Microsoft’s ESPN Deal May Not Be a Cable Killer After All

Microsoft (s MSFT) made a lot of potential cord-cutters very happy yesterday when it announced a deal with ESPN (s DIS) to make 3,500 live sporting events available through Xbox Live. But those users should probably hold off before calling up their cable companies to cancel service, since they might want to read the fine print first.

One important note not mentioned by Microsoft (s MSFT) during its presentation yesterday is that the ESPN deal extends only to users whose Internet service provider has struck a deal with ESPN to offer its streaming video services online. Buried in the footnotes of the press release announcing the deal is this little nugget:

“ESPN on Xbox LIVE, providing great content from and, is only available to Xbox LIVE Gold members. For access to content, Gold members must receive their Internet connection from an affiliated broadband provider. See for details and providers.”

The good news, for customers of companies like Comcast (s CMCSA), Verizon (s VZ), AT&T (s T) and Charter (s CCMM) is that they’ll have access to the ESPN content even if they’re just high-speed Internet customers of those providers, with no pay-TV subscription necessary. So if you’re a Comcast customer and love ESPN, by all means cut your cable subscription and go broadband-only, maybe supplementing Xbox Live ESPN with a Netflix (s NFLX) subscription and lots of Hulu.

But for a number of cable subscribers, that option won’t be available. For some, the ESPN content won’t be available on Xbox Live — even if they get ESPN as part of their basic cable subscription. That’s because some cable providers — including cable companies like Time Warner Cable (s TWC) and Cablevision (s CVC) — don’t have a deal with the ESPN for its broadband-only content. (A full list of providers that have signed affiliate deals for ESPN3 content is available here.)

For ESPN, limiting the service to customers who have a relationship with affiliates makes sense, as it will get paid for that usage. But for Microsoft, abiding by the agreements that ESPN has in place (or doesn’t) could cause confusion and frustration among the Xbox faithful.

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