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OTT and the Internet Set-top Box Opportunity

The latest global market study by MRG demonstrates how Over-the-Top (OTT) video services may offer new opportunities for Pay-TV providers to expand their reach through TV-centric "open" Internet services.

Is this the beginning of the end for walled-garden (closed) Pay-TV services? Well, that depends on your point of view, and perhaps if and when the CE manufacturers can bring new and improved Internet Video-Ready television sets to market.

Revenues in 2012 should exceed $11 billion, with Internet Set-top Box (ISTB) penetration (including game consoles) exceeding 57 million. Besides cost containment practices, MRG identified what kinds of OTT video content consumers want (and will pay for), based on a global consumer survey.

"The real question isn't whether Pay-TV Service Providers (SPs) should implement OTT, as most analysts already agree (they should)," says MRG Analyst Mike Galli.

"The real question is how and with what results, which is why we did a ROI analysis for Tier-1, 2 and 3 IPTV SPs explaining the best practices, cost-loading and break-even points for several different configurations of OTT service."

The MRG report also disputes the belief that smart TVs (TVs with Ethernet ports and Web browsers) will replace ISTBs in the next five years -- as predicted by some Consumer Electronics (CE) pundits.

"ISTBs will continue to be strong players beyond 2015," states MRG President Gary Schultz. "This is illustrated by the evolutionary path ISTBs must follow to stay ahead of the fast changing OTT business."

The MRG report further asserts that many HD (High-Definition) TVs will rely on (external) ISTBs to provide the needed storage, hybrid-processing, progressive download, and EPG-processing capability at an affordable price to deliver HD content.

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