Consumer electronics vs broadband companies

Staying in is the new going out, as consumers fight their way through the credit crunch. But while many sectors are suffering a fall in consumer spending, those eager to create the digital-entertainment hub for the 21st century look set to gain. Xbox, for one, has its eye fixed on taking control of home entertainment. No longer content for Xbox to be ‘just’ a games console, last week Microsoft introduced New Xbox Experience.

New Xbox Experience is a free software upgrade for the Xbox 360 that highlights movies and other content downloadable via its online gaming and digital media platform, Xbox Live. Further services will be added, including interactive TV channel Xbox Live Primetime. The industry is moving toward video-on-demand-style services. Consumer demand for a variety of content whenever and wherever they want is an established trend.

Sony, too, offers a range of entertainment content to network-connected PlayStation3 users. Its Life with PlayStation platform includes Live Channel, a selection of news and information from around the world. Games consoles, however, form just one of four main groups vying for control of digital home entertainment.

Microsoft is also a major player in the second of these groups: service providers offering content via broadband-connected set-top boxes. The Microsoft Media Centre acts like a PVR when connected to a TV, as well as allowing movies to be downloaded via broadband.

Apple, meanwhile, has Apple TV, which enables users to download HD movies, music and podcasts from iTunes via a set-top box for listening to or viewing using their TV. Broadcast PVR set-top boxes such as Sky+ and Freeview Plus represent the third group of challengers.

The final group comprises the major players in the consumer electronics sector. Earlier this year, Panasonic unveiled VieraCast, an IPTV-enabled TV allowing users access to streamed content without having to connect to the internet via a PC. However, there are key challenges to be addressed before the battle for digital home-entertainment dominance can be won.

While Microsoft and Sony are competing on a successful basis, people typically buy an Xbox or PlayStation as a games machine, and set-top boxes primarily as a bucket-load of TV. The games companies’ main challenge is ensuring consumers understand the full range of what their devices can do. But this is an education process and will, inevitably, take time. Identifying which customer benefits will turn a home-entertainment provider into the focal point of the digital home is another key area.

BskyB’s ongoing mission is widening choice. It is a central part of our strategy in terms of where and how our content can be consumed. To this end, Sky content can now be consumed on satellite TV, broadband, mobiles and Sony’s PSP handheld console. Earlier this month, the broadcaster unveiled an online subscription TV service that enables anyone not just Sky customers access to all Sky channels via their PC.

Dan Marks, chief executive of BT’s broadband-delivered service, BT Vision, believes customer management is as important as ease of access. Some have an advantage in content ownership, but in the longer term, that alone can not be a sustainable position.

As Xbox, Sky and BT jockey for position , it is easy to assume the millions each is investing leave them vulnerable in a recession. Yet evidence suggests that digital entertainment, particularly broadband, is one of the last cutbacks consumers will make. Entertainment has typically always been more recession-resistant than other expenditure and home entertainment more so.

While the battle for control of the UK’s sitting rooms is unresolved, consumers look set to make compromises elsewhere – for the time being, at least.