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[April 20, 2014]
Microsoft seizes a disruptive moment to stake its TV claim: Xbox games consoles will air original programming as it looks to Netflix model
(Guardian (UK) Via Acquire Media NewsEdge) Microsoft's move into original programming pitches it deep into Netflix and Amazon territory in the battle to control the living room. The company has so far publicly revealed a slate of just six shows that will air on its Xbox games console - including a Steven Spielberg-produced TV series based on its hit game franchise Halo, a documentary on former console giant Atari, and a remake of Swedish scifi drama Humans in conjunction with Channel 4. However, the intention is to build a TV powerhouse.
"We want to be the all-in-one entertainment experience, so going into original programming was a natural step for us," says Nancy Tellem, a former top executive at CBS with credits including CSI and Survivor, who joined Microsoft in late 2012 as entertainment and digital media president, heading its new production studio in Los Angeles. "The thing a lot of people don't know is we have an amazingly rich platform of content. Look at games, Halo is a fantastic starting point. MSN reaches 450 million users a day, amazing global reach. Our video and music rivals [US streaming service] Pandora, and on the TV and film side, buying or renting, the number of titles we have rivals Netflix. It is an amazing, important starting point in terms of assets." Tellem is keenly aware of how crowded the living room is becoming. Amazon unveiled its $99 Fire TV set-top box days before Microsoft's programming announcement, and is determined to leverage Xbox's powerful, if sometimes overlooked, position in homes across the globe. Xbox has 48 million paying monthly subscribers globally to its Xbox Live service, which features video on demand content from Netflix, ESPN, HBO Go, Amazon Prime among others, a huge base to try to develop.
Her challenge is to rebrand the core image of the Xbox as a gaming device, and here Microsoft is keen to take a leaf out of Netflix's success. "I think probably what Microsoft has looked at is the success of House of Cards for the Netflix company and brand and what building your own catalogue [of shows] can do," says Richard Broughton, TV analyst at IHS. "Our research shows that despite the rise of tablets and mobiles people watch the vast majority of live and timeshifted content on the main TV. Xbox is a formidable device for media consumption and opportunity, as a set-top box with a prime place in the living room." There is a certain irony in Microsoft looking to ape the success of Netflix's strategy, Broughton points out. "Games consoles were a key early driver of Netflix's streaming service, accounting for over half of viewing as they were ready-connected to the internet and the TV. Xbox got Netflix on to TV. It helped the streaming service to secure market share - and now Microsoft is adopting a strategy to restore Xbox to the forefront." Microsoft's opportunity is still considerable, and potentially hugely lucrative. Analysts at IHS put the total potential number of Xboxs globally that could connect to the Xbox Live service at 92.9m, rising to 116.9m by 2016. There are currently 10m in the UK and forecast to be 12.2m by 2016. Consumption of VOD content is growing fast, with 7.5bn shows and films watched in the UK in 2013, from streaming services including BBC iPlayer, Netflix, Amazon and 4oD, with a growth rate of between 20% and 25% per year.
"I spent a lot of time in TV and learned a lot at Warner Bros and CBS," says Tellem, who oversaw network entertainment at the US broadcaster from 1998 to 2009. "What is exciting about this opportunity is bringing together the two cultures of media and technology and offering the audience a new iteration. Look at Game of Thrones and the number watching on tablets, we are at a really interesting inflection point in media." Tellem is referring to the unprecedented surge in demand for Games of Thrones's season four premiere, which swamped HBO's internet service HBO Go. Microsoft also got Game of Thrones fever, striking a deal to make the first episode available free for a week, a great publicity vehicle for Xbox and for HBO a sampling tactic to try to snare more subscribers.
"When I started in TV from a programmer standpoint we were in control of what the consumer would watch, how and when," Tellem says. "Whether through gaming, the internet . . . what you are seeing is a disruptive moment with a lot of different platforms offering high quality premium content." To date, Microsoft's TV strategy resembles more of a toe in the water, in contrast to Netflix's $3bn annual commitment on TV and film rights, $300m of that on original shows. The software giant certainly has the muscle to make waves - profits were $6.56bn (pounds 3.94bn) for the three months to the end of December, beating Wall Street expectations, with revenues in the division housing Xbox up 13% to $11.9bn.
Tellem is playing her cards close to her chest on just how big a bet Microsoft is willing to make on TV shows. "If you were in LA you'd see how committed we all are," she says. "We are very ambitious and will grow at a pace that is right for the business and we have the financial support to do it. It is a space we are definitely in and will continue to be in. I not only believe in the Xbox service but [if the aim is] keeping the audience and expanding that reach, what better way [is there] than with an original show?" Captions: Xbox owners could watch Game of Thrones's season four premiere free for a week (c) 2014 Guardian Newspapers Limited.
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