Ericsson has completed the acquisition of the Microsoft Mediaroom business and platform, making it the leading provider of IPTV middleware by market share. Microsoft Mediaroom delivers television and video services to almost 13 million households worldwide. A new report forecasts that the number of IPTV homes around the world will increase to 167 million over five years, with most of the growth in the Asia Pacific region, mainly China. By then, IPTV services could account for over 10% of television households worldwide.

Microsoft Mediaroom powers services for AT&T, Bell Canada, CenturyLink, Deutsche Telekom, Portugal Telecom, SingTel, Swisscom, Telefonica, Telus, and VimpelCom, among other operators. AT&T has just over 5 million subscribers. The other 8 million Mediaroom subscribers are divided among over 50 operators that have so far deployed Mediaroom.

Based in Mountain View, California, the former Microsoft business unit employs more than 400 people worldwide. It will be integrated into the Ericsson group and become Ericsson Mediaroom. Terms of the deal were not disclosed.

“This acquisition places us even more securely at the heart of an exciting and highly innovative industry,” said Per Borgklint, head of the support solutions business unit at Ericsson. “By incorporating Mediaroom into our broad portfolio of solutions we will ensure our customers have the ultimate partner as they transform towards true TV Anywhere multi-screen services and optimized video delivery in any network.”

As a Microsoft platform, based on Microsoft technologies, Mediaroom did not directly address the growing multiscreen market of Apple iOS and Android handheld devices, supporting these through application interfaces that required integration by third parties.

“Previously we would always have to balance landing some strong experiences on Microsoft devices while at the same time we had to reach devices that already had a lot of volume,” Ben Huang, the global director of marketing for Mediaroom told informitv. “Now with the transition to Ericsson we can think about it from purely the marketplace perspective, without having the tension of the volume approach as well as having to land on a Windows phone, for example.”

He indicated that the next stage would be to marry some of the web-based experiences that over the top services are doing well with the classic television subscription model provided by IPTV service providers.

After spending over a decade and hundreds of millions of dollars attempting to break into the television business, Microsoft has decided to refocus its efforts around its Xbox brand. Its new Xbox One will be marketed as a games and general entertainment platform.

As a leading provider of products and managed services to telecommunications companies, Ericsson is arguably better positioned to support operator IPTV services. Ericsson has multiscreen at the heart of its messaging around next generation services and can be expected to focus on delivery to multiple displays and devices.

There is significant scope for growth, not only in established markets like North America, but particularly in developing economies.

At the end of 2012 there were 69 million homes subscribing to IPTV services worldwide, according to Digital TV Research. That is forecast to rise to 167 million by the end of 2018. Of nearly 100 million additional IPTV homes, over 70% are expected to be in the Asia Pacific region, which will then account for 64% of the total, with over 70 million in China.

“This means that IPTV penetration will exceed 10% of TV households by 2018, more than double the 2012 figure and up from only 1% in 2008,” said Simon Murray, author of the Global IPTV Forecasts report. IPTV revenues, from subscriptions and video on demand, will climb from $12 billion in 2012 to over $21 billion in 2018.

Despite making some impression on the North American market, the ambitions for Microsoft TV, failed to meet market expectations. Back in 2005 Microsoft was boasting that it had relationship with operators responsible for a quarter of the world’s phone lines. Microsoft had formed an alliance with Ericsson rival Alcatel to develop its television platform. It also worked closely with vendors including Tandberg TV, which became part of Ericsson in 2007.

Microsoft disposed of its Mediaroom business to the Swedish multinational while buying the mobile phone business from Nokia of Finland for over $7 billion, a considerable discount of its market capitalisation of $150 billion five years previously, when Apple launched the iPhone. Stephen Elop, who left Microsoft to become chief executive of Nokia in 2010 is expected to return to Microsoft and is seen as a possible replacement for Steve Ballmer, who will retire as its chief executive within a year.

Nokia is following Ericsson in shedding its handset business and will concentrate on networks. Nokia Solutions and Networks, a former joint venture with Siemens, will account for the majority of its business.

Nokia, Ericsson and Alcatel-Lucent are competing in the network space with Chinese companies Huawei and ZTE.

Ericsson is meanwhile building its television capabilities, from playout services to compression technologies and multiscreen delivery. This is just part of its broader vision of a networked society based on broadband fixed and mobile networks.

Global IPTV Forecasts, with five year predictions for nearly a hundred countries, is available from Digital TV Research.