Xbox 360 Leads The Way To Engaged TV

Interactive TV, a phrase still used but painful to hear, grates like the name of an old girlfriend, conjuring up hopes long since unfulfilled yet still surprisingly fresh. Gratefully, it’s time to put old notions of interactive TV behind us because this week Microsoft (NSDQ: MSFT) will release a user experience update to the Xbox 360 that will do for the TV what decades of promises and industry joint ventures have never managed to pull off.

Introducing engaged TV. After years of ranting and prognosticating, I will no longer need to plead with the audiences I address, the clients I meet, or my friends who still listen to me to imagine the future of TV. Because Microsoft has just built and delivered it: A single box that ties together all the content you want, made easily accessible through a universal, natural, voice-directed search. This is now the benchmark against which all other living room initiatives should be compared, from cable or satellite set top boxes to Apple’s widely rumored TV to the 3.0 version of Google (NSDQ: GOOG) TV that Google will have to start programming as soon as they see this. With more than 57 million people worldwide already sitting on a box that’s about to be upgraded for free – and with what I estimate to be 15 million Kinect cameras in some of those homes – Microsoft has not only built the right experience, it has ensured that it will spread quickly and with devastating effect.

The new Xbox 360 user experience will start rolling out across the world this week. This free upgrade packs two punches: new content delivered through a new experience. Let’s start with content. Depending on what country you’re in and what TV service provider you use, your own results will vary, but in my home served by Verizon FiOS, we will soon have the ability to use our Xbox 360 as another TV set top box, accessing dozens of linear TV channels from Verizon FiOS as well as a range of authenticated on-demand content. All of this is going into the same box that already has Netflix (NSDQ: NFLX), Hulu+, ESPN (NYSE: DIS) and other content channels beyond existing games both on disc and online.

This same content is popping up everywhere: Every set top box is adding similar content and more TV service providers are working to deliver their on demand content to connected TVs, game consoles, and tablets, followed in the coming year by more and more linear content. So the content alone isn’t really reason to proclaim the dawn of a new era.

That’s where the experience comes in. Microsoft is finally exploiting its Kinect sensor in all the right ways (dare I say, I told you so? ) This 3D camera with face- and voice-recognition creates the perfect opportunity for Microsoft to radically alter the way you interact with TV content. Navigation of the entire Xbox experience is now voice directed, giving you the ability to simply ask for – and receive – everything you want to watch or play.

Sure, this will make it easier to navigate thousands of content options, but it also builds a new bridge between that content and the viewer. Every fancy interactive TV promise you’ve ever heard before now has an easy platform through which it can be delivered – with no hardware upgrade required on anyone’s part, whether consumer or service provider. It’s all just a question of software at this point. And as one digital disruptor recently told me, “I can do anything in software for $30,000.”

While I’m thrilled with what Xbox is about to bring into millions of homes, Microsoft is not off the hook. To make this really happen, the company must deliver three things: cross-platform utility, a robust developer community, and even more TV experiences.

The cross-platform point is a sticky one. The new Xbox experience gives Windows Phone users cool options for two-screen interaction with the device. But the world is now dominated by Android phones and Microsoft would be wise to take its services to the platforms that people already use. The developer community will follow, especially if they see that they can extend Android apps into the Xbox world. Ultimately, however, Microsoft must let developers put custom apps – not just games – right into the Xbox with as little friction as possible. The third point will also flow from the prior two: People turn on the TV to watch TV. If developers can have their way with the Xbox, they will work hard to create all the TV experiences that we have watched flop over 30+ years of interactive TV trials. Yes, Virginia, you will finally be able to buy Jennifer Aniston’s sweater by clicking on it. But that will be the least interesting of the things that digitally disruptive developers will do to the TV screen once they have access to it, changing advertising, content co-creation, social engagement, and everything else we have long imagined TV could become.

That’s why I say interactive TV is gone, because if Microsoft does right by Xbox 360 users, it will go far beyond interactive TV, engaging viewers in ways that will forever alter the future of home entertainment, communication, and commerce. That’s not just TV worth watching, it’s TV worth engaging.

James McQuivey is an analyst at Forrester Research, where he serves Consumer Product Strategy professionals. James blogs here.

This article originally appeared in Forrester Research.