Summary:

Microsoft (NSDQ: MSFT) is giving Sky a leg-up in the VOD and IPTV stakes. The pair have teamed to bring both on-demand shows and more than 2…

imageMicrosoft (NSDQ: MSFT) is giving Sky a leg-up in the VOD and IPTV stakes. The pair have teamed to bring both on-demand shows and more than 20 live Sky channels to Xbox Live in Q3. This deal gives Xbox its first UK TV content but is also the first time live channels have been delivered to a games console. The package includes Sky Sports and the pair say they want to focus on live sport for now.

It’s a quick IPTV-VOD solution for BSkyB (NYSE: BSY), which lacks a VOD offering as full as Virgin Media‘s cable counterpart and will be threatened by Project Canvas’ free IPTV-VOD ambitions. Sky’s Sky+ PVR has been a big success but will only record what viewers tell it to. The accompanying Sky Anytime feature has to content itself with push-VOD, beaming Sky’s own selection of on-demand shows to a portion of viewers’ PVR overnight on their behalf. The company says it remains on course to launch a comprehensive IPTV-over-ADSL service through its own HD Sky+ boxes (which now come with an Ethernet port as standard), but it’s still yet to announce a date.

So the tie-up gives Sky a new box through which to deliver all the fancy features it cannot yet, and a potential new audience – Xbox Live has 2.2 million UK subscribers, Screen Digest tells us. “For us, this is a big deal. We’ve always stood for expanding choice so this is a big deal for our consumers,” Sky commercial director Stephen Nuttall said at a briefing for journalists on Thursday. But as for the pricing and commercial relationship between the two partners, execs from both companies were short on details. Will downloads depend on Xbox Live Points for PPV? The pair are “exploring all the options as to how people consume and pay for content”, Nuttall said.

One cool new feature Sky will get: a genuine online community. Sky viewers will get IM chat, friends lists and Xbox Live avatars, but MSFT has also created a new on-screen virtual sofa for those avatars to sit on, together with friends, during football matches. It will let viewers’ alter-egos goad fans of opposing teams or cheer a goal. While the interactivity looks to be limited to live sports so far, both parties say there’s more to come on the social side. (See our demo video).

Who gets it?: Just like on the web, existing Sky subscribers will get the “Sky Player” VOD shows on their Xbox as a free bonus. But live content is reserved for multi-room subscribers or people on high-end broadband packages. Microsoft wouldn’t be drawn on whether the service would also require subscription to Xbox Live’s Silver or Gold paid-for membership packages, which unlock VOD content and social media features. But it is worth pointing out that Microsoft’s deal to provide VOD movies via Netflix (NSDQ: NFLX) in the US requires a Gold subscription.

Targeted ads: Sky is more than happy to be involved in the advertising and sponsorship Xbox has been adding to its online service recently, and in adding a targeted element. Answering a question from paidContent:UK, Nuttall said: “Absolutely, we operate in mixed economy now — we have advertising and paid-for content on the Sky platform, so why wouldn’t we see that with this? We’ve talked about our plans to have more targeted advertising on TV using the adverts stored on Sky+ boxes, why wouldn’t we think of doing something similar here?” Ironically, it’s known Sky was earlier working with Google on its nascent ad-targeting strategy. Targeted ads won’t be in place for the autumn launch, however.

Sky Player beats iPlayer to Xbox: The BBC has long said it would like to bring the iPlayer VOD service to a games console, and is already on Wii and PS3 via web browser – but it’s been beaten to Xbox by the satcaster. Asked whether iPlayer may still come to Xbox in future, Xbox’s UK and Ireland head Neil Thompson said: “We’re just concentrating on this as our on-demand TV content at this point.” Sky’s Nuttall was hesitant on the point of whether the Xbox deal is exclusive and would bar Sky from content deals with other consoles: “We’re very focused on making this work, without getting into the ins and outs of what either party might go and do in future.”

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