Xbox 360: The Living Room’s 800-Pound Gorilla?


Ahead of next week’s E3 video game conference, Microsoft (s msft) is trying to position its six year-old Xbox 360 less as a video game console and more as an “all-in-one entertainment device.” In a blog post earlier this week, Microsoft VP of Corporate Communications Frank Shaw talked up the platform’s adoption not just as a gaming device, but as a platform for video viewing.

For those that have been paying attention, this probably isn’t a huge surprise; after all, Microsoft was the first to bring Netflix’s streaming service into many living rooms. And it continues to add new video services to the Xbox 360, including ESPN3 (s DIS) and Hulu Plus.

Its addition of streaming video content seems to be paying off. According to Shaw, about 40 percent of all Xbox activity is non-game activity. And Xbox Live members are watching about 30 hours of video a month on the device, which is three times more than they were watching a year ago.

While E3 is traditionally a big show for new video game announcements, all of this suggests that Xbox is likely to announce some new content partnerships. It wouldn’t surprise us to see an HBO Go (s twx) channel appear on Xbox Live, or even to see one of the major cable providers — like Comcast (s CMCSA) or Time Warner Cable (s TWC) announce apps that would tap into their traditional linear TV offerings.

The potential Xbox 360 audience is huge, with more than 53 million consoles sold and more than 30 million Xbox Live members worldwide. So it makes sense for content creators and distributors to build applications and reach that audience.

Even so, Microsoft’s approach to building its content ecosystem remains a challenge for many video distributors. Not just anyone can build for Xbox — to do so, you have to be a Microsoft partner. For video applications, that means the Xbox 360 has been limited largely to Netflix, (s NFLX) Hulu Plus, the Zune marketplace and, in the U.K., BSkyB. In that respect, even the PlayStation (s sne) boasts more options, including Vudu’s (s wmt) video-on-demand store and sports applications from MLB, the NBA and NHL.

Another problem with building for Xbox 360 is the platform itself. Microsoft wants to maintain much of the Xbox Live functionality across the different apps. That means that when possible, Xbox apps carry over Xbox Live avatars and the ability to see what others are watching. All of this requires a huge amount of custom integration — and the launch of Microsoft Kinect, as sexy as it is, only makes things worse by layering on a whole new level of complexity for developers.

Now compare Xbox’s limited number of applications to the competition. Samsung boasts more than 500 different applications available for its connected TV and Blu-ray players. And even Roku, with a little more than a million devices sold, has more than 250 different content channels available, mostly because it has an open software development kit that anyone can build for.

One could argue there’s a quality-versus-quantity component to allowing anyone to build for your device. But the custom integration required to deploy a media experience on Xbox Live not only limits the number of partners that build for the device; it also limits their ability to update those experiences once deployed. Netflix is a prime example: While it has done a good job of adding new features and improving its UI across a number of devices, many of those features are slow to make it to the Xbox 360, if at all.

In the short term, Xbox is a media powerhouse and will likely remain so for an increasing number of viewers that want to tune in to online video services. But unless Microsoft is willing to open its platform and make it easier for other content providers to build for Xbox Live, it’s likely to get left behind as more content is made available on other devices.

Image courtesy of flickr user



Microsoft set-top boxes power the AT&T U-Verse TV network also. There are also rumors that the Xbox 360 price could drop to $150. Many possibilities here, but cable operators (read Comcast) will definitely try to block this.


Why isn’t it necessary… is that because disks are dead or because we like having an extra box in our living rooms or because we want to spend an extra few hundred bucks. Seriously… I’m interested in your thoughts. It seems like it would be more compelling with a blu-ray player – no?

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