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Originally featured on BroadcastEngineering.com
Apr 14

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4/14/2013 11:23 PM  RssIcon

Confirmation of Ericsson’s acquisition of Microsoft’s Mediaroom IPTV platform came as a relief to those of us who had more or less preannounced its happening, but should have come as no surprise at all.

Mediaroom had been in a state of limbo after earlier successes, as Microsoft set about refocusing its TV efforts around its Xbox gaming console in the OTT rather than IPTV arena. Microsoft appeared content just to hold on to its existing accounts, leading some commentators to suggest that Mediaroom was “dead in the water”, although that always looked like overstating the mark.

Then over the last year Mediaroom seemed to stage something of a revival, with a couple of big customer wins at Telcos Oi Telecom in Brazil and Telefonica of Spain for its Global Video Platform (GVP) designed to serve its worldwide pay TV customer base, largely IPTV. It should have been clear at once when the GVP deal was announced in December 2012 that Mediaroom’s future was intimately linked with Ericsson, which has also been selected by Oi Telecom as a key supplier of radio base stations for its 4G/LTE mobile roll out that was earmarked to deliver video services outside its IPTV footprint. Without such a link Telefonica would not have given Mediaroom star billing in such a big project.

At the same time, by finally ditching its Mediaroom middleware, 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 looks sure to lay the foundations for 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.

Microsoft had by then decided that Mediaroom did not fit with its evolving OTT strategy around Xbox. Ericsson, however, on the back of the Telefonica win, saw plenty of mileage yet in IPTV for the platform. IPTV is still growing strongly in developing markets, notably China where Ericsson has a strong presence as a mobile equipment supplier. China has overtaken France to become the world’s biggest IPTV market with around 16 million subs now and is set for explosive growth, according to most forecasts. UK-based media analysis firm Digital TV Research predicts that China’s IPTV sector will soar to reach 77 million by 2017, which will then be 47 percent of the 165 million total, compared with 28 percent of the 51 million at the end of 2011. This forecast indicates that the global market itself will triple over that period, with firm growth also anticipated in the US as Verizon and AT&T aggressively promote their respective Fios and Uverse offerings.

Ericsson, in 2012, held a mere 1 percent of the market for IPTV set top box software, but Mediaroom was the leader with 20 percent, about seven points ahead of its nearest rival, UTStarcom. Since then, Ericsson has gained those two big customers in Telefonica and Oi, along with one or two others and now has the momentum backed by an all round portfolio of infrastructure products for encoding and transport. The Mediaroom purchase means Ericsson will now be able to compete as a one stop shop for IPTV contracts without reliance on a software partner.

Given the rosy position for Mediaroom now, it is worth asking why Microsoft agreed to sell it, although we have yet to see the price that was paid. The answer is that Microsoft will in time be competing in the same arena with its Xbox based solution, as IPTV and OTT converge. But, in the shorter term, Microsoft’s focus is on seizing control of the living room from existing pay-TV service providers, including cable and satellite, by positioning Xbox as a universal entertainment hub.

The key move will come next month when Microsoft will unveil the next version of Xboxaimed as much now at OTT as gaming, with the ability to take control of a TV and set-top box. This is like Google TV but with the additional weight of existing Xbox gaming and the 76 worldwide users that come with it.  The idea will be that Microsoft overlays its own User Interface on TV channels provided by other operators, so that Xbox connects over HDMI with existing set tops.

The sale of Mediaroom to Ericsson therefore cleared the decks for Microsoft by getting rid of all that IPTV baggage it considered had become too heavy. Yet for all that Ericsson may turn out to have emerged with the better part of the deal, given a near guaranteed expanding IPTV market to aim at, while it remains to be seen how successful Microsoft’s Xbox led OTT strategy will prove.

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