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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