Microsoft is selling Mediaroom, one of its few clear successes outside the PC business, to Ericsson.
Neither company volunteered terms of the deal. Ericsson said it expects to complete the purchase during the second half of 2013.
Mediaroom remained a valuable asset for Microsoft, and continued to be one of the leading product suites in its market, but expectations that the company would sell the operation were created by Microsoft itself as company executives began making public statements suggesting that it had ceased to be a strategic business for the company, especially in light of the success of the Xbox.
The company retains the means to deliver video – and other services – through its Xbox systems. Microsoft has increasingly been referring to the Xbox not as a game console, but as an entertainment center – what MVPDs have been referring to as gateways.
According to Yusuf Mehdi, vice president of marketing, strategy and business for the interactive entertainment business at Microsoft, the deal “allows Microsoft to commit 100 percent of its focus on consumer TV strategy with Xbox.”
To that end, he wrote in a blog post today, “We want to partner with the industry to deliver the next wave of innovation in games and consumer entertainment. We will partner with content creators, studios, labels, networks, content aggregators, operators and distributors to make this happen.”
Mediaroom fits right in with Ericsson’s business. With the acquisition, Ericsson further solidifies its position in the IPTV market, picking up ongoing support for Mediaroom customers AT&T (U-verse), Deutsche Telekom (Entertain), Telefonica, Telus (Optik TV), and Swisscom. Worldwide, the companies running Mediaroom reach a total of more than 22 million set top boxes.
Mediaroom of course supports multi-screen delivery, an important element for a company that sells infrastructure for a variety of network types. The company said the importance of video distribution capabilities for the customers and their consumers will be increasing as more and more LTE networks are deployed and filled with smartphone users.
Ericsson, of course, already has IPTV and multi-screen products, specifically targeting LTE devices. The company will go through a process of evaluating the combined product portfolios, said Simon Frost, head of TV marketing for Ericsson. “We will leverage the best of both in concert with our customers and our partners,” he said.
There are several companies that license Mediaroom technology and operate as either system integrators or equipment vendors, including Alcatel-Lucent, Motorola, and Pace, among many others.
In the short term, there will be no changes in relationships with various licensees, said Frost. “There are key partnerships, such as with Alcatel-Lucent, and we will continue those,” he said. He left open the possibility that some license agreements might be subject to change, largely depending on the needs of customers.
Per Borgklint, senior vice president and head of business unit support solutions at Ericsson said: "Ericsson's vision of the Networked Society foresees 50 billion devices to be connected via broadband, mobility and cloud. Future video distribution will have a similar impact on consumer behavior and consumption as mobile voice has had. This acquisition contributes to a leading position for Ericsson with more than 40 customers, serving over 11 million subscriber households. In addition, Ericsson will be powered with senior competence and some of the most talented people within the field of IPTV distribution."
Ericsson cited statistics that the global IPTV market is estimated to reach 76 million subscribers in 2013 with revenues of $32 billion, growing to 105 million subscribers and $45 billion in 2015.
Microsoft will invest its full attention on the Xbox as a vehicle for its consumer TV strategy. Ericsson, meanwhile, further solidifies its position in the IPTV market, picking up ongoing support for Mediaroom customers, including AT&T (U-verse), Deutsche Telekom (Entertain), Telefonica, Telus (Optik TV), and Swisscom.