Microsoft XBox 360 To Support HDTV - Challenge to Cablecos, Apple

Microsoft (MSFT) just announced that on November 22nd the Xbox 360 will allow users to purchase and rent high definition television and movies. I made this call back in January 2006, and repeatedly since then.

Engadget has the details. WSJ reports here.

It is abundantly clear that the center of power in video content distribution is moving from Cablecos to next generation set top boxes using high speed broadband connections.

In the absence of incumbent Cablecos unbundling the content, new providers of set top boxes will.

This is fundamentally why cable companies are over valued, and operators of content platforms (like Microsoft, Sony (SNE), Apple (AAPL) and Tivo (TIVO) ) superbly positioned.

It is the basis for why I think Cisco (CSCO) overpaid for Scientific Atlanta, an operator of legacy hardware tied to the fortunes of the incumbents. From January 2006:

As each day goes by, the Scientific Atlanta (SFA) shareholders who complain $6.9BB wasn’t enough for their commodity box company should shut up and cash their checks. What would you rather provide to subscribers as a cable operator- an Xbox 360 or a glorified radio tuner for video?

Apple will need to ensure their platform supports HDTV, as I postulated earlier:

First impression of the Apple iTV media extender- what marketing guy cooked up the term ‘near-DVD’ quality? What does that mean?

If I am going to go through the trouble of buying and provisioning a media extender for my TV, it better do HD. The venn diagram of people who will go through the trouble to install a media extender and don’t care about picture quality is a null set.

Their silly “near-DVD” marketing description will no longer fly.

Tivo, among other problems, has now completely lost their potential first mover advantage. It will be interesting to see what tricks Sony has up its sleeve with the PS3.

If you thought the loss of fixed line voice was giving Telcos a hard time, wait until you see what these new platforms do to Cableco revenue streams.

More later. This was such a big piece of news it needed immediate comment and distribution.

Photo Courtesy of Engadget

Comments

[CrossProfit]

This is precisely why we disagree with this MarketWatch article citing Citigroup.

www.marketwatch.com/Ne...;siteid=mktw&d...

It doesn’t make sense for Comcast (CMCSA) to purchase Sprint Nextel (S). It makes a lot of sense for Comcast to purchase a WIMAX manufacturer and to incorporate the tech into their already established marketing base, thus offering unbundled options without cannibalizing the cash cow.

Disclosure: Opinion of CrossProfit analyst and may not reflect the opinion of CrossProfit.com.
www.crossprofit.com