Microsoft (s MSFT) is making a play to get its users watching more video through its Xbox 360 game console, and could soon pose a clear threat to cable operators. Unlike big cable, it’s actually gaining subscribers who are eager to watch video available through the service.
Microsoft has sold more than 42 million game consoles worldwide, but the more impressive stat is that its Xbox Live subscription service now has more than 25 million users. That’s more subscribers than Comcast, (s CMCSA) which earlier this week, reported its subscriber count had actually decreased by 275,000 over the most recent quarter, ending at less than 23 million for the first time in years. While many Xbox Live subscribers are clearly international, with the service available in 26 countries, Microsoft clearly has some scale and a huge audience it could leverage.
After all, it’s one thing to have a lot of subscribers to your gaming network — and many Xbox owners only sign up for the service for multi-user gaming — but Xbox Live users are increasingly turning to the service to watch live and on-demand video. According to Microsoft, users spends an average of 40 hours a week on the service, and over the past year, the amount of time those users have spent watching TV and movie content has grown 157 percent. Not just that, but Xbox already makes more money from media sales than through its Xbox Live subscription revenues.
The console currently has video content from its Zune marketplace, Netflix (s NFLX) and ESPN3, (s DIS) and early next year, will also have video content from the Hulu Plus subscription service. That range of content has 42 percent of Xbox Live subscribers watching an hour of TV and movie content on average per day, or 30 hours of video per month.
So far, Xbox has played nice with pay TV providers, and some of its features are only available if you’re a subscriber to cable or IPTV services. The ESPN3 service, for instance, only works if your ISP has struck an affiliate deal with ESPN; that means Comcast and Time Warner Cable (s TWC) subscribers will have access to ESPN video on the Xbox, but customers of some smaller ISPs may not. Microsoft has also been working with AT&T (s T) to allow U-verse subscribers to use their Xbox 360 consoles as digital set-top boxes, instead of leasing one from the pay TV provider.
The day could come when Xbox might think about using its massive audience to roll out its own pay TV service, and that day may come sooner than you think. Earlier this year, Microsoft was reportedly in talks with former News Corp. (s NWS) President Peter Chernin to create an Xbox-only TV network. At the same time, based on its audience numbers alone, it wouldn’t be unheard of for Microsoft to approach existing cable networks about cutting out the cable providers and offering up distribution directly through Xbox Live.
Want to know if the Xbox 360 can help you cancel your cable now? Check out the second episode of our new show, Cord Cutters, in which Janko reviews the game console’s possibilities as a cord cutting device.
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