The market for set-top boxes is likely to grow dramatically in the next few years, according to a recent report.

Futuresource Computing said that the incoming wave of entertainment services plays perfectly into the hands of set-top box makers.

"Pay-TV operators around the world continue to use set-top boxes to drive digital services, increase average revenue per user and reduce subscriber churn with innovations such as high definition, personal video recording, video-on-demand and home networking," said Futuresource analyst Carl Hibbert.

The uptake of premium services, combined with growing demand for cable and satellite TV systems in developing countries, has led Futuresource to predict that shipments for set-top boxes will increase by 40 per cent over the next four years.

The growth in sales, however, may come as the number of companies in the market shrinks. Analysts predict that, as the market matures, the largest vendors will inevitably take over.

"The next five years will see further consolidation in the set-top box industry, with smaller vendors being absorbed or pushed out especially as China's major OEMs and brands increase their drive on export markets," said Hibbert.

"In a commoditising market, the long-haul survivors will be those with solid account relationships, competitive economies of scale and/or unique competencies in software or end-to-end network solutions."