Microsoft Mediaroom Podcast: The King of IPTV Keeps Polishing the Crown

It’s good to be king. With 20 of the leading Telco service providers as customers including AT&T, British Telecom, and Deutsche Telecom, Microsoft’s Mediaroom platform can certainly wear the crown as the king of IPTV. According to Ben Huang, Director of Marketing and Product Management for Microsoft’s Mediaroom Business, Mediaroom is being used by over 3 million households and adding 3 subscribers every minute of the day. I know, from competing with Microsoft in a past life working for IPTV middleware provider Espial, how daunting a task it is to chip away at Microsoft’s dominance. In addition to forging relationships with the who’s who of the IP set-top box community, including Motorola, Cisco-SA, Pace, and Phillips, Microsoft has recruited a couple hundred partners working on new apps through its Mediaroom Application Developer Program (ADP). And recently Microsoft announced that Mediaroom now supports server virtualization, reducing the number of servers to support it by 80% and thereby making it cost-effective for Tier 2 and Tier 3 telcos who previously could not justify the up-front investment to deploy it.

In our podcast with Ben we talk about the promise of IPTV and about how it relates to the growing Over the Top (OTT) video trend. How much of the business value of IPTV is being able to provide a competitive threat to traditional Pay TV providers like cable and satellite? How much is it based on the cost efficiencies of Internet Protocol? How much is it the unique capabilities that an IP-based video service can provide?

Click here to listen to our interview with Ben. And continue reading for a summary and analysis of our podcast and offline conversation.

According to Ben, Microsoft bet that, as the dynamics of TV watching changed, IPTV was going to drive the future of TV because of its two-way connectivity and enhanced applications. And while appointment-based TV is still dominant, Microsoft believes the promise of IP as a two-way connectivity platform is really just beginning to come to fruition.

“From the beginning our bet was on IP as a two-way conversation. We are still in the early stages of this,” says Ben. “Pay TV took a long time… and IPTV is moving at a way faster clip than (Pay TV’s) early years.”

Ben points to whole house content management, for example Mediaroom’s whole-home “DVR Anywhere” application that allows you to pause and restart content from any TV in the home, as the type of basic service that is inherently possible with IPTV. Other IP-based applications that consumers gravitate towards include a range of simple time-shift features, called Mediaroom AnyTime, such as restart TV and catch-up TV. “They have been proving to be huge differentiators (for our service provider customers),” says Ben.

Ben believes we will start seeing more and more interactive apps. Ben highlights the capabilities of MediaRoom’s Presentation Framework as examples of advanced applications that are possible today. He breaks down these advanced applications into two categories: 1) interactive apps that are launched separate from the TV viewing experience (things like getting weather and stock information or checking email or voicemail on the TV screen); and 2) blended apps that enhance the TV watching experience by melding live TV with web components (such as watching the Masters Golf Tournament with integrated player statistics). Other examples of advanced applications include:

• Viewing additional web-based video clips associated with the show
• Choosing from different live camera angles
• Participating in interactive voting

Snail-Mail “Interactive Apps”? Are You Serious?

And while the Cable MSOs still struggle to offer true interactive applications, Microsoft keeps trudging along. Consider the cable company-backed Canoe Ventures recent backtracking from its ambitious Community Address Messaging project (its targeted interactive advertising initiative) as evidence that cable has some fairly large obstacles to overcome before they will reach the interactivity potential of IPTV. Canoe Ventures is now driving to put lipstick on the Enhanced TV Binary Interchange Format (EBIF: pronounced “ee-biff” if you want to sound cool), a CableLabs-backed specification for more limited interactive TV applications that can run on low-end set-top boxes widely deployed by US cable operators. Instead of a truly interactive application, this new EBIF app will allow subscribers to click a button for more information to be sent to them by regular mail. Kind of like teaching a dinosaur to ride a bicycle. And yet, I am told even this more pedestrian cable app is being held back until a new version of EBIF can integrate the several different types of EBIF user agents in the market today.

Meanwhile Mediaroom has shrugged off its slow start and doubled its subscriber base in the past year. I remember trying to fight against Microsoft’s IPTV platform (which has gone by no less than four monikers over the years) based on it being a slow, closed, bloated, non-scalable and expensive platform for TV and VoD services. Though some of these attacks were more or less true, Mediaroom has overcome all of them. For example, I brought up the issue with Ben of Mediaroom being another “walled garden” like cable based on a proprietary framework. Ben suggests that as long as operator customers have a defined API to work with, a development community to help them innovate, and subscribers that are drawn to a service that is both advanced and easy to use, then everyone is happy. At the end of the day, major Telco operators have come to trust Microsoft as the developer of choice to help them build a robust IPTV service that subscribers will embrace.

Xbox Enters the Mediaroom

And what about the threat that Over the Top video presents as a potential death-knell to the entire Pay TV business model including IPTV? Microsoft is not worried. Through their Xbox Live platform they now have over 20 million gaming set-top boxes that can also deliver Internet TV and VoD content. And they are attracting traditional Pay TV operators, such as Britain’s Sky, to use the Xbox as a more cost-effective alternative to a costly truck-roll to install a new dish and set-top box. In fact, Microsoft has made it easier to integrate the Xbox as part of its IPTV platform— by porting the Mediaroom user interface to Xbox, IPTV subscribers can automatically extend their IPTV service to a room connected through their gaming console.

But according to Ben, using the Xbox as the “lead device horse” is still a niche application for most subscribers. “For the mainstream market, TV watching is a big part of their day,” he says. Traditional service providers still have a big advantage with average consumers because of their TV quality of service (QoS), support processes, and existing billing relationships.

“We believe in the potential of the OTT market, but from a mass market perspective there are still very fundamental things that you have to get right, regardless of whether you are serving it from a Pay TV service provider experience perspective or doing it straight over the top,” he says. “There are a lot of exciting things happening. People love the content choice, but they want to find things easier. You see almost every year there are another 100 TV channels in the standard TV package, but from what we have seen people still cap out at the same 10 to 12 channels, and we see that as a problem of discovery. They want enhanced search and discovery and the solution to the discovery problem is still in its infancy.”

Ben also points out that while “directed searching” is the norm for online video, the “lean back” experience of “passive discovery”, in other words channel surfing, is still the most desired mode for watching TV for many consumers.

Ultimately, according to Ben, Microsoft does not see the IPTV vs. OTT battle with an “either/or” perspective. He says that Telco operators are at the forefront of both innovation as well as addressing the challenges of the traditional pay TV business model. Their ability to provide a holistic blended TV experience, two-way applications, carrier-grade scalability, and robust advertising features will keep them growing their Mediaroom-based IPTV business well into the future.

Other things we learned from talking to Ben:
• Asked what happens when consumers can get a hybrid Pay-TV/OTT experience without the extra hardware, such as with Yahoo TV Widgets baked into their HDTVs, he answered: “Microsoft’s approach is 100% software based… you don’t need to get a new TV.”
• While social networking applications have already been added to Xbox Live, Ben suggests that social interactivity is a major development area for Mediaroom.
• Ben says that another major area for development is extending the TV viewing experience to other devices, including the PC, mobile, and TV-connected entertainment devices.

Brian Mahony is CEO and Principal Analyst of Trender Research. For research or consulting projects, contact him at bmahony@trenderresearch.com.