2008: Set-top Boxes Set Up for a Fight

Think of 2008 as Act I when it comes to set-top boxes, the prelude of what’s to come. Next year will bring the conflict in Act II, and 2010? Hopefully Act III and a resolution.

In 2008, all manner of brand-name and upstart players began vying to be the box that connects to your TV set delivering movies, TV, web video and is basically the center of your digital media universe. Stalwarts like HP and Blockbuster rolled out their devices as newcomers Sezmi and Verismo came on to the scene (while still others, like Vudu, tried everything to get noticed). But the two real newsmakers of the year were Apple (s AAPL) and Netflix (s NFLX).
Apple TV
Apple kicked the year off with a bang by rebooting its Apple TV, and it looked like Steve Jobs & Co. were poised to dominate video the same way they dominated music. Throughout the year Apple added all the major studios (even nabbing HBO), got digital releases day-and-date with DVDs and added HD content (heck, it even kissed and made up with NBC).

But it was Netflix who crashed Apple’s set-top party and became the one to watch — literally.

netflix_lg_bd3002Netflix moved its streaming beyond PCs to include the standalone Roku box, TiVo, Xbox, LG and Samsung Blu-ray players — and even Macs. And just as it got those services off the ground, bam! It started streaming some content in HD. Netflix’s genius was in making everything easy for the user. Streaming comes as part of a subscription, so you essentially got the online delivery “for free.” You don’t have to sign up anywhere else and there’s only one price to pay each month (for as much as you can watch). Next, Netflix came to you. TiVo and Xbox could access it without having to buy another box, people interested in Blu-Ray could get both, and those wanting to experiment only had to spend $99 on a dead-simple-to-use (and tiny) Roku.

While these two heavyweights made the biggest moves in 2008, there are still other contenders for the throne. Amazon (S AMZN) could still emerge as a sleeper hit as it expands its streaming VOD service, and the open-source media center Boxee could be one to watch as it establishes partnerships and (hopefully) becomes more consumer-friendly.

But the real battle in 2009 will be when these services move further into the mainstream and begin to butt heads with the cable and telephone companies providing Internet access. How much will metered broadband access and bandwidth caps put the squeeze on this burgeoning new way to deliver video? And what other ways will cable and telcos leverage their existing home presence? And will cable’s Tru2way eliminate set-top boxes altogether?

It’s amazing to think of how far set-top boxes have come in less than a year. But all that activity is just the calm before the very big (and very fun to watch) video storm coming in 2009.