Ever since Microsoft loaded the Xbox 360 with the ability to use the Media Center capabilities of a connected PC, we’ve known that this would be coming sooner or later. Having failed miserably to get a Media Center PC attached to every television set, Microsoft set about bolstering the entertainment features of Xbox Live. With Music streaming/purchasing, television purchasing, and movie rentals, the service only misses the beat in one key area: live television.
Shortly before this year’s Electronic Entertainment Expo, rumors of an updated Xbox LIVE capable of delivering live television directly into your living room surfaced. Sure enough at Microsoft’s keynote on Monday they confirmed the rumors, and nothing more. No user interface, no pricing, and specifics on availability. There seems to be some kind of collective dreaming going on in the tech press, it seems that they see this is something revolutionary. Although a lot of the details are absent, I’m decided to take a more pragmatic approach to how Microsoft may implement this.
In a Perfect World
Here’s what I like to call the “Disney” scenario. Microsoft goes directly to each media company on a case by case basis and becomes a defector cable company. This allows them to bring legitimate innovations to the industry like being able to pick and choose your channel lineup or (and I know this one is reaching) providing users channel lineups they want at a price we honest working Earthlings can afford. Of course there’s Kinect integration and all that jazz, but the real innovation here is pricing, pricing, and pricing. Renting movies and watching television shows is cool and everything, but if I can use that same device to watch just my local channels, History, and Cartoon Network; then that’s brilliant.
In Our World
Now that we’ve gotten the dreaming out of the way let’s look at what where stand here in the real world. Cable and satellite companies are the backbone of the internet infrastructure in the United States. This is brought things like fast internet connections in our cities and a decent amount of rural areas. It’s also created some of the biggest media giants on the planet, giving birth to things like Comcast-NBC-Universal; a market that is almost literally vertical in nature. Why is this of concern to us? In this environment, there’s no way our “Perfect World” scenario comes true. Microsoft can’t make an end run to cable channels because often those same companies are the ones who provide internet to the customers Microsoft is trying to reach. Instead we arrive at the only possible way Microsoft pulls off Live television in the United States: work with the cable companies. *Dun, *Dun
It seems Microsoft arrived at this same conclusion. When asked by the Seattle Times’ Brier Dudley, Mike Delman, vice president of global marketing at Microsoft’s Interactive Entertainment Business confirmed my suspicions almost entirely.
“It will be tied to either a satellite broadcast company or a cable company. So in international markets, you’ll just have one provider. In the U.S., it will be bifurcated by region, by market. You’ll be a Comcast guy [in Seattle], for example.”
That brings us to what I think is more likely to happen.
The Chaos Scenario
Here’s how I picture this. While the current state of media being where it is I would be absolutely shocked if Microsoft took a very hands on approach to the Live TV option for the Xbox 360. When first announced I suspect many thought that this was going to be Microsoft’s alternative to having a cable subscription. Now that the dust has settled I think that’s way too big of a leap to be making. Sure we’d all like that but I don’t think it’s where they’re headed. Now that we’ve confirmed you’ll need a cable or satellite subscription to enjoy this option I think it’ll work nearly exactly like Microsoft’s Mediaroom /IP.tv product from a few years ago. In fact Microsoft would have only succeeded in two things: integrating Mediaroom into the Xbox Dashboard, and finally getting more partners then AT&T.
Your Xbox will act more as a supplement to cable subscriptions, that is you’ll be able to use your Xbox and Kinect to replace your provider’s hardware. In short that means no new pricing model or anything of the sort. You pay your cable company your standard rate and your Xbox plays live TV. It’s that simple. This also means that in retrospect to the way we think people use the Xbox 360 and say Netflix, this changes absolutely nothing. Those people who refuse to pay 60+ a month to watch “Barney and Friends” won’t have a reason to be excited about this, and even if you did it could work much like ESPN does now. Some folks have it and some folks don’t.
The key here is pricing not the availability of channels. I’d be shocked if Microsoft is able to negotiate anything on the pricing front for Xbox Live users, companies like Comcast have nothing to gain. If you’re Time Warner, you’re already making a brisk $5 a set-top box, charging folks through the nose for channel packages, and getting away with it, why bother giving people choice? Why bother giving them a credible alternative to look at your content? I’ve heard all sorts of outlandish rumors this week about everything from Microsoft letting you pay per channel or hour, to Microsoft getting into the content business. These ideas are farfetched and not based in any competitive reality. I’ll tell you what, if Microsoft manages to pull off a live television coup anything like what these guys are talking, you can skin me alive and call me luggage.