Market Insight

Ericsson taps into Android TV with Google partnership

September 19, 2016  | Subscribers Only

Merrick Kingston Merrick Kingston Associate Director, Research & Analysis, Digital Media & Video Technology

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Ericsson is collaborating with Google to extend the scale of its MediaFirst TV platform. MediaFirst will be integrated into Google’s Android TV ecosystem, and as such, will allow operators to launch Android-TV-based services with ease.  

Our Analysis:

This partnership reflects a strategic shift for Ericsson, and threatens to pull at the thread of the pay TV UI’s primacy.

To this day, the set-top box software business revolves around the sale of large, highly-customized, proprietary builds. These builds must subsequently be integrated – painstakingly – with an operator’s choice of hardware and chipset. Integrating software in this fashion is ill-suited to rapid iteration, and holds back operators from incorporating 3rd party web services into the pay TV user-experience.

To mitigate this iterative lethargy, many software vendors have begun to pre-integrate major OTT apps – such as Netflix – onto their set-top software stacks. Ericsson’s partnership represents a break with this mitigative approach.

Ericsson isn’t merely accommodating operators’ desire to render pay TV an app-enabled proposition. Nor is Ericsson merely providing operators with the means to reduce CPE and subscriber-acquisition costs. Ericsson’s move serves as tacit admission that the full pay TV experience – delivered to and consumed upon the primary TV set in the home – can be compressed into a single app, packaged onto a 3rd party application platform, and accessed within a UI and UX that is not of the operator’s making.

For a vendor of its size and scale, Ericsson’s partnership is without precedent. The company is redefining what it means to play in the set-top software space, and by the same token, is articulating the validity of a software business model that doesn’t hinge exclusively on the sale of huge, highly proprietary – and most importantly high-value – set-top builds.

In wading into the Android TV space, Ericsson will find a market that is nascent, but not entirely devoid of operators. 14 operators globally – including Free Telecom and Bouygues in France, and LGU+ in South Korea – have already deployed Android TV-based boxes. Moreover, the addressable market for Android TV devices itself, while still small, is not insignificant. The installed base of Android-TV running Smart TVs from Philips, Sony, and Sharp currently numbers 7 million, but will continue to build momentum, and will reach 21m units by 2020. 

However, despite Android TV’s innate web-enablement and attractive cost model, the platform is no free lunch. On one hand, the licensing terms for using Android provide limited options for operators to customise the UX, which makes it difficult for firms to maintain the uniqueness of their brand. More critically, operators potentially relinquish control over rival services accessible on the STB.

Since purchasing Microsoft’s Mediaroom assets in 2013, Ericsson has been re-engineering its MediaFirst product, and aggressively trying to adapt it to a multiscreen and OTT-centric pay TV market. While the Google partnership is both an aggressive diversification strategy, as well as a watershed moment for an STB software business-model wedded to tradition, it remains to be seen whether Android TV will be embraced by pay TV operators on a large scale.

Ericsson Google Inc.
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