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Microsoft's Pursuit of 'Input 1'

11:15 AM -- Microsoft Corp. (Nasdaq: MSFT) will look to partner with MSOs and other pay-TV operators to make its Xbox TV service fly in the coming months, but it's clear that Redmond wants its console to become the center of the home's entertainment universe. (See Microsoft Sees Xmas Debut for Xbox TV .)

"They'll be looking to establish the Xbox in those homes that have them as input number 1," says Colin Dixon, senior partner for The Diffusion Group (TDG) 's advisory services, and a former Microsoft, Liberate Technologies and Oracle Corp. (Nasdaq: ORCL) exec. "They know, as we do, that most people don't switch away from input 1."

Input 1 is the primary input to the TV that's typically used to take in video services from a pay-TV operator-supplied set-top box. Microsoft is making tweaks to the high horsepower Xbox 360 so it can handle the baseline set-top-box functions, plus other goodies like Kinect-based navigation and using Bing for content discovery.

"Getting the Xbox on input 1 as the primary device gives Xbox a huge advantage," Dixon says. "It's better than being the default browser on the PC."

This sort of strategy is not really new. That's been TiVo Inc. (Nasdaq: TIVO)'s play with CableCARD-capable DVRs that can combine an MSO's subscription video services with over-the-top content, and the results have been mixed, particularly at retail.

Microsoft, however, isn't anchoring the Xbox to the clunky CableCARD, instead aiming to use software-based security to deliver cable's TV service in IP format, so its approach may end up being more simple and elegant than TiVo's.

But that approach also has its share of challenges since not every MSO has employed an IP simulcast yet. Cablevision Systems Corp. (NYSE: CVC) and Time Warner Cable Inc. (NYSE: TWC) are already moving in that direction in support of iPad apps that pipe in live TV channels, and Comcast Corp. (Nasdaq: CMCSA, CMCSK) has hinted that it will be doing the same. Still, Microsoft's market for Xbox TV and everything it wants it to be seems rather limited. (See TW Cable Flirts With Full IP Video Simulcast, Cablevision Launches iPad App With 280+ Channels and Comcast Keeps Eye on the iPad Prize.)

Dixon sees this as a "tremendous opportunity [for the Xbox] to be the main entertainment device in the home," but still has reservations about how quickly Microsoft can pull it off. It'll need the support of cable operators, which historically haven't been known to move at light speed when it comes to these kinds of partnerships. But cable's adoption of IP video could help to speed things up.

"You just can't take two years to do this anymore," Dixon says. "In two years we'll be in a different place with online delivery."

And there's some question if cable will play nice with Microsoft and cede some of this control. It's a fair question, given cable's history as a control freak, but I think the industry is finally ready to loosen up a bit, especially if it means it can avoid an AllVid mandate while taking some set-top capital off the books.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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tsat 12/5/2012 | 4:53:33 PM
re: Microsoft's Pursuit of 'Input 1'

Microsoft has talked about making the xbox the center of the living room since the day it came out. 


This opportunity has long been squandered long ago.


Where is the execution, Microsoft?

Pete Baldwin 12/5/2012 | 4:53:32 PM
re: Microsoft's Pursuit of 'Input 1'

Good think "Microsoft Input 1" doesn't sound creepy or anything.

msilbey 12/5/2012 | 4:53:32 PM
re: Microsoft's Pursuit of 'Input 1'

It seems to me there are several dilemmas with IP simulcast. On the one hand it costs money, which MSOs will (so I've heard) want to recoup in new service fees from subscribers. On the other hand, if there's heavy adoption of new IP services, it will put put potentially overwhelming strain on operator networks. So the MSOs need subscribers to pay for simulcasting, but they may also want to limit adoption so their networks aren't overloaded. Talk about balancing on a pin. I wonder how Cablevision's managing. The in-home-only access probably helps with limiting adoption. 

DCITDave 12/5/2012 | 4:53:30 PM
re: Microsoft's Pursuit of 'Input 1'

Yeah, but that's the cost of creating demand for hardware that people don't really need. It's a luxury. A non-necessity. So to make people want one, maybe MSFT needs to take a clobbering on margins for some services attached to said luxury device.


 

paolo.franzoi 12/5/2012 | 4:53:29 PM
re: Microsoft's Pursuit of 'Input 1'

 


Just a thought on IP video - especially if they think about it.  We were working with Verizon to move their long tail content off to IP video.  It will save them a boatload of frequency.  Reality is very few folks are watching the long tail, so it is not a huge cost anyway.


seven


 

craigleddy 12/5/2012 | 4:53:29 PM
re: Microsoft's Pursuit of 'Input 1'

Will any US MSO support Xbox TV? There's a mountain of issues and a long path of historical baggage (and thanks to all for taking us down the Memory Lane of Microsoft's TV past. Wasn't Windows Media Center supposed to resolve all this?). Xbox TV might get relegated to a pure OTT play, which at least might help Microsoft sell boxes and Live subscriptions.


But before we declare the MSO strategy DOA, think about this: It sure could be a lot better to use an Xbox to run TV rather than the clunky legacy set-top that's in millions of cable homes. It's a new day in cable, right?...Right?    


 

Jeff Baumgartner 12/5/2012 | 4:53:29 PM
re: Microsoft's Pursuit of 'Input 1'

You're absolutely right that an IP video simulast would increase bandwidth needs for MSOs, so they have to think about what the pay back is. 


  I didn't write about this at the time but Arris's Tom Cloonan talked about this a bit at a Cable Show tech session, noting that there would be a bandwidth "hump" that would rise up caused by an IP simulcast .  He didn't seem too worried about it, though, claiming MSOs have lots of tools to deal with an aggressive increase in unicast streams, such as using adaptive streaming, but that can't be the answer to everything.  Gateways that can transcode MPEG video traffic to IP to help eliminate some of the network traffic load,  but then you're talking about another box (some hybrid gateway) feeding content to the Xbox, which sorta defeats the purpose if Microsoft thinks its doodad stands a chance of being the center of the entertainment universe.


Cloonan also mentioned an "end point" of sorts when Docsis was used to deliver all the video services... but that's loooong term thinking.  The phase where there's hybrid MPEG/IP (which is just getting underway for cable) is going to last quite awhile.


JB


 

Jeff Baumgartner 12/5/2012 | 4:53:29 PM
re: Microsoft's Pursuit of 'Input 1'

That's alright, just wait until they go after Input 0, the port in the back of heads that will come into play when the machines take over. JB

Jeff Baumgartner 12/5/2012 | 4:53:27 PM
re: Microsoft's Pursuit of 'Input 1'

I'm not ready to declare their latest as DOA yet, even if their history with cable suggests they will have a tough time making it work anytime soon.   I'm giving MSFT a more plausible chance at success this time because the cable guys have some regulatory incentive to help Microsoft make this work, and work with others in retail/CE.  They don't want MSFT crying to the FCC, claiming cable's being discriminatory with crazy demands. JB


 


 




 
Jeff Baumgartner 12/5/2012 | 4:53:27 PM
re: Microsoft's Pursuit of 'Input 1'

Good point... makes sense to offer the less popular content in  IP to free up headroom or use existing spectrum more efficiently. Guess that's also the thinking with SDV and multicast... you probably wouldn't want to switch ESPN or another popular channel, though Adara is challenging that thinking with a hosted SDV system that switches an operator's full video lineup. JB

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