The terrestrial STB market

We’ve all got used to TV by now as it has become an indispensable attribute in almost every home and most of us can’t imagine life without it. Television plays such an important role in contemporary consumer society: it occupies a viewers’ free time with entertaining shows, movies and TV series; it distributes news; provides a communication avenue for advertisers; and in some extent, it enlightens people through educational programs. In all these areas, TV must confront powerful competitors such as movies, books, newspapers, radio and the Internet. However, the television industry is actively developing and absorbing the latest technologies by adapting to the viewers’ newfound demands.

Today TV signals are sent to the home in four key ways: “by air” via terrestrial broadcasting transmitters (terrestrial TV), from satellite (satellite TV), by cable (cable TV) and via Internet (IPTV). Chronologically, terrestrial TV is the first and most widespread as well as cheapest form for TV viewers. Every type is developed under a specific DVB (Digital Video Broadcasting) standard, for example, the digital terrestrial TV (DTT) has the DVB-T standard.

When the Russian government started to develop DTT, the next generation of DVB-T (DVB-T2) was introduced and therefore the DVB-T2 (with MPEG-4) was defined to be the national standard within Russia. DVB-T was used in Russia with previous small projects where European countries applied DVB-T as DTT was developed before T2 appeared. Only some of these countries turned to DVB-T2: the UK, Romania and Serbia. DVB-T2 is also used in Middle East, Egypt, Indonesia and South Africa.

Historically, terrestrial television has always been quite important for Russia and always free for its users. Therefore, DTT in Russia is also free as opposed to “Multiplex №4” in Poland, which is paid for usage. To what extent is the popularity of terrestrial TV in Russia? According to our estimates, based on several industry researches, around 16 million households watch only terrestrial TV. The other 36.7 million watch Pay-TV services (satellite, cable or IPTV) as their primary viewing method, but a large group of them still view terrestrial TV on a second or third TV set (72% of Russians have more than one TV set at home). According to our estimates, terrestrial TV is streamed to 42 million TV sets in Russia.

TV sets must have DVB-T2 tuners to receive a digital terrestrial signal. If the tuner isn’t integrated, the user should purchase a terrestrial set-top box. TV set producers such as Samsung, LG or Sony didn’t pass this chance and brought new TV set models in the Russian market. Mass sales of TV sets with integrated DVB-T2 tuners started in the summer 2012 and, according to GfK Group, now around 15 million TV sets of such type have been sold through the end of 2014, but only 5-6 million of them are used for DTT. As for the other 35 million TV sets, what terrestrial TV do they transmit? Some of these TV sets will be switched to Pay-TV transmissions, some of them will be thrown out as being obsolete, while the others form the market of terrestrial STBs.

The terrestrial STB market is very specific and has limited life cycle. None of the leading international producers of consumer electronics have decided to waste any time to occupy the market. Why is this market short-term oriented? It’s because it’s based on the massive switch from analog terrestrial TV to digital television. When the switchover is finished, terrestrial STBs will be in demand just to replace the STBs that are out of order.
Two brands currently hold leading positions in the terrestrial STBs market, the Russian company Rolsen and the Chinese company BBK. The other brands including D-Color, Mystery and Supra are produced in China. The Russian producers Promsvyaz and Signal also prepared some models, but have yet to influence the market.

Unlike satellite TV, terrestrial STBs are quite primitive and cheap. Their basic required function is to receive terrestrial signals from broadcasting transmitters, so customers aren’t ready to pay for other features yet. The CI module or integrated hard disk are too narrow niches and an average customer in Russia can’t afford to buy a new TV set or don’t have desire to spend money on it. Now let’s compare: a terrestrial STB costs 1,100 rubles (around 16 US dollars), while the price of a TV set with the DVB-T2 module starts at 6,000 rubles (around 88 US dollars). All the terrestrial STBs boast a function of a simple media player that’s able to replay files from a USB device and can record TV content directly to the USB device, but doesn’t have the internal storage. According to different surveys, media player functionality doesn’t actually interest customers.

The practice of developing DTT in Eastern Europe proves that up to 50% of terrestrial TV users could fail to switch to DTT by the official close of analog terrestrial TV. Therefore, before its death in few years the terrestrial STBs market will reach the peak of sales, while right now most related devices – from TV sets with DVB-T2 tuner to IPTV or satellite STBs – are rapidly narrowing the niche.