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If the Xbox Live network was a cable operator it would be the largest such operator in the world, with 35 million customers, which is why Microsoft is turning the Xbox into an over-the-top TV delivery device – something it has dreamed of ever since it first made the Xbox one of its IPTV Mediaroom set-tops.

Redmond announced the venture this week. The global breadth of the venture, as well as the maturity of the video, is such that it may appear as if Microsoft has succeeded where Apple failed: creating a rival for cable TV over the internet. However if we look more deeply at the announcement we see that this is far from the case.

This is because Xbox is in fact partnering with cable and using those partnerships to continue its war with Sony and its PlayStation. There will be some subscription revenue here for Microsoft, but mostly it simply makes the device and the Live network more appealing than the Sony alternatives.

Microsoft has announced deals around the world with 40 more major TV and entertainment providers, and lists its partners in the US as: Bravo, Comcast, HBO GO, Verizon FiOS and Syfy. It has a deal with the BBC in the UK, Telefónica in Spain, Rogers in Canada, Televisa in Mexico, ZDF in Germany and MediaSet in Italy. Microsoft said it would begin rolling out entertainment services in more than 20 countries over the holiday season.

The truth is that this announcement is not that revolutionary. Most of these players are forced to work with Microsoft products to deliver to the PC anyway, and in many cases will be using Microsoft-originated or Microsoft-approved video formats and its PlayReady DRM – perhaps with additional software fortification. What Microsoft has done is to partner with a broadcaster in each country to allow the Xbox to be a terminal for its OTT offering, directing it through the Live network.

What Apple and others have tried to do is work with content creators, but against existing content operators: going up against them rather than act as a conduit for their rapidly developing TV Everywhere strategies, designed as they are to support the status quo and support every one of these partners in their existing business, rather, than set itself up as a rival. This is the Xbox becoming an even cheaper TV streaming box than the Roku, by dint of the fact that you‘ve already paid for it, as opposed to it becoming another Netflix class company.

Microsoft points out that Xbox Live has 35 million members worldwide who spend in total 2.1 billion hours a month on the service. Video consumption is the fastest area of growth for the network.

"Today‘s announcement is a major step toward realising our vision to bring you all the entertainment you want, shared with the people you care about, made easy," said Don Mattrick, president of the Interactive Entertainment Business at Microsoft. "Combining the world‘s leading TV and entertainment providers with the power of Kinect for Xbox 360 and the intelligence of Bing voice search will make TV and entertainment more personal, social and effortless."

Comcast had already referred to the service in a letter sent this week to the US regulator the FCC, uncovering the fact that it was partnering with Microsoft‘s Xbox.

In a number of cases Microsoft is seen here as partnering on its current hot technology Kinect: in particular it plans this with Comcast, and with Verizon FiOS TV. Kinect can detect hand movements and turn them into remote control commands and can also work alongside Bing voice commands.

Eric Bruno, veep of consumer and mass business product management for Verizon, said: "FiOS TV on the Xbox 360 is an excellent example of how we‘re working with market leaders to erase old technology borders to expand the FiOS TV experience and taking advantage of unique new features including voice- and gesture-control of live TV entertainment via Kinect. This holiday, Verizon will bring a selection of popular live TV channels to Xbox 360 and will be a leader in delivering live, multichannel streaming HD TV, integrated with Kinect, via Xbox."

Each case will be different, but it doesn‘t look like much money is going to change hands here in terms of adding new subscribers. Instead, Xbox Live becomes part of the TV Everywhere experience for each of these major Pay TV operators. We expect that Netflix and Hulu Plus customers will be able to sign up to the service via Live, but for others they will have to be subscribers already.

Deals had already been struck in the past with AT&T, Netflix and Hulu Plus in the US, Telus in Canada, BSkyB in the UK, Canal+ in France, Vodafone Portugal, VimpelCom in Russia and Foxtel in Australia and these services will continue as well as the 40 new deals.

Jeff Weber, vice president of video services at AT&T Mobility and Consumer Markets, said in a press release: "Nearly a year ago, AT&T U-verse became the first TV provider in the US to launch live TV on Xbox 360. Now we look forward to working with Microsoft to deliver even more innovative features that will allow U-verse TV customers to use voice and gesture controls to manage their TV experience.

"Through our Microsoft partnership, AT&T U-verse TV has been a leader in delivering a multiscreen and interactive TV experience that offers customers more personalization, more control and more integration across devices."

Live will also have on-demand sports content from ESPN in the US, GolTV in Spain and from Maple Leaf Sports & Entertainment/Real Sports in Canada.

Copyright © 2011, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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