CAMPBELL, CA – The fourth quarter of 2010 saw a dramatic growth of over-the-top (OTT) services as providers such as Netflix and Hulu launched low-cost streaming services toward the end of 3Q10. Sales of OTT media servers (standalone set-top boxes such as Apple TV, Roku Media Player and Boxee Box) nearly doubled quarter-over-quarter, according to research firm Infonetics Research. OTT media server revenue jumped 90 percent in 2010 and is forecast by Infonetics to grow to $1.16 billion in 2015.

Infonetics analyst Teresa Mastrangelo says that this rapid growth shows service providers and equipment vendors have hit the ‘sweet spot’ for pricing. She adds, “However, these services continue to complement pay TV rather than replace it. On a global basis, demand for set-top boxes continues to increase as more countries transition from analog to digital and more operators offer enhanced services such as high definition and DVR. We also are seeing increasing demand for hybrid set-top boxes, which leverage the existing broadcast infrastructure but utilize the broadband connection to incorporate OTT content and increase interactivity and on-demand services.”

The Infonetics report also found that

  • Worldwide set-top box (STB) sales dipped 1 percent in 4Q10 from the previous quarter, to $3.63 billion, with cable STBs seeing the biggest sequential decline. However, Infonetics projects STB shipments to increase 25 percent from 2010 to 2015, while revenue declines 5 percent to $13.1 billion, as STB average selling prices continue to drop.
  • Netflix added more than 3 million subscribers in 4Q10 – nearly twice as many as in the previous quarter and three times as many as during the same period in 2009.
  • Hulu introduced its paid service, Hulu Plus, last year at a price point similar to that of Netflix; its subscriber base is expected to exceed 1 million in 2011.
  • Amazon UK’s purchase of LOVEFiLM will likely drive increasing OTT media server demand in Europe.