September 13, 2007 4:00 AM PDT
Set-top box makers still waiting for customers
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"The biggest strategic misstep by all of these companies is their inability to lease the box and charge for content, or give the box away for free and charge more for content," he said.
Set-top box ownership hovers under 30 percent in the U.S., and the breakdown of numbers tells the story about consumer preferences: cable and satellite service providers are dominating the set-top industry. According to The Yankee Group's Penetration and Usage Survey, 20.6 percent of U.S. respondents own a set-top box from a service provider, like a cable company, while 7 percent own a standalone box. The rest did not own one.
"We're dominated by service providers that subsidize equipment," Martin said. "Users get used to that."
TiVo, which basically owns the 7 percent of standalone box users, and other set-tops linked to a single source of content like Apple TV, are neat, whiz-bang technologies, but there doesn't seem to be a strong demand for them. Cable providers also do something that seems to be more appealing to a wider array of customers: all services are included on one bill and there's only one box. While TiVo's much-lauded user interface and Apple TV's distinct "Apple-ness" are attractive, cable boxes' generally acceptable quality, instant content and convenience have so far won more users.
Whatever happened to MovieBeam and Akimbo?
MovieBeam was unveiled by Walt Disney in 2003 as a VOD service using a technology called datacasting, which took advantage of unused portions of the broadcast spectrum. The box cost $199 and movies could then be rented for $3.99 a piece. But the nature of the broadcasting technology made it difficult to roll out on a nationwide basis. And by 2005 Disney spun it off into a separate company, in which Intel and Cisco Systems poured $50 million of capital. A relaunch was attempted before the company was bought in March by video rental chain Movie Gallery for just $10 million.
Akimbo hasn't fared much better. It arrived on the scene in 2004, offering video-on-demand via a $230 set-top box and a $10 per month subscription fee. Programs and movies were downloaded from the Web, but each box could store only 500 at a time. Two years later, it announced investments from AT&T and Cisco. It's now a vehicle for, ironically, a cable company, used to distribute AT&T's Homezone U-Verse VOD service.
"Clearly, it's a challenging market for companies to break into and find success with it," The Yankee Group's Martin said. For example, "TiVo has had tremendous difficulty maintaining relevance in the market even though they basically invented the DVR market."
Amazon Unbox on TiVo isn't the only competition that VOD boxes have. There's popular DVD mail-delivery services from Netflix and Blockbuster, as well as downloads from Microsoft's Xbox Live service, which is available to any Xbox console owner.
Granted, success in this industry doesn't have to be defined as 50 million boxes sold. Selling 10 million, or at least covering costs, would be an improvement over Vudu's predecessors.
Said Martin, "I think expectations should be realistic until they prove they can buck the trend."
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