Summary
Reduces capital expenditure costs improving ROI. Allows small telcos to compete with larger providers. Creates a more achieveable ancillary revenue stream especially as broadband into the home speeds increase.
Analysis
Microsoft's decision to make the MediaRoom platform more cost effective is a solid move for smaller telephone operators making them more competitive as more and more of their customers defect to cable VoIP services. Many telcos see entertainment as a new, and finally, achievable, ancillary revenue stream especially as broadband speeds into the home continue to increase. Telcos struggling with holding off cable companies VoIP services need additional product enhancements and a viable IPTV service improves the product offering to their current subscribers.
Smaller telcos can now compete against larger cable competitors on a more even keel. It allows them to lower entry costs involved in product launch, and then reduce on-going maintenance costs , (i.e. server capital expenditures and deployment, then re-occurring licensing fees and royalties). It has been these classic costs that have been prohibitive for telephone companies to develop their own IPTV services. Whether used as a method of holding down "churn" (or loss of subscribers), or to stimulate revenue, IPTV has tactical advantages. Even large cable operators are developing their own "IPTV" plays even if they have to be inside "walled gardens." Comcast is developing the "FANCAST.com" and "thePLATFORM" deployment vehicles while TWC is pushing its "TV Everywhere" initiative. IPTV can be an attractive offering whether used to hold churn or drive bottom line revenue, provided the content is appealing.
Hulu.com has shown the world that IPTV can attract users. Hulu has grown in popularity from a beta site to the number three Comscore site in less than eighteen months. Their crowning achievement is a Superbowl spot less than one year after public launch. Hollywood has also begun to embrace this new distribution model for their content after decades of complete product control. This is witnessed by Disney's equity stake in Hulu.com already partnered with NBCU and 20th Century Fox.
With worldwide broadband subscribers expected to surpass the 700 million mark by 2013 (http://www.fiercetelecom.com/story/telegeography-700-million-broadband-subs-2013/2009-05-27?utm_medium=nl&utm_source=internal) it is a natural expectation to see a greater number of more viable IPTV offerings especially in the United States as broadband speeds grow. Microsoft's move effectively removes one more barrier as an aging business segment stuggles to keep customers, and grow revenue.
