When Sky met the Xbox...

The reign of the standalone pay TV set top box is dead-killed conclusively yesterday when Sky TV in the UK unveiled a deal with Microsoft's Xbox to offer several of its channels and all its live sports channels to Xbox owners in the UK. The geographically limited offer will effectively put Sky's current PC service - Sky Player- on Xbox.
Set for an autumn launch, the new service is the first of its kind anywhere where live pay TV is offered through a gaming console, say the new partners. Microsoft won't disclose how many UK Xbox Live customers there are but worldwide they have 20 million Xbox Live (ie connected to the Net) customers.
Clearly the idea is to attract new users to the Xbox and to expand the reach of Sky to another device and another possibility for people to subscribe to Sky. The Xbox Sky service can be subscribed to separately (that will help Sky to reach its 10 million sub target by 2010) or current Sky customers at a certain level of subscription will get access to the service as part of their subscription- making it a churn reducer.
Xbox clearly likes enhancing its device and offering more reasons to buy their console and connect to an IP network to get Sky channels or play multi-player games etc.
The companies wont disclose the financial intricacies of the deal and it is unclear if current Xbox users will have to pay more for the Sky service, though this only seems to make sense.
Microsoft has also set up a UK technical development group headed by Jerry Johnson who has moved from the US to look at rolling out similar services in other European markets. He can very easily start with the other News Corp.-backed pay TV operators in Germany and Italy and move on form there.
What this means for set top box makers like Pace is clear: convergence on devices has taken another step forward and just as Tivo is now being incorporated into set top boxes, when will MIcrosoft and Sony start licensing to Pace and, dare I say, the Sky-owned Amstrad? And if they don't, where does this put Pace and Motorola? Interesting times.