Your Next Video Service May Come from Your Gaming Console

Microsoft and Sony to Push High-Value Video Over-the-Top of Cable Companies Directly to Mainstream Consumers

DALLAS, TX. — According to a new report from TDG, a leading voice regarding the diffusion of broadband video, game consoles such as Microsoft’s Xbox 360 and Sony’s PS3 are evolving into multimedia gateways with legitimate non-gaming media arsenals. Armed with the growing video libraries of Xbox LIVE and the Playstation Network, these consoles can deliver on-demand video services with content similar to local cable or satellite TV operators. Though similar efforts have failed (largely because they relied on consumers to buy yet another set-top box), the model and the timing seem to favor the console-based approach.

“There is a bit of a ‘value vacuum’ developing around today’s PayTV offerings,” noted Colin Dixon, TDG’s practice manager for broadband media and report co-author. “Rising dissatisfaction with service value, the lack of flexibility implicit in tiered strategies, and a growing interest in watching online video on the TV have combined to create a unique opportunity for alternative video services – an opportunity not at all lost on console vendors.”

“Microsoft and Sony know that today’s console gamers are perfectly suited for new TV offerings. The segment is dominated by males between the ages of 18 and 35 – a prized advertising demographic – with little sense of loyalty to their ‘local’ cable or telephone company. They are also heavy viewers of online video and quite comfortable spending money for online digital media. Simply stated, console vendors are inimitably positioned for success in the OTT space because (1) their gaming audience already owns the enabling device, and (2) they are highly likely to already have an Internet-to-TV relationship with the vendor.”

To quantify the extent of this opportunity, Dixon references data from TDG’s new report:

• By 2012, approximately 190 million households will use a next-generation game console;
• 80% of these households – 148 million – will have this console connected to the Internet; and
• 75% of connected-console households – more than 110 million – will use console-based video services at least a couple times each week.

Console Vendors and OTT Video Delivery – Let the Games Begin!, TDG’s latest analysis of the Over-the-Top video space, discusses the evolution of console-affiliated media portals; offers an analysis of current and likely portal video offerings; provides updated forecasts for broadband-capable and broadband-enabled game consoles thru 2012; as well as for consumer demand for this category of Over-the-Top video service.

The report is available at TDG’s website or by contacting the firm at 469.287.8050.