Speaking today at the D: Dive into Media conference, Microsoft executives Nancy Tellem and Yusuf Mehdi talked about the company's efforts to create new, original video content that will "hopefully" be rolled out this year. It's coming out of the newly-minted "Xbox Entertainment Studios" in Los Angeles, with over 150 employees led by Tellem — who came over to Microsoft from CBS last September.
Microsoft, however, isn't taking the same tack as Netflix in creating its original content — instead it's taking a very Microsoftian approach that will leverage the many advantages the company already has in the living room. To do it, the company is resurrecting the old chestnut of adding "interactivity" to traditional viewing experiences, but this time the firm may actually have the features, infrastructure, and partners to make it happen. Microsoft isn't trying to supplant video partners like Netflix — or at least it claims that it isn't, saying "We will be the most friendly player in the industry in that space." Instead, the company's trying to solidify the Xbox's lead in the living room, perhaps before Apple's "intense interest" turns into a new product.
Those advantages start with the Xbox itself: the company has sold 76 million of them worldwide, along with 24 million Kinect sensors, and most importantly it has amassed 46 million Xbox Live subscribers. Microsoft has also done a better-than-expected job partnering with large cable providers to bring their on-demand services to the Xbox, which of course streams Netflix, Hulu Plus, HBO Go, and a variety of other content. In short, the Xbox is a great starting place for launching a new attempt at interactive media, and with Xbox Entertainment Studios the company intends to do just that.
"You can either watch linear content or really interact with it."
The new video content will be originally produced and will be more than just a new TV-style series a la Netflix's House of Cards. Instead, Microsoft will offer content that is a mix of video and "interactivity." Tellem says that "you can have your choice, you can either watch linear content or really interact with it," and the options Microsoft has for that interaction ranges from leveraging Kinect motion control to simple push-button voting — something the company has already tried with the US presidential debates, where it conducted live polling. There will also likely be an (optional) second-screen experience via SmartGlass, but Tellem says that "I really don't believe in just adding interactivity for interactivity's sake," but instead that there are "some natural things that evolve out of it that enhance the experience."
Presumably the new content will be available to paying Xbox Live subscribers — the service costs $60 a year — but it will "definitely" also include advertising. There, again, Microsoft is hoping to add some kind of added benefit beyond simple commercials. Medhi says that the goal is to take "the power of what the internet can bring to advertising and marry it to the scale of television." What the internet brings, primarily, is laser-focused demographic targeting and much better information about actual consumer engagement, and with Kinect, the Xbox is uniquely situated to take advantage of that. "Our value-add is not being just another distributor," Medhi explains, "It's adding another level of interactivity." Microsoft could stand to make real money off of the ads if it plays its cards right. "Advertisers are very excited about that opportunity," Tellem says.
"Our value-add is not being just another distributor. It's adding another level of interactivity."
All of these plans seem perfect for the rumored low-cost "Xbox TV" we've been hearing about, but Medhi was careful to nether confirm nor deny its existence. What he did do was defend the for-pay subscription model for Xbox Live, in the face of new numbers showing that the PlayStation had exceeded Xbox in total Netflix viewership. "[The] Xbox brand stands for the best, most interactive, most amazing entertainment you can get," he said, comparing it to low-cost media streamers like the Roku. "Our current and future investment is about doing things that are big and premium."
We've heard companies like Microsoft tout vague, futuristic notions of "interactive" entertainment since the heyday of "interactive" multimedia CD-ROMs in the 90s, but perhaps this time it could actually work. Microsoft has many of the tools to enable a next-generation experience, including SmartGlass and Kinect, but to-date there's still no strong, coherent ecosystem for this kind of content. It looks as if Xbox Entertainment Studios could be the start of that ecosystem — if only by example. If the company wants its work to be more than just a few whiz-bang tech demos, it will have to focus on the difficult work of getting its partners to create similar content, and convince them that it's not trying to take over their business in the meanwhile.