A new report from Texas-based IMS Research has concluded that the digital set-top box market is one of the few segments that is defying the economic downturn, and predicts that volumes are expected to grow substantially through 2009 and 2010.

IMS argues that because TV is a cheap form of quality entertainment, it is one of the last costs to be cut by western households, while adoption in developing countries is continuing at unprecedented rates.

Accordingly, set-top box shipments in 2009 will see almost 10% growth over the previous year, the company predicts. Stephen Froehlich, an analyst in the company’s consumer electronics research group, comments that “Television remains one of the most economic forms of entertainment available and is traditionally one of the last expenses to be cut in tough times, making set-top boxes one of the few growth areas to be found in consumer electronics at the moment.”

The relative buoyancy of the set-top box market is also down to the fact that digital TV services are becoming available in new territories, says IMS. “Digital TV services, including HD, are also providing consumers the option of staying home to watch movies and sporting events, rather than paying for tickets and concessions at the theatre or sports field.” The company is forecasting that worldwide digital TV households will still see 20% growth over 2008.

However, there is a downside, the company says: annual set-top revenues are already near their peak, which it is forecasting to be $19 billion in 2011 - while prices of most types of set-top box are expected to decline by more than 10% each year.

“While there are some very real opportunities out there for suppliers to this market, they are getting harder and harder to find,” says Froehlich.