The first pay TV business I launched was at BT in London nearly 15 years ago when we early-adopted Microsoft’s Mediaroom platform (come on, who knew back then) and released BT Vision to an ambivalent British public. The STBs were dual tuner DTT PVRs that cost us somewhere around US$150 each if I recall correctly.
A few years later, BT determined that it needed more functionality to run its pay TV business than Mediaroom would allow and so it decided to switch platforms and undertook an ambitious and ultimately wildly successful project to hot swap the STB software on their live STBs in customer homes, saving the high cost of truck rolls, on-going Mediaroom license fees and, indeed, new STBs that would run the new platform software.
Swapping STB Software Isn’t Straightforward
The historically bespoke nature of STB components from the SoC upwards means that swapping STB software isn’t like replacing Windows with Linux on generic PC hardware. It’s a specialist job to get a legacy STB to download and boot into somebody else’s software and there are specialist companies that can do so: BT used Oregan Networks and other pay TV operators have used Zodiac Interactive.
What this shows is that the requirement to reuse legacy STBs has a long history in telco and pay TV when swapping platforms, and it’s still a common requirement today in video platform RFPs. It’s easy to understand why. Unlike the mobile phone industry that writes off the cost of a US$500 phone over a 24-month subscription contract, the pay TV industry insists on amortizing the much lower STB cost over many more years to inflate the apparent profitability of the customer each month. And after the STB is fully amortized, the pressure to leave that STB in place is still paramount because its monthly cost is then zero.
This was all acceptable because innovation in pay TV was historically slow and so there was no business need to update STBs regularly. It took decades for us to move from B&W to colour TV, widescreen for a cinematic experience, digital broadcasting for more channels and HD and now 4K for picture quality. And none of these innovations changed the core pay TV business model: the retailing of subscriptions for bundles of linear channels delivered over a broadcast network (satellite, cable, DTT or IPTV) to the main household TV.
Enter OTT Disruptors
But times have changed dramatically and the anxious desire of finance departments to hold on to legacy STBs is the greatest millstone to the Pay TV business today because it impedes the ability to play in the new OTT competitive landscape, which is the future of pay video. The OTT competitive landscape disrupts many characteristics of pay TV from the business model that unbundles linear channels (or dispenses with them altogether for a purely VOD experience) to the customer’s viewing behavior across multiple screens. And it is here that legacy STBs fail. When pay TV businesses started adding multiscreen services such as catch-up TV or standalone VOD libraries they generally had to build or buy a new platform to manage this video because their legacy STB middleware platforms were utterly unfit for purpose. Legacy STBs and their proprietary legacy software stand isolated in the ecosystem of connected multiscreens with their standards-based browsers, players and security.
What we now call Converged Video – video of any type playing happily on any screen – falls down dismally when we have to include a legacy STB into the ecosystem. The problem isn’t just the STB’s proprietary software that resolutely fails to support the open standards required by OTT video. That can often be partially solved by software swaps. But the legacy SoCs themselves are either not powerful enough to offer an acceptable converged user experience or they simply don’t support the required video standards in hardware such as H.265 encoding and haven’t got a hope of performing the task in software. Something is wrong with the pay TV company’s mindset when a new, cheap off-the-shelf OTT STB can deliver a slicker user experience with web video than the company’s legacy STBs that are apparently so critical to the pay TV company’s future financial success.
In my personal opinion, the virtualization of STB UIs on remote servers that stream their client images in real time to tiny clients on legacy STBs is a horrible short-term unscalable fudge that is rooted in the past and screams out that the business’s future is unimportant.
Recommendations for Pay TV Companies
Pay TV companies today need to establish the platforms and capabilities that enable them to play in an all IP world hand in hand with the emerging OTT providers. Even if the core linear channels in SD, HD or 4k are delivered over an alternative broadcast network like satellite, DTT or cable, the rest of the video (catch-up TV, start-over TV, PVR recordings, box-sets, movies etc.) should all now be delivered on demand using open web standards to multiscreens and the STB must be an integral part of that multiscreen ecosystem.
This means the operator’s video must be agnostic to the screen and its platform must natively integrate 3rd-party OTT services from the metadata to the player to create a single, comprehensive gateway to video on any screen, including the main household TV. This is fundamentally important to a pay TV operator because their STB must be plugged into HDMI1 on the main household TV and therefore be the default and primary gateway to all video services.
The proliferation of other devices such as Apple TV, Roku, Android TV and games consoles that happily sit within this converged multiscreen ecosystem means that the traditional pay TV operator has no choice but to be a seamless part of the same ecosystem otherwise they run a high risk of being relegated to HDMI2 for their linear channels. Once a viewer has switched to a more friendly OTT device in HDMI1, it’s a challenge to get them back to the pay TV provider’s STB.
This is why legacy STBs must not be viewed as a financial asset to be lovingly maintained as the bedrock that underpins the pay TV business’s future.
Today, frankly, they’re nothing other than a terrible liability and they need to be replaced with a box and platform that can be the heart of a converged video ecosystem on the household’s main TV.
Video has transformed so rapidly over the last five years and continues to do so at pace. It’s now clear that the greatest threat to legacy pay TV business is not the OTT players – it’s the desperate clutching to legacy STBs that’s risking the future capability of the business.
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