[Satellite News 06-03-09] BSkyB’s decision to team up with Microsoft to offer satellite-provided Sky Player TV content through its Xbox 360 gaming consoles in the United Kingdom and Ireland is a “smart way” to enhance the appeal of BskyB’s offering but does not compensate for the service’s lack of competitive pricing, Jonathan Doran, principal analyst of Ovum told Satellite News.
    Doran does not consider the partnership a landmark move for the industry. “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. Ultimately, I think it’s more of a landmark for Xbox, as it helps grow its online content portfolio and brings both live and premium TV to the platform for the first time,” he said.
    In announcing the May 29 deal with Microsoft, BskyB said it was attempting to provide Sky TV packages on a host of different platforms. Sky Player currently provides access to a range of live pay-TV channels — including Sky Sports — an on-demand library of thousands of programs spanning entertainment, movies, documentaries, kids, culture, news and sport.
    Mike Jeremy, a satellite equity analyst at Daniel Stewart, agrees with Doran’s assessment. “[The deal] adds functionality via another box rather than fully replacing or integrating functions with the Sky+ box. As a strategy, it still falls short of a single integrated platform rather than a hybrid proposition as they now have,” he said. 
    Despite the lack of enthusiasm from the satellite industry, Doran believes the deal is further evidence of video games console providers adopting a more progressive strategy in this area. “It’s another positive step in the evolution of consoles towards becoming home entertainment hubs rather than just gaming machines, but it’s not entirely new. BBC iPlayer has been available (for free) on both the Nintendo Wii and Sony Playstation 3 for some time now, while Canalplay, the Canal+ online video-on-demand service in France, is also accessible via Xbox 360. But this may be the first instance of a pay-TV operator actively teaming up with a console provider,” said Doran.
    Maxime Baudry, a satellite analyst at Idate, said the deal is an opportunity for BskyB to capture a lucrative new target market. Baudry estimates that there are currently about 4.5 million Xbox 360s in the United Kingdom and other media groups have concluded similar profitable agreements around the world.
    In 2008, advertising group, Dentsu initiated an agreement with Nintendo to broadcast advertising programs through the Wii. In that same year, Microsoft signed a content agreement with Netflix in the United States — a move that has contributed to significant growth for both Xbox 360 console sales and Netflix video-streaming services.
    “Video game console providers are definitely entering the home network battle, where each provider wants to provide the terminal that will centralize all major leisure functions — watching TV, surfing the Internet, playing video games, etc. They have understood that increased convergence is now becoming a reality. TV set manufacturers are following the same path by allowing their TV sets to be connected to the Internet,” said Baudry.
    Despite treading new market territory, Doran believes the deal still does not alleviate some of BSkyB’s weaknesses in this area. “It will definitely be attractive to Xbox owners who also take Sky TV, as it will add both multi-room and on-demand options to their viewing experience but the limitations of Sky Player and Sky Player TV remain. What’s still missing is a fuller alignment of its satellite-based and Internet-based products. For example, if you can’t get the free-to-air (Public Service Broadcast) channels on Sky Player, then the Xbox TV experience will be somewhat lacking. Viewers will still have to switch between platforms unless they take a full pay-TV package from BSkyB,” he said.
    Jeremy believes the offering will not be attractive to the general Xbox 360 audience in the United Kingdom “We have seen similar hopes for mobile content delivery which has also not taken off,” he said.
    BSkyB’s strategy in partnering with Microsoft is not without risk, according to Baudry. “For existing Sky customers, it may be nice-to-have option that could improve stickiness and customer loyalty, but Sky should seriously consider the risk of cannibalizing its multi-room product. A clear benefit for Sky is the ability to deliver true to the TV set rather than the PC, but this will be dependent on a customer having an Xbox which, although increasingly popular, is by no means a prevalent device among U.K. households. However, I expect there will be some cross-marketing initiatives to promote the dual benefits of having both Sky and Xbox Live,” he said.
    Doran believes the BSkyB/Microsoft deal could be the prelude to a larger development for Microsoft. “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 . The Xbox deal looks like a first dip of its toe into the waters of true-, but we’d expect it to treat this initiative as an interim solution, as well as a marketing exercise, while it seeks to address the bigger challenge of bringing full-blown, network-based TV and to its customers,” he said.