Analysis: The Coming Battle - Game Console Makers Vs. Cable Companies

[In his latest piece for Gamasutra, editor-at-large and game journalism veteran Chris Morris examines the coming war between console makers and cable TV companies, as each seeks to invade the other's territory and compete for dominance in our living rooms. ] The relationship between console makers and cable companies can be a dicey one. Both compete for consumer eyeballs in the living room – and dip their toes in the other’s waters from time to time – but have avoided any sort of direct battle so far. Were they to square off, the brawl would likely be an epic one. It might be time to start looking for ringside seats. While Sony and Comcast aren’t exactly drawing lines in the sand these days, the game industry has been setting the stage for a move that could redefine the battle for the living room. Microsoft’s the latest to rattle its saber. At the Consumer Electronics Show in January, the company said the Xbox 360 would soon begin supporting AT&T’s U-Verse service, essentially turning the console into a set-top box for select owners. Then it went silent – and hasn’t officially spoken about it since. Earlier this month, though, reports emerged that testing was underway and an official release could come within the next few months. U-Verse, of course, makes up a mere fraction of the cable universe – but even that is a big playground for the video game industry. The service is currently available in 24 million homes. (That number is expected to hit 30 million by the end of next year.) And this is still an official partnership between the two companies (and U-Verse subscribers are required to have an AT&T set top box in their homes). But it’s also a good way for Microsoft to judge how much interest there is among Xbox owners in using the 360 as a primary way to watch live television. The upcoming launch of ESPN3 for Xbox Live Gold members is another. Select games will be broadcast via both the service and ESPN broadcast, letting Microsoft compare the number of users watching via the Xbox 360 to the Nielsen ratings for the cable channel Sony, meanwhile, hasn’t made quite the same reach for live programming, but it’s not standing on the sidelines. Two years ago, the company released the PlayTV add-on for the PlayStation 3, allowing the console to act as an HDTV receiver as well as a DVR. The device was never released in the United States, but the company is reportedly working on a follow-up. Gaming, of course, is evolving as an industry – in some ways, much faster than anyone expected it would. The rise of Apple’s iDevices and social network titles is luring away casual gamers at an alarming rate. And though they’re in their infancy, streaming game services offer a glimpse into what the future might hold. Console makers have known for years that the key to success is more than having just quality games – even exclusive ones – in their arsenal. The growing inclusion of non-gaming functionality, such as Netflix, Hulu Plus, Last.fm, etc. are meant to give gamers additional functionality, yes – but, more specifically, they’re targeted at the spouse or family member who rarely or never will pick up a controller. If Sony and Microsoft can train non-gamers to think of their console when those people want entertainment options, they can dramatically expand their footprint in people’s social lives. In the meantime, they’re also able to try and woo those viewers with games made for them. (Hello, Kinectimals!) Cable companies, of course, aren’t ignoring the threat. Most currently offer some form of interactive gaming to subscribers – but the only industry interests threatened by those are sites like Pogo. And, even then, it’s a minor threat. But as the libraries of streaming services grow – and competitors to OnLive ramp up – cable companies could be exploring them as possible acquisition targets. Meanwhile, similar services like Otoy are already talking with cable providers about licensing deals. By acquiring or licensing the technology behind these companies, cable providers would instantly become a more viable threat to console makers. While Microsoft might be proud of the 21-million-plus Xbox 360s that are in homes around the U.S., Comcast alone has 23.5 million. The Top 10 providers have a subscriber base of roughly 90 million people. If less than one in five of those subscriber households opted to play games through a set-top box and forego the purchase price of a console, it would be devastating for console makers. This is not a fight that’s going to happen suddenly. And it’s not a fight that’s going to have an immediate winner. But all signs point to a fight that’s coming – and one that will be an ugly one by the time it’s over.