We have recently interviewed Richard Smith, a seasoned industry expert and entrepreneur with a passion for innovation in the field of set-top boxes (STBs) and broadcast technology.  In this interview, we delve into his insights and experiences.
We hope you find this conversation as enlightening and inspiring as we did.

Thank you for accepting my request to better understand the STB business Richard. Could you please introduce yourself and your company, EKT?

My name is Richard Smith, and I am the co-owner and founder of EKT. I was born in the UK but spent the first 15 years of my life in Southern Africa. I returned to the UK to complete high school and pursue a degree in production engineering. In 1992, I joined a UK-based company specializing in set-top boxes and LNBs. My entire professional life has revolved around set-top boxes and this industry.
In 1999, I relocated to China and lived there for over 20 years. In 2007, I founded EKT, so we are 16 years old and employ around 100 people.
The key challenge for EKT has always been finding a unique position in an extremely competitive and crowded market. Our approach was to blend the strengths of both Eastern and Western practices: Western emphasis on communication, project management, language-oriented software development, and quality, combined with Eastern advantages in time-to-market, hardware design, manufacturing, and cost-efficiency. This strategy allowed us to establish our presence in the market, and it remains consistent in our ongoing SkyFlow project with EasyBroadcast, which introduces a new concept -- native IP in an end-to-end offering.

Now, let's delve into the SkyFlow project. Could you provide a brief explanation of the project, its future plans, and EKT's role in it?

SkyFlow is a collaborative effort involving four like-minded, enthusiastic companies. The project's success is attributed to our shared enthusiasm for innovation and the belief that demonstrating technology is the best way to sell it. Each member contributes a crucial aspect to the project: EasyBroadcast manages content preparation and metadata, Quadrille or Broadpeak convert multiple unicast  streams and files into a single multicast stream, ST/I-Direct adds DVB-S2X modulation for satellite transmission and encapsulates the mABR stream with GSE-HEM, and EKT, as the fourth partner, receives the signal, removes the GSE-HEM encapsulation to expose the unicast channels, and delivers content to TVs or mobile devices with the EasyBroadcast app. The project aims to provide an end-to-end experience, demonstrating this technology, which is quite unique. We have invested significant time in developing and refining the software to ensure seamless operation. As we expand into the mass market, especially DTH (Direct-to-Home) for paid content delivery, our next step is to enhance security throughout the end-to-end solution. We are currently collaborating with EasyDRM to achieve this.

How has the traditional set-top box (STB) evolved over the years, and what are the current economic and supply chain challenges in this industry?

In many ways, the traditional STB has not evolved. The traditional STB started in the 70s with the first analog cable and satellite TV, and if we consider a STB is a device to receiving multicast video and sending it to a connected TV, it is essentially still the same. The difference is that the multicast video has evolved from analog to digital, SD to HD, HD to 4K and the transmission technology has improved from analog to DVB-S to DVB-S2X. However, the fundamental concept of receiving a multicast signal and displaying it on a single TV in the living room, has remained unchanged.

Regarding economics, there has been a significant shift. Before, approximately 90% of the set-top box cost was attributed to hardware development, driven by complex hardware and expensive components. In contrast, software development accounted for only 10% of the cost with basically just a simple UI. Today, the landscape has reversed, with 90% of the cost associated with software development and 10% with hardware. Except now, customers do not see the value in the software because companies like Google with their Android middleware and Widevine DRM have offer this for “free”. So, setting a fair pricing model for the STB becomes extremely difficult. 
Another challenge is supply-chain related, especially during the COVID-19 pandemic. Our reliance on China for hardware and components was exposed when various disruptions occurred, including temporary factory closures, shutdowns at component factories, and port closures. These events had a significant impact on our operations. To mitigate such risks, now we are diversifying our supply chain by establishing manufacturing facilities in Poland and Turkey.

You offer a range of different products. Now, let's categorize your set-top box products by industry and discuss regional variations in suitability.

Set-top box products can be broadly categorized into two types: unconnected (unidirectional) and connected (bidirectional).

Unconnected (Zappers):

  • These boxes lack a return channel, Wi-Fi, or the ability to send a signal back to the headend.
  • Typically, they are priced at less than $20, and still form a big market segment for us as the reality is that there are large areas of Africa, Mexico and South America, which will not have affordable broadband for many years to come.

Connected (Bidirectional):

  • These boxes have a return channel to the headend, enabling requests to be sent back.
  • They are all about software and integration with 3rd party software and has basically become a battle between Google’s Android OS and open-source Linux, such as RDK. EKT fundamentally believes that Android is bad for the industry and so we have chosen to work with RDK.

What role do set-top boxes play in the businesses of Mobile Network Operators (MNOs) and satellite operators? How are these devices distributed and financed? Do you foresee OTT players distributing their own devices?

This is not an easy question to answer as there are multiple possibilities.
The role of set-top boxes in MNOs and satellite operators' businesses varies based on their specific strategies and goals. Most traditional operators, with a managed network, offering a linear TV service, and these will be the companies you are familiar with, such as Canal +, SKY, Liberty Global, take a position that they want to have:

  • a direct relationship with their customers and a managed relationship with them, where they can control the user experience,
  • the user’s data
  • the way advertising is pushed to their customers and who makes money from it.
    Typically, these operators will purchase STB and then distribute them to their customers through contractual agreements of some kind.
    Once we move to OTT, where the reach of OTT programming extends far beyond the limits of the managed network, and may even cross international borders, the distribution of managed STBs becomes more complicated. We observe a shift towards utilizing the retail chain and, notably, downloadable apps to facilitate this distribution process. Developing an OTT app may initially seem more cost-effective, but, in reality, it presents significant challenges.:
  • The number of devices you need to support (phones, tablets, TV etc.) is huge. Not only do you need to get all of these apps approved on the various application stores, and the TV brands, which can be costly, but then you have to support them when the OS of those devices is updated.
  • You will never be able to cover all TVs and devices. Some households will not have a smart TV
  • Watching premium sports on a mobile device, is not preferred. A TV still gives the best viewing experience. So, if the TV does not support an app, then a STB is required.
  • You have no control over how the App is positioned in the TV/OS UI and whether or not it will be in a prominent position.
  • You are relying on a 3rd party billing system
  • You give away all your customers user data.

Finally, what trends are shaping the set-top box market, and what is your vision for the future of set-top boxes in a changing landscape of viewing behavior, with increasing app-based experiences on smart TVs, streaming devices, and mobile devices?

The set-top box market has seen a transition from traditional multicast STBs to a landscape that includes OTT services and a desire for multi-device viewing at one's convenience. However, if we look at the delivery platform options, cable and satellite have faced challenges in keeping pace with IP as a delivery platform, because cable and satellite are fundamentally multicast.
Tier 1 operators often prefer managed set-top boxes, as they allow for a consistent and controlled user experience. Despite the rise of OTT, there is no evidence of declining demand for traditional STBs, particularly unidirectional ones, which lack OTT capabilities. Affordable broadband availability and the customers’ ability to pay for connected STBs with advanced features remains a challenge I many developing regions.
The future of set-top boxes will likely involve coexistence with app-based experiences on various devices, with traditional STBs continuing to serve a prominent role in many households. The diverse viewing experience will accommodate a range of preferences, and set-top boxes will remain relevant, especially for delivering a superior living room experience.