Microsoft-BSkyb Gives Satellite a Chance to Grow

By | July 1, 2009 | Broadcasting, Editor's Note

Microsoft and Sky Television signing a deal for users in the United Kingdom and Ireland to watch BSkyB satellite TV via an application on Xbox 360 video game consoles created a fairly big stir in the media, as will happen when the name "Microsoft" is attached. Sky Player will be launched this fall with live and on-demand channels, and with sales of the Xbox 360 having passed 30 million, it certainly looks like a good move — an opinion shared by a majority of media outlets.

I found it interesting, however, that our Satellite Group staff produced a story with a different take, featuring satellite analysts who gave the deal a lukewarm reception.

While analysts view the deal as a "‘smart way’ to enhance the appeal of BSkyB’s offering, Jonathan Doran, principal analyst of Ovum, does not see a landmark move for the satellite sector. "If you’re going to pay for Sky TV, why not get it on satellite — which most people in the United Kingdom can — instead of via your Xbox, whereby you’ll be dependent upon your ISP for quality of service."

Doran’s argument has a tone that could be expected from the satellite industry, which tends to be overshadowed in partnerships with big name software companies — or, at least, have a limited history of success stories. It could be attributed to various divides between the space age and the Internet age, and having a video game console hailed as a development that will broaden the appeal of a satellite TV service may rub some satellite players the wrong way.

Mike Jeremy, a satellite equity analyst at Daniel Stewart, thinks the deal benefits the Xbox more than BskyB. "It helps grow its online content portfolio and brings both live and premium TV to the platform for the first time. [The deal] adds functionality via another box rather than fully replacing or integrating functions with the Sky+ box."

But in his criticism, Jeremy captures the impetus of the development — integration. If satellite players can pay attention to new media, they may discover a formula for future success. Younger generations have grown up with all-in-one services and have become loyal customers. This point has been largely missed by analysts: when the Xbox 360 becomes old news, these customers will still have the satellite TV service. If they are too old for video games, they may opt for a set-top box. Some of us outgrow video games, but nearly all of us grow old with television.

Analysts have at least embraced the potential of the deal. "Sky has always been ahead of the pack with service development and innovation, but a big stumbling block has been the absence of real-time [video on demand]. The Xbox deal looks like a first dip of its toe into the waters of true-[video on demand]," says Doran

The deal also pinpoints the changing attitudes of video games console providers. They are moving beyond looking just to provide amazing gaming experiences, to becoming more of a focal point for video services within the home. Video, it seems is a new competitive battleground for these providers. It will be interesting to see how their strategies evolve in the wake of this deal. Will Sony and Nintendo also look to ramp-up their video offerings and do deals with pay-TV providers going forward? Will the next generation of consoles beyond the Nintendo Wii, Sony PS3 and Microsoft Xbox 360 be more video focused than ever before? While no one can say for sure what will come of this deal and while I don’t know if I’ll be adding the video game console to my coverage, I can say that at least it will be fun. The satellite industry should do the same — explore the possibilities and have fun with it.

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