Game consoles, such as Microsoft’s Xbox 360 and Sony’s Playstation 3 (PS3), are evolving into multimedia gateways, with growing video libraries and on-demand video services that rival those of cable and satellite operators, according to a new report from The Diffusion Group (TDG).

“There is a bit of a ‘value vacuum’ developing around today’s pay-TV offerings,” said Colin Dixon, TDG’s practice manager for broadband media and the report’s 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 over-the-top (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.”

According to TDG’s new report:

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

“Console Vendors and OTT Video Delivery – Let the Games Begin!” discusses the evolution of console-affiliated media portals and offers an analysis of current and likely portal video offerings. It also provides updated forecasts for broadband-capable and broadband-enabled game consoles through 2012, as well as consumer demand for this category of over-the-top video service.

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