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What does the sale of Microsoft’s Media Room to Ericsson say about Redmond’s TV strategy?

By finally ditching its Mediaroom middleware and all the associated IPTV baggage, Microsoft is at last well placed to make a big splash in the living room, driving in with a new version of the Xbox console. The Mediaroom sale to Ericsson was well timed from Microsoft’s point of view, coming just ahead of a long planned Xbox announcement in May which we are sure will lay the foundations of an ambitious and aggressive OTT strategy designed to beat Google and Apple, as well as beleaguered service providers.

At least by selling Mediaroom to Ericsson Microsoft has ensured that its existing IPTV customers are not left high and dry this time. Back in the 90s this happened to the early adopters of Microsoft TV such as TV Cabo in Portugal. This was Microsoft’s first foray into Pay TV, focusing mostly on the cable sector, although the technology later evolved into Mediaroom for IPTV.

With the market confused over its direction at that stage, Microsoft

pulled out all the stops to gain customers. Steve Ballmer came over to Europe several times to meet CEOs from the leading Telcos, and many technical teams were flown out to Redmond.

Commercial success for the first Mediaroom customers was dampened by technical teething problems and unavailability of good content, which retarded subscriber uptake. BT Vision in the UK being a good case in point, still being short of a million customers in 2013. But all Microsoft’s marketing might did prevail in the end and sufficient operators around the world took up Media Room to make it officially the leader of the IPTV middleware market according to many analysts.

But the rise of OTT services in the last few years has left Mediaroom falling behind the curve, although that has also been the fate of Microsoft’s IPTV middleware competitors. Now the sexy new Service Delivery Platforms are all the rage.

If even a B2B2C company like Intel wants its slice of the OTT pie, through its soon-to-be-launched web TV service, then surely a true B2C company like Microsoft would be even more motivated. After all the xBox, which started life as a pure games console, has always had the potential to become a living room Trojan horse. With Media Room now gone, there are no more cannibalisation concerns, no more internal conflicts over strategy and no more market confusion.

So we are in line with those who predict a major push by Microsoft in this area. Windows 8 was supposed to stop the decline of the PC as a platform. It hasn’t even slowed it! Steve Balmer doesn’t need us to point out how urgent this is. It could even be an opportunity to get something right before Apple for a change.

So next month we expect Microsoft to unveil the next version of Xbox positioned at the heart of its OTT strategy, with a feature that allows the new console to take control of a TV and set-top box. This sounds like Google TV but with the additional force of the existing Xbox gaming and the large user base that goes with it, about 76 million worldwide.  This will give Microsocft a big leg up into OTT, armed with a product that will overlay its own UI on top of existing TV channels, with the Xbox presumably being capable of connection to existing set tops via HDMI.

For service providers Microsoft’s bold change of strategy will exert further pressure. After Apple stole control of the smartphone form telecom operators and Google jumped into that breach, are service providers now going to lose what little influence they still have in the living room?

Blog post written By Philip Hunter & Ben Schwarz

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Intel’s reported exit from connected TVs: long live STBs

I feel like I've had the discussion on whether the future of TV includes STBs a thousand times at least. I seem to conclude yes about half the time, then no the other half.

I joined geekdom in the late eighties so my technological world vision was built around the Wintel duopoly. Remember when Microsoft brought out windows 3.1 (the first version that really worked). Most PCs needed to be changed. Then again when Intel came up with a new chip, twice as fast as the one 18 months ago, software vendors like Microsoft, Adobe, or game developers would quickly bring out « great » new features using all that power.

Asked whether the TV has an STB in its future, my answers always refer back to those simple old Wintel days: as long as people like NDS can come up with hungry UIs that require ever more processing power under the hood, then yes. Indeed the NDS latest Snowflake UI is reputed to be just one such power hungry killer-application.

Upgrading the TV’s processing power has always been harder than to swap out an STB. Traditional business models usually have it that a 500€-1000€ TV set belongs to the subscriber whereas the 50€-200€ STB belongs to the operator. In the days before connected TV and IP, the shelf life of a box was about 7 years. If the accelerated rate of change means that this has to be shortened to say 3 years, so be it. Lowering hardware prices will absorb a good part of the extra cost and the business model can take on the extra 10-15€ a year that shortened amortizations adds.

We had a changing world that I made some kind of sense out of with my Wintel analogy. But Intel then goes and exits connected TVs. How can that fit into the picture?

Despite their vested interest to sell to every part of the value chain, Intel have basically told the market that they believe their future is in the STB and companion devices, not the TV itself. The extra shelf life of TVs could be the culprit here. I'll be looking out for the roadmaps of other silicon vendors to see if they agree. But Intel carries so much weight that their analysis will affect the market even if they are wrong in the long term.

Thank you Intel for helping me to treat my split-personality disorder. I am no longer wavering and clearly do see an STB in the TV's future at least for the next couple of years. Other stakeholders were already pointing in this direction like Microsoft's with their big X-Box push in the TV space and Apple's non-entry into TV sets despite persistent rumors.

Jamie Beach of IPTV News recently pointed out to me how Google's Android strategy seems to be heading towards some kind of convergence with the TV. In the short term that will probably mean that Google's role in the TV will be played out on android companion devices only. It'll still be a couple of years before they get the lean back STB or TV OS sorted.

If anybody at Samsung, Philips, LG, Toshiba, Sony or any other set maker was worried about Intel's move, they are wrong. Their Connected TV strategies may need to be scaled down, but as soon as I have some spare cash I can now go and buy a new TV, based on its screen qualities and stop worrying about its OS, processing power or Apstore... I worry about the connectedness of my TV set itself when I next upgrade in 2 to 3 years.