Cable providers like Time Warner (NYSE: TWX) and Comcast (NASDAQ: CMCSA) are already preparing themselves for a siege. Internet television, whether through enabled televisions or set top boxes, isn’t quite ready for primetime yet — but the initial armaments including Apple TV and Google TV are preparing to hit living rooms in the next year.

Apple Inc. (NASDAQ: AAPL), with its new cheaper Apple TV already available at stores, by no means represents that company’s full ambitions in television entertainment. And Google Inc (NASDAQ: GOOG) with its Google TV is also a just getting started. As of now, the software is part of hardware produced by Sony (NYSE: SNE) via its Internet Television, but there’s still no ship date on either of these products. Still, content providers and cable companies alike are nervous about how Internet TV devices will circumvent traditional venues for content, and more importantly, advertising delivery.

Internet TV through devoted boxes like Apples isn’t the only threat however. Cable companies need to worry about video game consoles before they worry about Apple and Google TV.

Microsoft (NASDAQ: MSFT) originally announced that it was working on an IPTV solution for its Xbox 360 consoles all the way back at CES in 2007. Last January, a video demo popped up online showing an Xbox 360 that could run the AT&T (NYSE: T) feature U-Verse TV. Now, thanks to some hints in U-Verse’s tech support database, it looks like that Xbox 360 IPTV option is getting ready to launch.

U-Verse support is just the latest initiative from Microsoft leveraging the Xbox 360 as a way to control living rooms. They entered into their historic partnership with Netflix (NASDAQ: NFLX) on the system back in November of 2008, bringing instant streaming video to subscribers. Microsoft also announced a new partnership with cable channel ESPN – a property of Disney (NYSE: DIS). Starting later this year, select sporting events will air simultaneously over Xbox Live — albeit for paying subscribers to Microsoft’s online network — and ESPN.

Sony has also been bulking up its television initiatives on the Playstaion 3. While never released in the United States, Sony did release a device called PlayTV in European and Australian markets. PlayTV made the Playstation into a devoted set top box and DVR player. Like Microsoft, Sony also entered into an agreement with Netflix to offer streaming video. Just recently Sony began offering Hulu Plus on Playstation 3.

While Time Warner, Comcast and others have all launched streaming video game content over their cable services over the past five years, none have made hardware (such as controllers) standard issue with their set top boxes, nor have they made modern software available (most cable video game services stream older PC titles.) Now isn’t the time for them to start actively ramping up their video game strategy either. A Yankee Group study published last March found that 2% more American households have a video game console than a cable box in them. In many ways, the battle is already lost and now it’s up to cable providers to find ways to forge new partnerships.

Much as streaming film and television are starting to replace broadcast content, streaming gaming is what lies on the horizon. While the devoted streaming hardware generation is still some years away, Sony and Microsoft’s digital initiatives on current consoles are already a success. Apple has hinted that iPad owners will be able to stream their iPad games on to their televisions via the Apple TV, and televisions with Google TV software will provide access to many casual and social network game options. There are also fledgling streaming gaming services like OnLive that offer a devoted gaming set top box and PC streaming service free of physical software media. OnLive’s investors include AT&T, Autodesk (NASDAQ: ADSK), and most notably, Warner Bros.

If cable providers are to survive in the future, it’s time to follow TWX’s lead and invest in services like OnLive ASAP.

As of this writing, Anthony Agnello did not own a position in any of the stocks named here.

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