Apple, Google take lead in pay-TV innovation

Adrian Drury and Michael Philpott/Ovum
07 Jan 2011

In December 2010 Apple and Roku both hit sales of 1 million units of their video streaming boxes. This is a strong performance but the figures are not yet directional relative to the installed base and shipment volumes of the incumbents: the games console majors, pay-TV operators, and CE manufacturers.

The main effects these new entrants are having on the market is to light a fire under the innovation cycle of the incumbents, as demonstrated by two recent bleeding-edge CPE programs from Comcast and Iliad.

As Google may be about to demonstrate through its acquisition of Widevine, the smart play may be to embed oneself in the emerging web video supply chain, rather than try to take ownership of HDMI port 1. Even in the fight for the second port Apple faces stiff competition, although if it is successful then pushing its App Store ecosystem onto the television will prove strategically very powerful.

Sales of video streaming boxes not yet directional relative to incumbents

On December 21, 2010, Apple announced that it would hit sales of 1 million units of its revamped $99 Apple TV streaming media box by the close of the year. Likewise, this week Roku, a US-based specialist player in this market and Apple TV’s closest competitor, has reported that it is also pulling close to 1 million units sold for its HDMI-equipped media-streaming device which supports Netflix, Hulu Plus, Amazon VoD, and Pandora.

It has not been a straight fight to the 1-million mark. Roku’s box has been available since 2008, but is only available in the US. Apple’s second TV product has only been available since late September 2010, but is also shipping in markets outside the US – notably Australia, Canada, the UK, Germany, and France. However, Apple only has a subscription VoD service in the US thanks to its prelaunch Netflix integration, and in Ovum’s view this is likely to be skewing share of sales towards the US market.

An aggregate figure of 2 million video streaming boxes, plus a small number of D-Link Boxee units and the limited shipments of Sony and Logitech Google TV units that have made it into the supply chain, is a long way from being directional relative to the total size of the three other strategic axes converging on control of the TV interface. Axis one – the games console platform operators – have a worldwide aggregated installed base of 162.1 million units of their latest-generation hardware. Axis two – the CE vendors – dwarf this number again. Samsung’s annual sales of TV sets alone stand at an estimated 50 million. Finally, the third axis – the multi-channel broadcast platform operators – will alone have shipped an estimated 180 million subsidized set-top box (STB) devices through their customer channels during 2010.

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