In our latest blog, Tim Pearson explores the impact that increased memory prices are having on the consumer electronics market, and particularly the set-top box. But, as consumer behaviour migrates beyond the box to watch aggregated experiences on connected TVs, does this make it the perfect time to #swapthebox?
If you’ve tried to buy a phone, laptop or TV lately, you’ll have noticed that prices are rising. But behind the headlines about inflation and supply chain pressures lies a quieter, more technical culprit: a global memory price explosion driven not by consumers, but by cloud giants and AI hyper-scalers who are consuming memory capacity at an unprecedented scale.
This shift in supply and demand is reshaping the consumer electronics landscape, creating ripple effects for device manufacturers, retailers, pay-TV operators, and ultimately, the end consumer.
Let’s break down what’s happening.
The Consumer Device Impact
As AI workloads balloon, the market for memory such as DRAM and NAND has tightened dramatically. Hyper-scalers like Amazon, Microsoft, Google, and Meta now consume memory at a scale that dwarfs the traditional device market. As a result, consumer grade memory, everything from the DRAM in a set-top box to the flash in a smart TV, is now competing with enterprise grade demand.
For manufacturers of consumer devices, this triggers a cascade of challenges:
- Higher Bill of Materials (BOM): Every dollar added to DRAM or NAND translates into higher upfront costs.
- Margin Erosion: Consumer electronics operate on thin margins, so component cost increases hit hard
- Delayed Refresh Cycles: Operators push back hardware upgrades and focus on refurbishment
- Downward Pressure on Inventory: Increased prices lower demand which drives down order volumes
This isn’t just theory. Its impact on service providers dependent on hardware-based delivery models is already being keenly felt at a time when our industry is already battling strong headwinds around consumer stickiness and retention.
The Set-Top Box Impact
Set-top boxes are uniquely vulnerable to memory price volatility. Unlike mobile phones or laptops, these devices are often still subsidised by operators. When the BOM goes up, operators face a several key questions:
- Absorb the additional cost? In a price sensitive market, that’s increasingly difficult.
- Pass the cost to consumers? Risky, especially with churn already rising in many regions.
- Delay new hardware rollouts? Keeping subscribers on legacy hardware may impact new feature rollout.
- Refurbish existing stock? Pragmatic, extend lifetime of existing stock and retain ability to drive growth
And for set-top box manufacturers themselves, the impact is direct. Decreased operator orders, more price negotiations, slimmer margins, and in some cases, cancelled hardware refresh plans.
But at a time when consumers are increasingly choosing to engage with their content via a connected TV rather than switching inputs to a set-top box, does this forced crossroads present a new opportunity?
The connected TV has become the natural home for entertainment, aggregating every service in one place. Instead of asking consumers to step out of that experience to connect to a set-top box, why not bring the pay-TV experience into it? A connected TV experience can give operators control of the UX on the very screen where consumers already spend their time. All of which suggests that now is the perfect time to #swapthebox.
#Swapthebox But Retain Control Over the UX
A key area for discussion with any move to app-based distribution is how do I still control the user experience in the same way that has been done for years in a set-top box environment? No operator wants to be just another app in a TV app store. But as memory prices continue to climb, one argument has become equally important:
If hardware is getting more expensive, don’t ship hardware.
The NAGRAVISION solution to this conundrum is TVkey Cloud. A joint initiative with Samsung, it offers a direct-to-TV, operator-branded experience, identical to that found on a set-top box, delivered through a secure, cloud-integrated framework direct to connected TVs. The app updates the default TV user interface to place the operators brand front and centre and ensures the app is positioned in the optimal place within the connected TV’s UX: Consumers are just one click away from the operators’ branded environment which enjoys greater visibility within the UX than even the leading streaming apps.
It’s a powerful combination:
- No STB BOM
- No supply chain delays
- No retail logistics
- No memory price inflation risk.
- On-chip security to protect premium content investments
- Fully branded operator UX that persists within the connected TV
That’s why operators, such as OSN in the Middle East have made the switch, swapped the box and provided their consumers with the same proposition and content mix, directly to their connected TV.
OSN: Adapting to the New Economics of Pay-TV
NAGRAVISION recently announced that OSN have launched their standard pay-TV service to connected TV’s using TVkey Cloud. While extended service reach to drive consumer acquisition was their key focus, the continued pressure on hardware prices was also a key consideration.
Strategically, this also meant addressing several industry trends:
- Hardware is getting more expensive — and will likely continue to do so.
- Consumers increasingly prefer appfirst and TVnative experiences.
- Operators must own the UX, not get lost as “just another app.”
- Security must be equivalent to traditional STB environments.
TVkey Cloud ticked every box.
The business aim of OSN was boxless distribution but in a way that gave them a persistent UX, identical to the set-top box meaning they could still ‘own’ the UX. This means that rather than being just another app in the app store, the OSN app customizes most of the native TV interface. In addition, when the TV is first turned-on, it provides a ‘subscribe now’ option as part of the set-up process, which provides a valuable acquisition tool and retail point-of-sale marketing option. In parallel, a core requirement for OSN, due to the content they carry, was a robust and secure distribution model that was equitable to that found on the set-top box. Here, TVkey Cloud utilizes on-chip security built into the board of the connected TV meaning it provides the highest level of robust security – to the extent that it meets the MovieLabs enhanced content protection standards for 4K Ultra HD, HDR and early release content. When a device becomes compromised, it can be securely revoked, and the on-chip security allows different levels of revocation, that can target a single TV or larger groups.
Seizing the first mover advantage and as the first deployment in the region, OSN’s success is now a reference point for operators across the Middle East, Africa, and beyond.
Are You Ready to #swapthebox?
With volatile hardware prices and changes in consumer behaviour determining a focus on aggregated, bundled subscriptions consumed through devices such as connected TVs, why not learn more about how you can leverage the benefits of TVkey Cloud? Contact us to see a demonstration or visit our product page. We look forward to continuing the conversation.
