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Optical/IP

Should the Xbox Be Your Set-Top?

Is Microsoft Corp. (Nasdaq: MSFT)'s Xbox 360 on a path to replace the consumer set-top?

According to Microsoft, that's not really the intent. But it is clear that giving the Xbox more to do in the livingroom will give set-top makers more to worry about in the coming months.

At CES, Microsoft announced its Xbox 360 will soon be available to act as an IPTV set-top box in Microsoft-powered IPTV networks. Carriers will be shipping those special Xboxes to subscribers before the end of 2007, Microsoft says. (See Microsoft, Verizon Aren't Playing Games.)

With its software running the IPTV network, personal computers, handhelds, and now having Xbox as an option as a set-top replacement, the notion of "end-to-end" video solution is taking shape.

Should set-top vendors be worried? Well, they're not fretting just yet.

Scientific Atlanta 's director of video products for IP subscriber networks, David Alsobrook, says the set-top box market is a big one, and even if some households use the Xbox as their "master" set-top box in the living room, they'll still need more for the other TVs in the house.

"One thing about set-top boxes like ours is that they have a much bigger hard drive," Alsobrook says. Alsobrook points out that SA set-top boxes, unlike the Xbox, were purpose-built to act as the master set-top box in the living room.

Timing will also be an issue, Alsobrook says. "You've got this confluence of events that has to happen in order to sell IPTV Xboxes." For one thing, he reckons the overlap of people wanting to add IPTV at the same time they want a new gaming console is probably pretty small.

AT&T's other set-top box provider, Motorola Inc. (NYSE: MOT), declined comment on the implications of the IPTV Xbox.

Paul Brunato, spokesman for CPE maker 2Wire Inc. , says Microsoft's jump into the IPTV set-top box business only underscores the diminishing appeal of the set-top box business.

"There are all these different types of set-top box manufacturers now; we are kind of moving away from the set-top box market because the set-top box in itself is becoming commoditized," Brunato says.

2Wire's only set-top box, the MediaPortal, is a hybrid broadband/satellite TV device used in AT&T's Homezone service. (See Homezone Debuts in OH, TX.)

Microsoft's IPTV-enabled Xboxes will be just another end-point in the home, one that will be sold through service providers by the end of 2007, according to Microsoft TV spokesman Jim Brady. (See Telcos Should Watch Apple's iTV .)

Brady says the way the IPTV-enabled Xbox reaches the market will depend greatly on the service providers offering the IPTV service. The preferred model might be one where service providers distribute the IPTV Xbox, and maybe even subsidize it, much like they already do with set-top boxes. (See Microsoft to Sell VOD on XBox.)

SA's Alsobrook says the cost will be a key consideration for carriers. "So if you are AT&T, do you subsidize a regular set-top box, or do you subsidize an Xbox 360, which will cost a lot more? Since the operator subsidizes the CPE there's a financial issue there."

Microsoft has announced five carriers in commercial deployment with its Microsoft TV IPTV Edition middleware, which would be required for the IPTV-enabled Xbox to work. They include AT&T Inc. (NYSE: T), BT Group plc (NYSE: BT; London: BTA), Club Internet (French subsidiary of T-Online International AG ), Deutsche Telekom AG (NYSE: DT), and Swisscom AG (NYSE: SCM).

— Mark Sullivan, Reporter, Light Reading

Greenbone 12/5/2012 | 3:16:01 PM
re: Should the Xbox Be Your Set-Top? "If SA and MOT don't see the XBOX and general open architecture as a threat, wait until the functionality gets directly integrated into the Consumer Electronics. Maybe then they'll see that they are no longer needed."


...amen.

I have the Xbox 360 and I'm already using it to access all media on my local network - and download interesting music, shows, movies, game demos, etc. - and right now I'd pay good money for add-ons to manage any/all of my media in clever ways (like I do on my PC with the free software like Windows Media player, itunes, Ultraplayer, etc.).

Slideshows, DVR, digital audio / video - playlists, shuffle, media tagging, visualizers, macros, home automation, internet - I want it all on (or thru) my xbox so i can just buy software modules I want / need at will.

As it is, I have to hack the motorola remote to get a "skip 30 seconds ahead" feature on the remote. The button latency on the remote is absurdly long (much of the time). The motorola box can't handle use of an HDMI receiver for switching the signal, the USB and Firewire ports on the Motorola box don't work - I'd really like to chuck it.



MorningWd 12/5/2012 | 3:16:01 PM
re: Should the Xbox Be Your Set-Top? and he points to the increased memory size of the SA STB as one of the ways to demonstrate SA's "purpose-built" box. How hard is it to add storage capacity to a 360?

The proprietary nature of STBs does not exist in the non-CATV model, so SA and MOT are both hosed long term here. They used to give away RF headends to secure the STB market. The margins on STBs will continue to get thinner and thinner. With all of their overhead, I don't see how they plan on surviving on this front. I think that STBs will go away much the same way that WiFi cards did with laptops. Soon that functionality will be built right into the CE.
Mark Sullivan 12/5/2012 | 3:16:01 PM
re: Should the Xbox Be Your Set-Top? Hello Morning, uh, Wd: Alsobrook is citing the "Xbox as master set-top box" as a worst-case scenario. He says "even then" (you edited this out in your post) SA boxes would still be needed in other rooms. -M
MorningWd 12/5/2012 | 3:16:01 PM
re: Should the Xbox Be Your Set-Top? I found the comments from CSCO (SA) interesting:

"David Alsobrook, says...households use the Xbox as their "master" set-top box in the living room, they'll still need more for the other TVs in the house."

but then he goes on to say,

"SA set-top boxes, unlike the Xbox, were purpose-built to act as the master set-top box in the living room." So is SA going after the "master" STB, or trying to get the "other TVs in the house?"

On the CATV side, fat money could be made by the STB manufacturer because they were proprietary. SA headends needed SA STBs, MOT headends needed MOT STBs. IPTV is supposed to change that, opening up possibilities for numerous manufacturers to drive down the pricing.

If SA and MOT don't see the XBOX and general open architecture as a threat, wait until the functionality gets directly integrated into the Consumer Electronics. Maybe then they'll see that they are no longer needed.
neeloy 12/5/2012 | 3:15:58 PM
re: Should the Xbox Be Your Set-Top? I especially like his comments on subsidizing:

"SA's Alsobrook says the cost will be a key consideration for carriers. "So if you are AT&T, do you subsidize a regular set-top box, or do you subsidize an Xbox 360, which will cost a lot more? Since the operator subsidizes the CPE there's a financial issue there."

I think he misses the fact that operator wouldn't have to subsidize at all. The STB would be optional and most likely mounted on the exterior of the house similar to a VoIP MTA.

As far as needing STB's on all TV's, what does think the recent announcements from Sony about putting wireless in the TV are all about? That is exactly where it is headed.
whammer 12/5/2012 | 3:15:57 PM
re: Should the Xbox Be Your Set-Top? Any STB manufacturer who thinks that customers will boxes all over their house for each TV is delusional.

Re subsidies, I have no idea what the relative costs are between a digital STB and an XBox. However, one thing that SFA/MOT are forgetting is that the XBox is already subsidized by game royalties.

So there is an extra source of subsidization revenue that SFA/MOT do not have available to them. I don't know how the numbers work on the Xbox, but I have seen estimates that suggest Sony provides a subsidy per PS3 box of greater than $300.

$300/box pays for a more than enough storage ;-).
PO 12/5/2012 | 3:15:55 PM
re: Should the Xbox Be Your Set-Top? My PC is as good as an XBox.

I can already set up my set top box in my basement and distribute the signal to other rooms in my house, alongside other shared audio/video resources (DVD jukebox, CD jukebox, live TV, gaming, web surfing, etc). As long as each room co-ordinates which source to select at any time, full flexibility is available.

Using the XBox as my set-top is a niche market; much broader is the whole-home a/v distribution center.
Adrasteia 12/5/2012 | 3:15:46 PM
re: Should the Xbox Be Your Set-Top? "SA's Alsobrook says the cost will be a key consideration for carriers. "So if you are AT&T, do you subsidize a regular set-top box, or do you subsidize an Xbox 360, which will cost a lot more? Since the operator subsidizes the CPE there's a financial issue there."

Here's an idea. How about instead of blowing millions per node on building out useless buggy, expensive walled gardens using Microsoft's WebTV trash, they instead just deploy cheap and dumb GPON bitpipes and leave the rest to someone who knows what they're doing.

Let Google/Microsoft/Yahoo/whoever invest the hundreds of billions required to maintain media delivery infrastructure and let foxconn (or whoever in China who builds those $20 DVD players) flog the set top boxes at Walmart and Costco.
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