Why German vMVPDs Are Getting Into the Hardware Game

The successful German vMPVD waipu has just expanded its hardware portfolio with a new Android based set top box. Which is an interesting development. vMVPDs started out virtually (that is what the v stands for) with no hardware of their own, “only” apps available on 3rd party platforms like Smart TVs or streaming devices (e.g. Fire TV). 

But now, providing their own branded hardware to subscribers has become a strategic feature in the vMVPD product mix.

As vMPVDs offerings continue to evolve, hardware is becoming increasingly relevant. The once-sufficient “EPG” apps and box-less approach from vMVPDs are not good enough anymore. To continue succeeding, vMPVDs need to step up and start bundling other streaming apps. Not just from a commercial standpoint, but by actively taking on the role of an aggregator within their platforms. This means that in order to enable advanced experiences like deep-linking into third-party apps, vMVPDs will need their own dedicated hardware.

Without that hardware, Smart TVs running aggregation-oriented operating systems (like Android TV, Tizen, Roku, etc.) and streaming sticks (e.g. Fire TV) will increasingly take over that aggregator role - gradually pushing out vMPDs as providers of traditional linear channels.

To maintain control over the customer experience, and to at least partially own the user relationship, vMVPDs have decided to invest in hardware. They typically do not try to reinvent the wheel, but, instead, leverage existing operating systems (mostly Android TV) and focus more on improving discoverability within their own operator apps. 

In addition to enabling essential aggregation features, providing hardware options creates customer stickiness. A branded device with a remote control becomes part of the daily routine — which likely has a positive effect on churn as well. Not to mention that, in retail, it’s generally easier to sell a physical product than a purely virtual subscription.

With that context in mind, let’s take a closer look at how (v)MVPDs are approaching hardware strategies and monetization models — both in terms of portfolio variety and commercial flexibility.

1. Commercial models

In the past, set-top boxes (STBs) were typically bundled into the TV offer — as they were technically mandatory. As technology evolved and TV distribution transitioned to OTT (Over-the-Top), STBs became increasingly optional — which is not necessarily a bad thing in terms of usage ratio. It also allowed MVPDs to offer more choice to customers and provided sales teams with greater flexibility — whether customers wanted a dedicated box, a stick, or were happy using the vMVPD app on their Smart TV.

The spectrum of commercial models now ranges from:

• Fully bundled hardware (with no visible pricing and no opt-out option), to

• Complete customer choice, where users can purchase hardware separately.

Rental models appear to be particularly attractive for vMVPDs, as lifetime rental revenues often exceed the total cost of the hardware. Customers, in turn, benefit from free hardware swaps if something goes wrong. However, this becomes less critical with OTT devices, where components are generally more durable and less prone to failure (e.g., no hard disks or tuners).

When looking specifically at Germany, the fastest-growing MVPDs — waipu.tv and MagentaTV (Deutsche Telekom) — offer both rental models and purchase options for their hardware. More traditional providers like Vodafone and Sky treat hardware as mandatory, with no opt-out option. The upside? No visible price tag for the hardware — though it’s clearly baked into the pricing of the core product.

Amazon, as a representative of the tech giants, exclusively offers purchase options for its hardware — frequently at heavily discounted rates during multiple promotional events throughout the year. And their TV sets are typically manufactured and sold by partners using the Fire TV operating system.

2. Hardware portfolio

It seems that one device type is no longer enough. Most MVPDs offer at least two hardware options, with the key differentiator being the form factor. There are three main options: sticks, boxes, and TV sets.  Amazon is the only company to actually provide devices in all three categories — with its Fire TV Stick, the Fire TV Cube in the box segment, and its own or third-party TV sets running the Fire TV operating system.

The above-mentioned German vMVPDs waipu and Magenta TV offer both a stick and a box. Magenta TV even offers the Apple TV as a third option – it can be purchased or rented. Vodafone offers two boxes differentiated by a better audio experience. Sky Germany has two boxes differentiated by distribution method (Satellite vs. OTT). In the UK, however, Sky was the first (and still only) MVPD to offer a Smart TV set via a rental model tied to the contract.

When it comes to hardware, however, feature differences can be hard to communicate to customers. In the end, price—as well as form factor—remains the key differentiator. Sticks are small, they’re the cheapest options, and they are easy to exchange/upgrade. Boxes are positioned as “premium” options offering better performance at a slightly higher price.

3. Outlook

There is clearly no right or wrong, as the strategies differ from MVPD to MVPD, and customers appreciate having a number of options and approaches they can choose from. We expect further consolidation at the Operating System level, while offering customers a choice between streaming sticks and set-top boxes will remain standard practice, at least in the mid-term.