Ericsson is to acquire the Mediarooom business from Microsoft. It elevates Ericsson to become a leading provider of services in the multiscreen television market, in which mobile services may become increasingly important. Microsoft will instead focus its efforts on Xbox, moving from supporting operators with IPTV services to delivering services over the top of their networks directly to consumers.

Ericsson says it expects that future changes in video distribution will have a similar impact on consumer behaviour and consumption as mobile voice has had. The importance of video distribution capabilities will become increasingly important as fourth generation mobile networks are deployed and adopted by smartphone users.

“Mediaroom is the leading platform for video distribution deployed with the world’s largest IPTV operators,” said Per Borgklint, who heads the Business Unit Support Solutions group at Ericsson. “This strategic acquisition positions Ericsson as an industry leader thanks to the skills and experiences of the talented people of Mediaroom combined with Ericsson’s end to end service capabilities.”

Microsoft Mediaroom provides the technology for service providers including AT&T U-verse, Deutsche Telekom, Telefonica, Telus and Swisscom, reaching more than 22 million set-top boxes in 11 million homes. The global IPTV market is forecast to reach over 75 million subscribers in 2013.

The agreement to acquire the Microsoft Mediaroom business is subject to the usual regulatory approvals and other conditions and is expected to close in the second half of 2013. Terms of the deal were not disclosed, although it has been reported to be less than $200 million. Mediaroom is currently based in a separate campus at Mountain View in California and will become part of the Business Unit Support Solutions group within Ericsson.

“We are proud of the number one IPTV market position that we have achieved with Mediaroom. Ericsson’s complementary portfolio of TV and networking services will help drive the future growth and development of Mediaroom,” said Tom Gibbons, Corporate Vice President of Microsoft Corporation. “Ericsson is positioned to be a valuable strategic partner for operators and TV service providers around the world as the IPTV market evolves.”

Microsoft was a leading driver of the telco television transformation with its TV platform, which became Mediaroom, acquiring many leading telecommunications operators around the world. AT&T U-verse, with 4.5 million subscribers, is one of the fastest growing IPTV services in the world. However, other operators, such as BT, have been moving away from the Mediaroom platform.

With its strong heritage in telecommunications, Ericsson may prove a more attractive partner to telcos.

Based in Stockholm, with over 110,000 people working with customers in more than 180 countries, Ericsson is a leading provider of information and communications technology and services to the telecommunications industry. Supporting customer networks servicing more than 2.5 billion subscriptions, 40% of the mobile traffic in the world goes through Ericsson networks.

Microsoft will instead focus its efforts on Xbox, with a successor to the Xbox 360 expected soon. Microsoft has been making moves to make it a general entertainment platform, including television services. Essentially, it marks a signficicant change in strategy from Microsoft, moving away from service provider IPTV services to over the top delivery to consumer devices.

In a statement, Yusuf Mehdi, who is responsible for marketing, strategy and business for the Interactive Entertainment Business at Microsoft said: “With the sale of Mediaroom, Microsoft is dedicating all TV resources to Xbox in a continued mission to make it the premium entertainment service that delivers all the games and entertainment consumers want — whether on a console, phone, PC or tablet.”

“And with 76 million Xbox 360 consoles around the world with 46 million Xbox LIVE members, it is a mission that gets us out of bed in the morning.” He added: “Our vision and energy for the future of entertainment is more focused than ever. Stay tuned.”