Ericsson Acquires Microsoft Mediaroom in IPTV Grab

The European provider of telecom solutions aims to place first in the IPTV race by snapping up Microsoft's Mediaroom division.

Swedish telecommunications equipment maker Ericsson announced on April 8 that it is in the process of acquiring Mediaroom, Microsoft's Internet protocol television (IPTV) division.

While the companies have yet to officially disclose Mediaroom's price tag, Ericsson Vice President Ove Anebygd did give Reuters some clues as to the deal's worth. Anebygd told the news organization, "This deal is within range where we previously bought a company called Optimi for $99 million and where we also bought LG Nortel for $234 million.

"So this is somewhere in between the two," teased Anebygd.

Microsoft Mediaroom is best known in the United States as the platform that anchors AT&T's U-verse television services, but its global footprint is fairly robust. There are more than 22 million Mediaroom-enabled set-top boxes in operation throughout the Americas, Europe and Asia. The technology powers TV services offered by Deutsche Telekom, Telefonica, TELUS Optik TV and Swisscom.

Absorbing the Mountain View, Calif.-based unit help will launch Ericsson into first place in the "TV Anywhere" market, argues the company. The combined entity will make Ericsson "the leading provider of IPTV and multi-screen solutions with a market share of over 25 percent," boasted the tech company in a statement.

Ericsson's interest in Mediaroom is owed to a growing market for IPTV solutions, which is being fueled by the growing popularity of mobile devices and cloud computing services.

The company estimates that in 2013, the industry will reach 76 million IPTV subscriptions and $32 billion in revenue. By 2015, those figures will grow to 105 million subscribers and $45 billion in revenue.

In press remarks, Ericsson Senior Vice President Per Borgklint laid out his company's reasoning for the Mediaroom buy. "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," he said.

As it happens, Mediaroom dovetails nicely with that vision. "This acquisition contributes to a leading position for Ericsson with more than 40 customers, serving over 11 million subscriber households," said Borgklint. "In addition, Ericsson will be powered with senior competence and some of the most talented people within the field of IPTV distribution."

The Ericsson-Mediaroom deal doesn't necessarily close the book on Microsoft's pursuit of TV services, according to Yusuf Mehdi, corporate vice president of marketing, strategy and business for Microsoft's Interactive Entertainment Business unit.

Microsoft had long eyed IPTV. As far back as 2004, the company inked a $400 million deal that would bring IP-based TV services to SBC's Project Lightspeed fiber-optic network. On Jan. 24, 2011, the software giant filed a trade complaint against TiVo alleging that the DVR pioneer violated Mediaroom's intellectual property.

Now, as it prepares to hand off Mediaroom to Ericsson, Microsoft is signaling that, going forward, its TV ambitions rest on the Xbox platform.

"With the sale of Mediaroom, Microsoft is dedicating all TV resources to Xbox in a continued mission to make it the premium entertainment service that delivers all the games and entertainment consumers want—whether on a console, phone, PC or tablet," wrote Mehdi in a blog post.

It also helps that Xbox has a massive subscriber base. "And with 76 million Xbox 360 consoles around the world with 46 million Xbox LIVE members, it is a mission that gets us out of bed in the morning," stated Mehdi.

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...