If you believe the rumor mill, Microsoft will announce as early as today that Xbox 360 will be able to deliver pay-TV services from Comcast and Verizon, as well as additional content from HBO, Sony, Amazon and others, as the gaming console continues its transformation into a full-fledged entertainment hub. Focusing specifically on the Comcast and Verizon aspects, the integration would mark a milestone for the pay-TV industry in moving from a services model delivered through the traditional, set-top box control point to one where video becomes more like an app (albeit an expensive one!) to be delivered through multiple CE devices.
To the extent that other pay-TV operators follow suit, and further devices beyond the Xbox also gain the ability to deliver pay-TV services, this initiative has significant long-term implications, as it signals a major shift toward open IP-based delivery and new innovation cycles. To be clear, I don't necessarily see the Xbox move precipitating major changes in channel bundling or pricing, both of which are key industry vulnerabilities. To gain access to the Comcast or Verizon services the user will need to be authenticated via a sign-in process comparable to what's already being used in TV Everywhere, which means being a paying subscriber.
Rather, the big upside here for subscribers, and for the ecosystem, is that by putting the video into an open IP-based device with robust processing power, the video app can be more easily enhanced, making it far more compelling than today's pay-TV video services.
What does that mean? First up would be improved navigation and discoverability, long sore points for the industry which still uses derivative versions of the scrolling on-screen guide. Search-based content navigation, recommendations, queues, playlists and the like are all standard features of over-the-top services. Bing or other search apps that could be available as part of the video experience would make a huge difference.
Another area ripe for development is interactivity and social engagement. Though the pay-TV industry has leveraged the set-top to deliver some of these features, they till pale in comparison to what can be done online or what might be possible with the Kinnect motion sensor. It's pretty cool to think about changing channels or hitting pause by waving your hand.
Yet another area for innovation is delivering video across multiple devices, regardless of time or location. The dream of seamless anywhere/anyplace/anytime video access becomes more tangible when powered by Microsoft's operating systems. And envision the potential next step here, when the video app is also made available via Google and Apple's operating systems and devices as well?
Last but not least is advertising innovation. An incredible amount of energy and resources are being poured into the online video advertising industry, and many of these benefits could now be applied the video service via Xbox and other devices as well.
The Xbox integration is an early but important step for pay-TV operators in loosening their control over the video service, in exchange for 3rd parties to add more value to it. For all of the above reasons, and more, it seems like a win for everyone that will play out over the long-term.
Update: The Microsoft press release is now out, and there are almost 40 different content partners and pay-TV operators integrating with the Xbox 360. In the U.S. the list includes Bravo, Comcast, HBO, Verizon and Syfy. Verizon's own release notes that its broadband and FiOS subscribers will be able to get certain live HD channels via Xbox 360. A Comcast blog post says that only Xfinity on Demand VOD choices will be available for Xbox 360. A Comcast spokesperson clarified that this is the same selection as is available on-demand via the set-top box, which is slightly different than what the company makes available on its Xfinity TV iPad app.
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