Xbox or Cable Box? Game Consoles Emerge as Serious Threat to Cable

How Long Before the NFL Does a Rights Deal With Xbox?

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Zuobin He
Zuobin He
Video game consoles are quickly emerging as the biggest threat to the cable box, especially in the under-17 demo, which is doing a lot more than playing games on their Xboxes and PS3s.

Data on the recently -released BBC iPlayer -- the BBC's answer to Hulu -- reveals that as much as 10% of its TV programming is viewed through its console player partners like PlayStation and Wii in the U.K. (Data on Xbox is visibly missing from the report.) Recent Nielsen's findings in the U.S. market show not only that Xbox users' prime time is TV prime time, but also that 44% of the users are in the age 2-17 demo groups.

Spotting this growing trend, Netflix acted quickly. Its aggressive push on partnership with other console players like Wii and PS3 signals that the game console is a critical distribution platform for media business. Indeed, for Netflix its business model is to be at every point of access.

About a year ago, my 10-year-old son and his group of Xbox-addicted friends discovered the fun and convenience of Netflix. As tween behavior dictates, when one got it, they all had to have it, and the parents eventually gave in. It turns out, after playing games on Xbox Live for a year or two, these kids were bored.

Watching movies on Netflix was a welcome diversion from long hours of Xbox games during weekends. The game controller is now their remote control and the headset is their water cooler. Within their social circle, they tell each other what movies/TV shows to watch on Netflix, they watch them and comment on them, together through the Xbox headset. The era of the virtual playdate is born.

At the beginning of this summer, Sony's PlayStation Network announced its partnership with MLB.com to live stream Major League Baseball games through its player PS3. The estimated number of web connected PS3 and Xbox users is 30 million and counting. The size of the audience is so attractive, it was reported that Peter Chernin, former president-CEO of News Corp, approached Microsoft to discuss creating an original programming channel on Xbox. The underlining issue here is that consoles are becoming a legitimate threat to broadcast/cable business in the battle for viewing destinations. It is not inconceivable in the future that if the NFL will strike a deal with each console maker after their contracts with major broadcasting networks expired.

The boys' media consumption behavior is not isolated. Converging platform breeds converging behavior. Game console has evolved into a gateway for content for younger generation. With the rapid expansion of points-of-access in the consumer's entertainment life, viewing fragmentation will inevitably continue. Apple, Microsoft, Google, Sony, Wal-Mart and Amazon are poised to challenge the broadcast/cable industry. This industry's landscape will not be a same in the next 5 years.

ABOUT THE AUTHOR
Zuobin He "Peter" is former director of digital media research at MTV Networks Consumer Insights & Research Group. Prior to his work at MTV, he managed online merchandising campaigns at Audible.com and spent five-plus years in digital publishing at McGraw-Hill's Professional Publishing Group. He can be reached at hezuobin@gmail.com.
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