Apps that deliver the pay TV experience on Roku boxes and other retail devices are poised to broaden, not replace the market for operator-supplied set-tops and gateways, Bruce McClelland, Arris’s CEO, said.
“I don’t think of it as an experiment as much as an augmentation to the offer they [MVPDs] have today,” McClelland said Wednesday at the Goldman Sachs Technology and Internet Conference in San Francisco. “We don’t see it as a replacement approach as much as an augmentation of what they do today.”
The question about the impact of those apps emerge soon after Comcast started to beta test an app for Roku devices, and will soon offer on Samsung smart TVs and will likely support on a broader range of retail platforms in the months to come.
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That trend is important to Arris, which now leads the set-top market following acquisitions of Motorola Home in 2013 and of U.K.-based company Pace plc last year.
Though the retail model for MVPDs will certainly grow, operators tell Arris that they “like controlling the technology in the home,” as it helps them differentiate their offer, predict how their services evolve, and enables them to keep tabs on the overall customer experience, said McClelland, who succeeded Robert Stanzione as CEO at Arris last fall.
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But he doesn’t expect this gradual trend to alter the core fundamentals of a video CPE business that has been moving to gateway/client architectures that use Lightweight IP devices as well as more powerful boxes with storage and other advanced features. He also sees Arris well-positioned to benefit from “product refreshes” that occur with CPE for video and broadband.
McClelland was also asked about the logic of Arris’s recent warrants agreements with Charter Communications and Comcast.
While noting that such agreements are somewhat unusual, they are beneficial to both sides because they “align our interests” and help to ensure that Arris is investing in the right areas, he said.
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“We felt like with acquisition completion of Pace last year that, given the concentration of spend, finding a way to incent our customers to …get comfortable with the level of spend with us was important,” McClelland said.
And they aren’t as unusual as he was letting on, as both Harmonic and Universal Electronics have similar deals in place with Comcast, which also took a small stake in Arris when Arris was pursuing its Motorola Home acquisition.
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McClelland also said Arris is ready to pivot as access architectures become more virtualized, disrupt the market, and open the door to new competition.
The challenge for Arris, he said, is to support a graceful migration to new approaches and to be “disruptive to our own business…if the technology takes us in that direction.”
