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Did Microsoft Just Kill The Cable Set-Top Box Business?

This article is more than 10 years old.

Write it down: this may have been the day that the cable set-top box business came down with a terminal disease.

Microsoft this morning announced announced a new set of video services for Xbox Live, including the ability to watch certain programming both live and on demand from paid TV service providers Comcast and Verizon, among other sources. While there are a host of other content providers mentioned in the announcement, and the content offered via Comcast Xfinity and Verizon FiOS over Xbox isn't the full set you can get with a traditional set-top box, the move would appear to set the stage for the eventual elimination of the Motorola and Cisco cable boxes that litter American living rooms.

BTIG analyst Richard Greenfield writes in a blog post today that the prospect of a box-less future for multichannel video providers like Comcast far outweigh the risks.  "Transforming television into an IP-based “app” increases the need for a fatter (higher ARPU) broadband pipe, playing into cable’s competitive advantage, significantly reduces capital expenditures and at the same time dramatically improves the user interface/navigation of [the cable provider's] programming."

Compare navigating cable content with a traditional remote control to surfing around with voice commands and hand gestures using Xbox - which would you rather to?

The set-top box isn't going away any time soon, mind you, but the need for the device is gradually fading. As demand for the boxes crumbles, it would be very bad, indeed, for the two companies that dominate the U.S. set-top box business. One of those is Motorola Mobility, which of course has agreed to be acquired by Google for $12.5 billion; this would appear to be Larry Page's problem now. The other leading player is Cisco, thanks to its $6.9 billion acquisition of Scientific Atlanta in 2005.

And let's not forget this: consumers are likely to embrace the idea that they can reduce the stack of boxes sitting near their TVs: One less set-top box? Who wouldn't be in favor of that?