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Internet TV and the future of set top boxes

By November 20, 2006 January 1st, 2007 9 Comments

This is a follow up to my post last Internet TV – its the end of the world as we know it.  There were many comments (for which thank you all) which were the result of some fairly bold statements, a couple of which deserve a little more consideration.  This is about the future architecture for the home and the place for set top boxes.  I will write another about the future for channels and what consumers might want.

It was Fred Destin’s comment on the post above over the weekend that finally stimulated me into action.  As an investor in DailyMotion and Gotuit he knows a thing or two about this space.  (By the way, check out Gotuit to see it’s lightning fast embedded Flash player – nice.) 

That said, I don’t agree with his points, which is good, we learn from disagreement.  With these posts I’m giving my best guess as to how things will pan out – that is what we do as VCs when we back early stage companies, so this debate will help us guess better.

To the meat of the post then. 

As I said, I think Set Top Boxes (STBs) are on the way out.  STBs (set top boxes) are better than PCs for TV apps today.  No question.  It might even stay that way – but I believe that over time they will disappear.

The main reason I think the PC will eventually replace the STB is that all the functionality that is required can be easily provided on the PC (and MSFT is working hard on this via Windows Media Centre and Vista).  Once everything is internet connected the TV needs to be networked to the PC so the set top box becomes redundant, an unnecessary expense.  At the moment it is subsidised by TV service providers, but if I’m right about channels going too then the subsidy will disappear.

The argument hangs on the ease of replicating STB functionality on the PC so I’m interested in evidence and thoughts on this point.

As with any purpose built hardware set top boxes are expensive to develop and maintain.  Custom chips don’t come cheap.  The difficulty of writing good software can be seen in the quality of the electronic programming guides we all use (think about Sky – it works fine, but not much in there, no search for example, and if you ever had Ondigital in the UK you will know what I’m talking about).  

For the ‘no set top box’ vision to come to pass people will need to have PCs in their living rooms.  Either that or some kind of remote control that directs the PC from the living room.  New software will be needed too, so that people can control their PC in familiar ‘sit back’ mode, probably from a device that doesn’t look too different from today’s remote controls.  My guess is that people will populate their TV schedule on their PCs and then drive their viewing in sit back mode.

None of this seems that difficult, and the benefits to consumers are huge.  Being able to control our TV schedule from our PC will give us access to programmes and filters that will be very hard otherwise.  Doing that from a set top box will be hard …. unless it has a full keyboard and browser.

Whilst it won’t be difficult, there is still an awful lot that doesn’t work.  For example, connecting a PC to a TV is still v. difficult.  So this stuff will take time and as I said in my last post there may be space for some successful STB style devices before we get there.