At the TVNext Conference in San Jose on Wednesday, Microsoft announced that it would be bringing mainstream TV to the Xbox platform. Working with 40 PayTV operators and content providers from around the world, Microsoft positioned the Xbox 360 as the only platform a consumer needs for all his home entertainment.
Tom Gibbons, Microsoft Corporate VP of the TV and services business, shared the stage at TVNext with Eric Bruno, SVP Consumer Product Management & Development at Verizon, where the two described how Verizon FiOS TV would appear on the box. Verizon will be making the FiOS VoD library plus some live broadcast channels available to FiOS TV subscribers that are Xbox Live Gold members (requiring a $59.99 annual subscription.) A similar deal has been struck with Comcast, although there will be no broadcast channels available on Xbox for Comcast subscribers. As well, Xbox users will only be able to see the Verizon and Comcast applications if they live in an area served by the MVPD. So, no open competition between cable companies over the Internet, yet!
The big win for consumers with this integration is in search and discovery. Microsoft is applying all the power of the platform to allow users to speak a command - say "Xbox, Bing, The Wire"- to search all the content available on the box. Not only will the search include all the MVPD provided content, but also content from Netflix, Hulu Plus and Zune Marketplace.
This deal has some pluses and minuses for the operators. On the plus side, the Xbox 360 is a great media platform and will allow them to create new and exciting user interfaces. As well, reaching the demographic that uses the game console is a challenge for traditional PayTV providers and this should put the company literally in their face. But on the minus side, consumers will see operator content side-by-side with web competitors, potentially devaluing MVPD content in the process.
For Xbox this is a much better deal. The battle between connected devices beneath the TV is beginning to really heat up. Devices such as Roku, Blu-ray Players and Smart TVs are finding their way into consumer homes and all seek to be the primary web portal for TV content. Having operator content available through the Xbox should keep users there longer and reduce the need for consumers to turn to a different device. This opens up all sorts of commerce opportunities for Microsoft. For example, as David Dennis - Senior Group Manager for Microsoft's IEB - explained, they get a bounty for every user that signs up for a service through the box. If a user searches for a show and finds it on Hulu Plus, they can sign up right there and Microsoft gets a bounty worth a couple of month's subscription revenue.
When I discussed the deal with my "Myth's Versus Reality" panel right after the announcement at TVNext, the panelists all agreed the deal was evolutionary rather than revolutionary. While this is certainly true, earning a permanent place beneath the TV is a pivotal battle. Consumers are going to buy 2 billion TV connectable devices between now and 2016 and Xbox is going to have to justify its use every time a consumer buys a new one.
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