Competition from … Video Games?
The competitive landscape is tricky enough for cable operators, with satellite providers and telcos on the scene. Now companies like Microsoft and Sony are making video moves with game console-affiliated media portals like Xbox LIVE and PlayStation Network.
Research consultancy The Diffusion Group estimates that today 90 million households worldwide have game consoles, 41 million of which are broadband connected. Additionally, 22 million of these households already use these consoles to consume over-the-top (OTT) video services at least once a week.
TDG last week issued a related report on the game console market.
"To some extent, I would expect marginal pay-per-view dollars already are being pulled away from cable and telco VOD systems to game consoles," said Colin Dixon, TDG director broadband media strategies.
Sony has 1,000 movies, and hundreds of available TV shows will ramp up to remain competitive with Microsoft’s Xbox LIVE, which has accumulated 15,000 movies (1,000 in HD) and 13,000 TV shows.
To date, the choices have weighed heavy on science fiction and action adventure to appeal to the typical gaming audience. However, the gaming companies are working to expand their reach. "(Nintendo) Wii hasn’t delivered any movie services, but once they do, and we expect them to do that, they will have a much broader set of content," Dixon said.
And Xbox has been repositioning to compete more effectively with Wii. On the movie side, it has partnered with Netflix, gaining access to a different pool of movies (12,000) and genres that could appeal to anyone in the household, Dixon said. "They are creating reasons why everyone in the family should be going to Xbox. The more that happens, the more people will take advantage of media services. That will occur to the detriment of cable and satellite."
In addition, even without an Xbox, Netflix subscribers (with any type of unlimited plan) can purchase a Roku player for $99.00 and stream video for no additional charge. Netflix also has partnered with premium movie provider Starz Entertainment to offer an additional 2,500 movies and programs – again, with no additional charge to Netflix subscribers.
"This is directly competing with the premium movies services on cable today," Dixon said.
What to do? One option for competitive response stems from the "if you can’t beat, ’em …" school of thought.
U.K. telecom giant BT has partnered with Microsoft to bring gaming, television and movies to BT’s broadband customers through Xbox 360. "BT is co-opting the game console as a sort of one-stop shop for the delivery of service," Dixon said. "They are not paying for the game console. Customers are actually using their own Xbox 360s." Hence, there is no set-top box expense.
Dixon also suggested that cable operators continue to make content more portable. "A lot of the appeal of over-the-top is you can consume it in way more places."
For several years, cable operators and their vendor partners also have been exploring IPTV as a way to co-opt the delivery of video over broadband. Click here for a recent survey of the IPTV landscape; and here and here for respective proposals from Motorola and Harmonic for delivering video over DOCSIS.
For a provocative discussion of the tradeoffs between "dumb pipe" and "dumb monitor," click here.
– Monta Monaco Hernon
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