Ericsson buys Microsoft's Mediaroom IPTV unit

Updated: Ericsson (Nasdaq: ERIC) officially purchased Microsoft's (Nasdaq: MSFT) Mediaroom IPTV platform today, without disclosing a price. The move allows the software giant to dedicate its TV resources to its Xbox gaming platform and gives Ericsson a market share "of over 25 percent" of IPTV and multi-room solutions, the two companies said.

For Ericsson, Mediaroom is an important piece of an end-to-end television delivery fabric that will also include the company's mobile LTE products, said Simon Frost, head of TV Marketing for Ericsson.

Mediaroom, he said, is "the world's most successful IP video platform" with "the greatest market share and the greatest penetration and they've done a very good job of pioneering some great technology and some early advancements to the IPTV space" which makes the acquisition "extremely complementary to the TV Everywhere, the multiscreen, the mobility aspects now that we see the shift of the industry moving towards."

Ericsson, he said, will tap into "the ability of IP video experience of Mediaroom with the mobility expertise of Ericsson and the services organization" but will not concentrate on either wireless or wireline services.

"If we look at what's happening in the fixed TV environment before we called everything multiscreen TV, when we were really only addressing a single screen in the home, we were predominantly using RF networks to deliver the video," Frost said of the shifting environment. "Increasingly now, with IPTV we saw pure IP delivery of video to the home. And now we're seeing that every TV platform in the future in the home is going to have to leverage IP in there somewhere."

Mediaroom's biggest U.S. customer is AT&T (NYSE: T) U-verse. Internationally, the platform is used by Deutsche Telekom, Telefonica, Telus Optik TV and Swisscom.

Offloading Mediaroom, which recently lost BT (NYSE: BT) as a customer to Comcast's (Nasdaq: CMCSA) thePlatform, will allow Microsoft to concentrate on its "continued mission to make (Xbox) the premium entertainment service that delivers all the games and entertainment consumers want," Yusuf Mehdi, corporate vice president of marketing, strategy and business for Microsoft's Interactive Entertainment business wrote in a corporate blog.

"With 76 million Xbox 360 consoles around the world with 46 million Xbox live members, this is a mission that gets us out of bed in the morning," he wrote.

It's likely that Microsoft and Ericsson will continue their relationship on a different scale once the deal passes through regulatory and other approvals and Mediaroom is incorporated into the Ericsson Business Unit Support Solutions group.

"We want to partner with the industry to deliver the next wave of innovation in games and consumer entertainment. We will partner with content creators, studios, labels, networks, content aggregators, operators and distributors to make this happen," he continued. "We believe the future of home entertainment is one where TV becomes more simple, tailored and intelligent."

Ericsson, on the other hand, believes that the future of TV is connected to IPTV, estimating market growth to reach 76 million subscribers this year and 105 million by 2015.

"Mediaroom is the leading platform for video distribution deployed with the world's largest IPTV operators," Per Borgklint, senior vice president and head of Business Unit Support solutions at Ericsson said in a press release. "This strategic acquisition positions Ericsson as an industry leader thanks to the skills and experiences of the talented people of Mediaroom combined with Ericsson's end-to-end service capabilities."

Mediaroom, which employs about 400 people, is based in Mountain View, Calif. Ericsson also has a base in nearby San Jose and has yet made a decision on what facilities might be combined or used, said Frost.

For more:
- Ericsson issued this press release
- and Microsoft has this blog post

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