The set-top box was once a valuable tool in the entertainment world, giving people not only access to a wider range of content, but also allowing them to record shows, skip commercials, and rewind live TV. Today, with the arrival of streaming services such as Roku and Fire TV, what was once an asset has now become a liability, even if a profitable one. Cable companies are now faced with a difficult choice: to kill off the set-top box altogether and replace it with apps, or to evolve it radically to make it more useful, higher quality, and able to access more exclusive content. This talk explores the evolution of the set-top box and the ways it must change in order to maintain its relevance in a disrupted industry.

1. WHY THE CABLE BOX
NEEDS TO DIE
Jason Brush
NAB
APRIL 11, 2019

3. October
$6.99

4. October
$6.99
November
$7.50

6. $7.50
$12.99
$20.49

7. Skipping ads on live tv
Restarting (some) live
broadcasts
Accessing content not easily
available through OTT apps
$7.50
$12.99
$20.49

11. Netflix
Basic Cable
Broadcast
YouTube
Hulu
Amazon Prime Video
Premium Cable
Other
0 10 20 30 40
Source: Cowen & Co. Consumer Tracking Survey, 2018
TV SERVICE POPULARITY, ALL CONSUMERS
% of survey respondents who say which TV service they use most often

12. Netflix
Basic Cable
Broadcast
YouTube
Hulu
Amazon Prime Video
Premium Cable
Other
0 10 20 30 40
Source: Cowen & Co. Consumer Tracking Survey, 2018
ONLINE SERVICES DOMINATE AMONG GEN-Z & MILLENNIALS
% of survey respondents 18-34 who say which TV service they use most often

13. 0
50
100
150
200
250
2011 2012 2013 2014 2015 2016 2017 2018
Online Services Broadcast Cable
ONE THIRD OF ALL SCRIPTED TV SERIES ARE FROM ONLINE SERVICES
Source: FX Networks Research
189
146
160

15. 74% OF U.S.
HOUSEHOLDS
HAVE AT
LEAST ONE
CONNECTED
TV DEVICE
!15Source: Leichtman Research Group

16. Source: FX Networks Research, Leichtman Research Group
0
20
40
60
80
0
40
80
120
160
2013 2014 2015 2016 2017 2018
Scripted TV Series from Online Services
% of US Households with Connected TV Devices

17. Source: Leichtman Research Group
Connected TV Devices
Set-top Boxes 1.7
2.8
Mean number of TV Devices in U.S. Households
Home Broadband
Pay TV 78%
84%
% of US Households With Connectivity

18. Source: Wall Street Journal

19. 2015 2017
Affiliate fee per
subscriber
$6.61 $7.86 18.9%
Number of
subscribers
94,396,000 87,437,000 -7.4%
Source: Variety

20. Nothing / Does Not Want Channel
Up to $10 a month
Up to $30 a month
More than $30 a month 2%
6%
46%
47%
2%
4%
40%
54%
ESPN Cable News
MORE THAN HALF OF ALL TV VIEWERS DON’T THINK
ESPN & CABLE NEWS ARE WORTH PAYING FOR
Source: Reuters

21. SO,WHY SHOULD
PEOPLE PAY FOR A
SET-TOP BOX?
!21

22. FIDELITY
Better (literal) quality
EXCLUSIVITY
Content you can't get anywhere else
TOOLS
Functionality that improves your experience
!22

23. FIDELITY
Better (literal) quality
EXCLUSIVITY
Content you can't get anywhere else
TOOLS
Functionality that improves your experience
!22

24. IN 2016,THE AVERAGE
PAY-TV SUBSCRIBER
PAID $231 PER YEAR IN
DEVICE LEASING FEES
Source: FCC

25. !24
SO, WHAT NEEDS
TO CHANGE?

26. A TOOL TO
DECODE THE
CABLE SIGNAL
!25
A PLATFORM FOR
ENTERTAINMENT
INNOVATION

28. 0
750,000
1,500,000
2,250,000
3,000,000
2008 2009 2010 2011 2012 2013 2015 2016 2017 2018 2019
THERE ARE OVER 2 MILLION APPS IN THE APP STORE

32. Gen X Millenials Gen Z
80%
88%
77%
57%
51%
67%
Pay TV Streaming Video Services
TV VIEWERS JUGGLE MULTIPLE SUBSCRIPTIONS
Source: Deloitte
% of US TV Viewers

33. Roku Amazon
Fire TV
PS4 Xbox Apple
TV
Google
Chromecast
Other
3%
5%
10%11%12%
18%
41%
SHARE OF CONNECTED TV VIEWING HOURS BY DEVICE
Source: Convia

37. THE OPPORTUNITY FOR
SET-TOP BOXES:
BECOME THE PLATFORM
FOR THE MOST COMPELLING
INNOVATIONS IN
ENTERTAINMENT
!36

39. THANK YOU
JASON.BRUSH@WUNDERMANTHOMPSON.COM
!38