldwide STB shipments, highlighting that they fell 2% to 275 million units in 2014, due to minimal growth or actual cut backs in key emerging markets like Russia, Brazil, China and India. This was caused by economic factors or delays in government cable digitisation programs. Shipments are predicted to gradually fall despite negative market factors such as over-the-top (OTT) services, cable-ready TV/conditional access modules (CAM), SmartTV, virtual STB, and operator mergers.

"Despite the year-on-year decline the market is still huge, 275 million units in 2014 and we predict that it will remain in excess of 250 million units year-on-year until 2019. The sector will be worth over $17 billion by that time," added Wetherill. "The modem and gateway business is certainly interesting, it is much smaller than the STBs but holds promise as consumer dependence increases on broadband, home networking and managed services."

Whilst STB is a mature, commodity market, Futuresource also states that innovations like 4k and cloud-enabled services will continue to drive demand for new generation set-tops and gateways. Operator mergers like AT&T and DirecTV may also influence STB demand. 


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