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Ericsson closing in on Microsoft IPTV platform

Swedish telecom and pay-TV equipment maker Ericsson has been in discussions to acquire Microsoft’s IPTV business, although both companies have yet to confirm whether or not a deal is imminent.

However, Ericsson executives were heard off the record hinting that a deal was imminent at the recent TV Connect show in London, and since then, speculation has mounted to fever pitch in the media. There is no doubt that the move is in the cards given the synergy between Microsoft’s Mediaroom IPTV software and Ericsson’s extensive TV portfolio embracing just about all system components of video delivery embracing the headend, encoding, content management, multiscreen delivery and integrated receiver decoders.

For Microsoft, the axis of pay-TV strategy has shifted towards the Xbox gaming console, which is being repositioned as a universal entertainment hub of the home and the brand for a group of emerging media platforms supporting pay TV. These look likely to include a set-top based on the Windows 8 operating system, but also incorporating some Mediaroom components, which could itself be a factor in negations with Ericsson. Meanwhile, Mediaroom has been reportedly making losses and has failed to keep pace with some of the big changes in IP video, notably the rise of multiscreen and OTT services. That is partly why Microsoft is shifting its efforts to Xbox.

On the other hand, Mediaroom has got into some attractive big accounts with 44 deployments in 21 countries around the world, serving more than 11 million households and installed in 23 percent of all IPTV set-top boxes, according to ABI Research. Perhaps the clinching factor, highlighted by the UK analyst firm Rethink Research, is that Ericsson is already hitched tightly to Microsoft at one of the most recently won (and potentially by far the biggest Mediaroom account) Telefonica of Spain, which is building its Global Video Platform (GVP) around Mediaroom.

As Rethink Research noted, Alcatel Lucent was chosen to supply much of the network infrastructure for GVP, which will serve as a worldwide platform for playout and distribution over that network, replacing its previous in-house built Imagenio IPTV service. However Ericsson then won the contract to manage GVP, and has since been collaborating closely with Microsoft over incorporation of Mediaroom.

Ericsson, itself, owns some software elements for OTT and IPTV, which (as Rethink again noted) are likely to form part of bids for OTT contracts at other major operators, such as Deutsche Telekom and AT&T. In some of these cases, they will also have to integrate with Mediaroom. It would make sense, then, for Ericsson to own Mediaroom so that it can fold it into its overall platform and retain the parts that add value, while ditching those that are obsolete or overlap with its own components.