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How Can Cisco Compete in the New Digital Living Room?

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The new Apple TV may have been somewhat ho-hum compared to expectations, but the $99 price point and Apple logo should entice a few million buyers. Google, meanwhile, has plans to position itself as a connected TV platform, complete with advertising hooks and movie download offerings. However, as I write in a new post at GigaOM Pro, another tech giant seems to be missing from the connected TV conversation: Cisco.

The future of the living room will be determined in large part by leadership in software, something Cisco has always been challenged by. The company’s traditional customers in this market are cable MSOs, a stubborn bunch who are determined to craft their own software solutions, but, in reality, have been flailing in terms of creating a true vision for next-generation interactive services for the TV market.

What Cisco needs to do is carefully balance its legacy customer sets while creating innovative new service platforms that harness the power of a new generation of software developers. This requires investing in software beyond simple UI and consumer experience (competencies acquired through the purchase of Pure Digital/Flip), and instead, taking a platform-centric approach that would conceivably unleash a set of creative forces beyond Cisco’s own in-house developers.

This could mean acquiring Skype, which has endeavored to push into the living room through its SkypeKit offering. A move like that would give Cisco a low-end offering to accompany its high-end telepresence dreams. Or, the company could pursue a smaller bet like Boxee. Either way, developers would appreciate a large incumbent provider with strong carrier relationships creating a platform on which to create new services and applications.

The recent acquisition of ExtendMedia is a step in the right direction for Cisco, since it gives them an OTT delivery management system and moves beyond the closed cable architecture, but that’s only a first step. By going big into software and ultimately marrying the results to both carrier hardware and retail offerings, Cisco could provide a law-abiding counterbalance to the Wild-West entrants like Google and Apple looking to take over the town.

Read the full post here.

Image Source: Flickr user dailyinvention

7 Responses to “How Can Cisco Compete in the New Digital Living Room?”

  1. Michael, I am not sure I follow. you do know that Cisco is the largest vendor of set top boxes IN THE WORLD…don’t you.

    I am not sure that this changes the overall point that you are making since SciAtlanta has mediocre responses to Google and Apple TV, but your article fails to allude to the horse that they have in the race.

    • @George – Motorola was, last I checked, the set-top market leader. And Motorola was looking to sell the division and had no takers.

      Now why is that? Probably because making underpowered set-tops for carriers is a nice business, but it’s a business that’s whistling past the graveyard. At the same time, there’s a potentially huge opportunity selling direct to consumers, one Google and Apple have identified. Cisco has designs on the living room beyond set tops (anyone whose listened to Chambers talk about consumer telepresence knows that) – but they’re going to see the market eaten from below them by Skype.

      Bottom line – they need a more solidified strategy, one that doesn’t rely on simply a set-top oligopoly, as that business is low to no-growth.

  2. I’ll vote for “continue to sell mediocre boxes to the cable companies, aka government-sanctioned monopolies, adding features when demanded to, regardless of user experience since it doesn’t actually matter if your monopoly cable company gives free boxes away and takes 3 years to pay for them”

    All the other options seem unlikely.

    • @Jeremy – that only addresses their carrier business – which I don’t really think they want to whittle away and become another Motorola. Considering consumer and the entire company as a whole, there’s no doubt they’ll make more acquisitions, most likely on software front, that will bolster consumer business and more. Skype would at least make sense, as they’d own video communication from low to high, from consumer to SMB and up to high-end telepresence.

  3. jimmy lee

    I agre with this article. I don’t think cisco has any strategy for the living room and just watch Apple and Google eat Cisco’s lunch. Focusing on core routers will only get you so far. You need to control the ecosystem end to end. Even google is devloping their own routers and switches in their data center.

    With Move network on firesale mode and matrixstream iptv rapidely expanding on the OTT iptv side, I am surprised Cisco hasn’t made more IPTV acquisitions.

    • @jimmy lee – Cisco’s always been a bit challenged on consumer – they originally wanted to build their own home gateways and sell them for $500 or $600 (this was around 2000-2001).

      The company eventually realized they needed to move to a low-cost model and acquired Linksys, which powered their consumer group for the following 3-4 years.

      In the new age of networked media/OTT – they are searching for their next move. The Pure Networks and Pure Digital acquisitions have helped, but they still need some significant help, a bigger play, or they’ll see the end-points and CE devices consumed by Android, Apple, etc. I think they can play both the carrier and the consumer/smart-end point side, if they do it carefully, but they’ll need significantly more help (likely through acquisition).