Following a relatively flat three years, the set-top box market achieved the highest annual revenue in its history last year, says analysts IHS.
This growth spurt sets the stage for continued growth through 2015. Revenue will set new highs during the next two years and will peak at $22.8 billion next year.
"Set-top-boxes proved to be critical to the strategies of pay TV operators in 2013," said Daniel Simmons, researcher at IHS.
"Far from being pushed out of the living room by Internet-enabled consumer electronics, STBs are being repositioned as the hub of the connected home."
Growth was mainly driven by set-top-boxes that are 'multimedia home gateways' which support pay-TV services with Internet access, Wi-Fi and other advanced features.
Demand has been strong for PVRs and Digital Video Recorders (DVRs), says Richard Tassone, General Marketing Manager Consumer Electronics at Panasonic Australia.
This was due to several factors including last year's digital switchover and demand for more feature rich boxes with 'smart' functions like WiFi to stream web content, dual tuner, Blu-Ray recording and 4K upscaling.
Panasonic recently launched an army of new range of boxes that costs up to $700.
Despite the digital switchover, there wasn't a huge spike in sales last year, but there is a "solid foundation" which he expects to continue to be strong.
MHGs are being used by content players to transition from a legacy broadcast TV to Internet-centric one, to compete with over-the-top (OTT)-rivals Amazon and Netflix.
U.K box maker Pace leads this market with almost 50% share in 2013.
Ultra-high-definition or '4K' boxes using High Efficiency Video Codec (HEVC) will become significant in the future, analysts predict.
"UHD STBs will be strategically important to operators in all territories," says Simmons.
"Beyond enabling an additional premium-content tier, HEVC use will result in more efficient Internet Protocol (IP) video distribution, allowing operators to offer superior OTT services."
UHD is four times the resolution of Full HD, meaning better screen quality and picture resolution and brightness.
Pay TV is nearing saturation across the world, and operators will be increasingly reliant on the technology-based differentiation enabled by set top boxes to compete for subscribers.
IHS expects pay-TV operators to purchase 13 million UHD set top boxes in 2018.