TDG: Consumers To Turn To Consoles For On-Demand Video

A new report from research and consulting firm The Diffusion Group (TDG) says that current trends could potentially lead consumers to abandon their local cable companies or satellite TV operators, turning to video game consoles, such as Xbox 360 and PlayStation 3, for on-demand video services. Titled "Console Vendors & OTT Delivery: Let the Games Begin!," the 49-page report argues that the Xbox 360 and PlayStation 3 are evolving into multimedia gateways with their non-gaming media offerings. Both consoles' online services, Xbox Live and PlayStation Network respectively, provide downloadable videos, with Xbox Live recently integrating streaming film rentals with Netflix. "There is a bit of a ‘value vacuum’ developing around today’s PayTV offerings," says TDG's Broadband Media practice manager and co-author of the report Colin Dixon. "Rising dissatisfaction with service value, the lack of flexibility implicit in tiered strategies, and a growing interest in watching online video on the TV have combined to create a unique opportunity for alternative video services -- an opportunity not at all lost on console vendors." TDG provides several predictions supporting its argument, forecasting that some 190 million households will own a next-generation video game console by 2012, of which 80 percent will connect their console to the internet. The firm also infers that 75 percent of those connected-console households will use console-based video services at least a couple times each week. "Microsoft and Sony know that today’s console gamers are perfectly suited for new TV offerings," says Dixon. "The segment is dominated by males between the ages of 18 and 35 -- a prized advertising demographic -- with little sense of loyalty to their 'local' cable or telephone company. They are also heavy viewers of online video and quite comfortable spending money for online digital media." He continues, "Simply stated, console vendors are inimitably positioned for success in the OTT (over-the-top) space because their gaming audience already owns the enabling device, and they are highly likely to already have an Internet-to-TV relationship with the vendor."