CES 2008

Microsoft TV Partners with BT to Launch Integrated IPTV and Gaming Solution

| Jan 7, 2008 | Digital Media Infrastructure | Show Update

| Analyst: Yoav Schreiber

Current Perspective: Very Positive Vendor Importance: High Market Impact: Very High

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Event Summary

January 6, 2008 – Microsoft and BT announced that BT Broadband customers will gain the option of accessing the BT Vision IPTV service from either an Xbox 360 console or a set-top-box (STB). BT Vision, which is powered by Microsoft Mediaroom, plans to make this service available to existing and future Xbox 360 console owners in the middle of 2008. The announcement was made during the keynote address by Microsoft Chairman Bill Gates and Microsoft President of Entertainment & Devices Division at the 2008 International CES.

Analytical Summary

• Current Perspective: Very positive on BT’s announcement that it will be the first operator to deliver an integrated Microsoft Mediaroom and Xbox 360 solution for accessing the BT Vision IPTV service. By delivering an integrated consumer entertainment and communication experience, Microsoft TV is leveraging its unique core assets such as its widely deployed Xbox 360 gaming solution as well as strong partnerships with leading telecom operators worldwide to further differentiate its Mediaroom offering from rival IPTV offerings. As the momentum in IPTV subscriber growth increases, Microsoft TV is expanding the platforms available for accessing IPTV services, enabling operators that select Mediaroom to deliver enhanced interactive entertainment experiences as well as access to larger pools of subscribers.

• Vendor Importance: High to Microsoft TV, as the company needed to announce a telco operator partnership to follow through on its CES 2007 announcement to integrate the Xbox 360 with its IPTV offering. With Mediaroom now running on 1 million STBs worldwide, Microsoft can exploit its advantage of over 13.4 million deployed Xbox consoles to further accelerate Mediaroom subscriber penetration. The announcement has a high importance to BT which needs to demonstrate accelerated IPTV subscriber growth (beyond its current ~100,000 base) by tapping into the more than 1 million Xbox 360 users in the U, in order to reach its medium-term goal of securing 2-3 million BT Vision customers.

• Market Impact: Very high on the digital media infrastructure (DMI) market, since Microsoft has used its traditional CES keynote address to announce this widely anticipated move. To meet the enhanced Mediaroom/Xbox 360 challenge, rival IPTV middleware vendors will be forced to bolster the integrated entertainment and communication experiences of their interactive platforms. IPTV service providers will be required to compare Mediaroom’s enhanced platform versatility vs. rival IPTV solution offerings.

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