It used to be so simple. Cable operators simply leased set tops to customers who used them primarily to switch channels (and perhaps tell time). Then came addressability. The boxes did a little bit more, but they remained clunky. For years, all of this was acceptable because the same box makers made the same cheap-as-possible boxes for cable and satellite distributors—and those boxes were the only game in town. So people didn’t complain much. But now the world has changed. Boxes are everywhere. And some of them are pretty fancy. Is cable falling behind? Yes. Does this portend the end of the industry? Hardly. But let’s all agree that the good ole’ days are over. Cable operators need to innovate like never before when it comes to set tops. Many are already trying, but it’s an open question as to whether they are moving fast enough.
Over the weekend came more set-top news as Logitech became the first device maker to announce a Google TV box, which will ship this fall. It’s called the Logitech Revue and will seize on an established and growing trend of boxes that fuse the Internet and traditional cable TV into an amorphous blob of living-room entertainment. It will present everything on a state-of-the-art interface that blows away the functionality of most existing cable set tops. Make no mistake: Logitech—while not yet a force in the world of TV-connected CE devices—is an extremely ambitious company that makes numerous high-quality peripherals, including HD webcams, “playseats” for gamers and the well-reviewed “Squeezebox” series of standalone WiFi-enabled music devices. With convergence, Logitech has branched out into the CE space and gotten rave reviews from computer geeks, audiophiles and perhaps soon TV aficionados.
Unlike Boxee, which plans its own similar set top in Nov, Logitech is no scrappy startup with a few million bucks in venture funding. Rather, it’s a publicly traded powerhouse with $2.75 billion market cap, the marketing dollars to make lots of noise, and the discipline and patience to stick around a while. Plus, it’s hooking up with Google—a company known as much for its tenacity as its innovative spirit. Meanwhile, Apple’s self-described “hobby” called Apple TV could at some point become more than that, especially if Steve Jobs gets spooked by watching primary competitor Google make progress in the space. The Logitech Revue, after all, with use the Android operating system, which already directly competes with Apple’s OS in the mobile space. And then there’s the similarly Web-enabled TiVo Premiere, which TiVo continues to market as a device “that replaces your old cable box,” not to mention the bevy of Blu-Ray players and gaming devices now on the market with easy access to streaming Netflix movies and YouTube content.
None of this is to say that the ongoing box revolution spells doom for cable. It doesn’t. In fact, the fine print often works in cable’s favor (For example, TiVo Premiere can’t access the cable VOD menu, which makes it a quite imperfect cable box replacement). But these third-party boxes get better every day. And increasingly, they offer so many incredible features—often leveraging Web-based VOD streaming content such as that from Netflix—that cable operators can’t turn a blind eye.
But perhaps all of this actually bodes well for cable. After all, just as DBS satellite competition in the 1990s cajoled cable to build out its broadband networks to offer something satellite could not, the new set-top competition should drive all multichannel distributors to (finally) supercharge their set tops to compete. Comcast and others are on the case and making progress. But as usual, it’s slow. And with the market about to get much more interesting come this fall (just in time for Christmas), it’s time for cable to redouble its efforts. Again. The cord cutters and end-runners are out there. And the Googles of the world are making it easier for them to access Web content through their TVs. These days, Web video competes directly with cable VOD. Neither authentication nor Hulu’s potential switch to a pay model changes the basic reality that these boxes are giving consumers more ways to bypass cable. Until cable gives them a reason to stay.
(Michael Grebb is executive editor at CableFAX).

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