Microsoft is focused on shows and channels over games for its new generation console.
Xbox One’s voice and gesture-activated TV wizardry is unlikely to leave BSkyB worried about its future. But with big name games and on-demand content Microsoft is aiming to maintain Xbox’s appeal in the face of consumers spending increasing amounts of time on their tablets and smartphones.
Microsoft has not given its Xbox console a major revamp since 2005; in the interim there has been a digital revolution which is having an increasingly big influence on traditional living room entertainment.
The surge of smartphone and tablet usage has given rise to the “second screen” phenomenon – effectively users looking at other content or interacting with social media such as Twitter and Facebook while watching TV – and the promise of internet-enabled smart televisions meant Xbox One had to be more than just a games console to compete.
Xbox One will allow users to flick instantly between game play and watching TV, or activities such as browsing the internet or Skyping, as well as adding interactivity to programmes, such as fantasy football elements to live NFL matches.
“The key innovation is the overlay with live TV,” says Piers Harding-Rolls, games analyst at research firm IHS. “It is all about maintaining Xbox’s relevance and keeping it at the centre of entertainment by offering lots of games, content and channels. In some ways it is a defensive perimeter because Microsoft, and Sony, need to stop encroachment in the TV entertainment space.”
He points to “ecosystem companies” such as Google, Apple and Amazon which offer products and content across a prolific range of devices, all of which could eventually damage Xbox’s core gaming business by taking a growing slice of people’s spend home entertainment time.
According to data from the BBC in March 8 million requests for TV shows on the iPlayer video catchup service came from people using games consoles, with pretty much zero growth in usage in the past year.
This compares with 81 million programme requests via mobiles and tablets in March, with portable devices growing rapidly from 15% to 30% of all iPlayer usage in the last year.
IHS estimates there were 47m smartphones and 11m tablets in the UK at the end of last year, compared with 8.2m Xbox 360s.
“Smartphones and tablets are increasingly used for viewing – they are good for catchup content and video delivery. All this eats into [Xbox] play time and usage time on TV,” said Harding-Rolls.
While Xbox is aiming to be the gateway point for access to TV, analysts do not consider it to be a threat to broadcasters such as BSkyB.
Microsoft may have announced a big budget programming initiative with Steven Spielberg’s TV series based on the Halo game, but it is considered to be more of a PR stunt to appeal to gamers than the first salvo in the battle to become a major TV content producer and rights owner.
“What Microsoft is doing there around creating exclusive interactive content is very interesting and certainly a draw for consumers,” says IHS TV analyst Richard Broughton. “Unless Microsoft decides to take a big step and buys exclusive rights, which at this stage would be a risky bet and very territory-specific, it will be playing an aggregation role.”
In the UK the Xbox Live service has content from more than 20 content providers including Sky, the BBC’s iPlayer, LoveFilm, music video service Vevo and Channel 4’s 4oD.
By beefing up the XBox Microsoft is also aiming to head off the growing threat of smart TV manufacturers like Samsung aiming to be the gateway for internet and linear content, as well as the threat of cheap rivals such as Android-based TV-meets-gaming console Ouya.
Analysts concur that for all Microsoft’s talk of a making the Xbox One an “all-in-one” entertainment device it still boils down to one thing: games.
With a rumoured price of $400 (£265) in the US, and online games and technology store Zavvi in the UK offering a pre-order price of £400, the Xbox One is considered too pricey to appeal to a mass audience beyond its gaming heartland.
“At the price they are asking the TV elements are not enough to convince a mass audience to buy into it,” said Harding-Rolls. “It all comes down to high-end games – smartphones and tablets can’t replicate them, they are its strongest selling point.”
Microsoft is expected to make major announcements about its games lineup at the E3 trade show in the coming weeks.
“Xbox has gone for a sophisticated approach – it won’t be bringing out another Xbox for maybe 10 years and it has to be prepared,” says Heloise Thomson, a digital analyst at Enders. “It is about how they can make money subsequently, from selling content through the Xbox Live service and building usage. It will come down to games.”