Xbox 360Microsoft’s Xbox gaming console has long been eyed as a perfect over-the-top video vehicle. Xbox LIVE, its online entertainment portal for the Xbox 360 console, is now in 20 million homes. Compare that to Comcast, the nation’s largest cable MSO, which has close to 24 million video customers. Xbox LIVE subscriptions, which are free, give users access to Netflix videos and Microsoft’s own Zune video marketplace. Xbox LIVE users can use this console to watch thousands of movies and TV shows — today.

Now comes word Microsoft is negotiating with Disney to bring ESPN to the Xbox.  Bringing sports to the growing availability of video and other entertainment services of the Xbox only add to its momentum as a potential replacement product for subscription video services. Microsoft doesn’t mince words about its intentions with the Xbox. “Our goal is, really, how can we get as much content there as possible,” says Marc Whitten, the general manager of Xbox Live to the New York Times.

Microsoft also recently announced that Mediaroom, their IPTV middleware platform, will soon be available on the Xbox (although only through AT&T U-verse, at least initially). Facebook and Twitter functionality are also available, creating, in Microsoft’s words, “the largest social network on your TV.” It all adds up to a ‘perfect storm’ of over-the-top video and entertainment capability for the Xbox. A storm that may soon generate enough momentum to catapult the Xbox into a legitimate contender to subscription video services, if it hasn’t already.

Should existing video service providers be ‘shaking in their boots?’ Not really. This is not an overnight sensation, and the existing subscription video model is in no immediate danger. But developments like Xbox LIVE  should not be ignored. Quite the contrary. They should be actively observed and studied. These developments will keep existing video service providers honest – ensuring they are constantly adapting and innovating to meet the changing demands of the market. If not, Xbox LIVE and other services like it will gladly take subscribers off your hands.

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7 thoughts on “Xbox Over-the-Top Video Role Gaining Momentum

  1. Sports is the key for OTT. You can get just about everything else, but live sports (granted, you can get MLB). My understanding is that Microsoft is talking to ESPN about ESPN360. That in it of itself isn't enough, considering I can get ESPN 360 through my ISP. BUT, if Microsoft is somehow able to negotiate the rights to a broader fare of live sports, then you'll begin to see the traditional subscription model crack. We're not there yet, but it's getting closer.

        1. my point exactly. what percentage of total homes passed are active ethernet or GPON in the u.s. maybe 15%? and 90% of that is verizon. not exactly a wide reach. and we're not even counting the congestion problems this creates inside the cloud.

  2. Xbox or anyother gaming console will not be a replacement service for cable/IPTV anytime soon. Among other issues, these consoles are typically only present at one TV in the home. What about all the other TVs?

    These debates miss the point. It's not an all or none proposition for the masses. Devices like Xbox will complement (and enhance) subscription video not replace it. Sure there will be a small number of people who go OTT only, but not enough to kill the model.

    Service providers should be looking for ways to embrace OTT and add it as a value add, not running scared from it.

  3. Xbox Live also needs to consider the network. Many consoles are connected to ISP connections that cannot sustain CBR's necessary for live video feeds much less HD video fees. Current game users already suffer brown outs, stalling video, etc. during their gaming experience…..imagine that during games, playofffs, live news, etc. Downloaded video is one thing, but going live is yet another.

  4. I remember 10 years ago people said Internet video would never work because of bandwidth issues and the last mile. That was when dial-up Internet was popular. I'm still surprised that people are saying this today.

    I'm assuming that in a few years, last mile connections will be much faster. Fiber is becoming more popular, especially in Asia. Although North America is dominated by cable broadband, I think there's still an opportunity here for Broadband service providers. Broadband will become faster, we will crave more and more broadband applications like video.

    I think Microsoft released a game changer with Mediaroom 2.0. It allows Service Providers to expand their access into regions and territories that are not possible today. Already, AT&T has a limited subscriber growth potential for U-Verse TV since they are just using DSL rather than fiber. It's a risky strategy that is paying off well so far, but I think AT&T has to realize that they need to lay down fiber in order to keep up with Verizon and other last mile providers like Cable companies.

    Already, AT&T can deliver 4 tuner via U-verse, 2 HD and 2 SD, so adding an Xbox 360 video connection shouldn't have a dramatic impact.

    What this really comes down to is net neutrality. Will Comcast, for example, allow its subscribers to access and subscribe to AT&T U-Verse over an Xbox 360? Will they throttle bandwidth? Is this the beginning of metered bandwidth?

    Lots to think about here.

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