Yes, mobile integration is critical to the set-top box market

Smart set-top boxes typically attract less attention than other connected CE devices such as TVs and game consoles.

Indeed, Apple continues to refer to its TV set-top as a “hobby,” even though Cupertino leads the market with approximately 4 million units shipped through 2011. 

Meanwhile, rival Roku has managed to rack up some recent success by shipping over 2.5M units in 2011.

Nevertheless, ABI Research analyst Sam Rosen believes the future will be quite challenging for dedicated streaming devices as they struggle to break out of niche status.

“TVs, game consoles, Blu-ray players, and even mobile devices are quickly conspiring to engender a very competitive market for the digital living room,” he explained. 

“Even so, set-top box shipments are expected to reach as high as 57 million by 2017.”

According to Rosen, Google currently has a split personality in this market. On the one hand, China, in particular, is seeing growing interest in “generic” Android based set-top boxes and USB (or MHL) dongles/stick devices. 

Then again, Mountain View is also launching its second generation of Google TV platforms (including the well-priced and impressively spec’ed Vizio Co-Star) where it attempts to clinch additional content relationships alongside an improved ecosystem.

“The smaller form factor USB and MHL devices are both portable and like the Android set-top boxes, offer consumers similar services and features found on popular mobile devices,” said Rosen.

“Both of these devices expand the presence of Google Play but also could work well as a companion device for Android based mobile devices – not unlike the upcoming Nexus Q, just at a more appealing price point.”

Senior ABI analyst Michael Inouye expressed similar sentiments. 

“Dedicated devices have traditionally had a difficult go in the market, often lacking the same value proposition as more full featured products like game consoles,” Inouye explained.

“The changing consumer landscape, however, could present a window of opportunity for smart set-top boxes as more consumers allocate entertainment budget, both monetary and time, to streaming media.”

Inouye also noted that the future of connected CE will ultimately work together with mobile devices – rather than against them.

“Other CE devices like connected TVs and game consoles are already integrating mobile devices into the user experience, the same will likely prove true for smart set-top boxes as well. If the Android boxes gain popularity this could create a stronger ecosystem play for Google,” he added.