Can Microsoft Successfully Pioneer Interactive Television?

Heading into the most recent console cycle, Microsoft (NASDAQ: MSFT  ) placed significant emphasis on merging gaming and television to create a new entertainment experience. During the official reveal of the Xbox One at the E3 expo last May, company spokespersons repeatedly drove home the point that television programming was central to its latest console. The Xbox One was even originally slated to offer a la carte channels and content subscriptions, a move that would have been revolutionary and disruptive across multiple industries. Amid pressures from cable companies this wound up not going through, but it shows a compelling demonstration of the extent to which Microsoft intended to pursue new means of content integration.

If the success of Sony's (NYSE: SNE  ) "gaming first" PlayStation 4 messaging has Microsoft worried, it's not apparent from the company's upcoming TV-crossover plans. Last generation's Wii from Nintendo (NASDAQOTH: NTDOY  ) showed that the casual audience would embrace a gaming platform as a video streaming device, and Microsoft still has the opportunity to win that audience this time around. Here's what the company and its rivals have planned in terms of gaming and video integration.

Halo action figures, Halo lunchbox
One of the biggest stories to come out of Microsoft's Xbox One unveiling was that there was a "Halo" TV series in the works, overseen by the legendary Steven Spielberg. Rumblings of a movie based on Microsoft's premier gaming property had circulated for years, with names like Peter Jackson and Neil Blomkamp attached to the fledgling film. Microsoft has recently shot down rumors that Ridley Scott would helm a big-screen adaptation of the property, but production on the live-action TV series is ongoing.

As Microsoft's most valuable gaming IP, expanding the "Halo" universe into other mediums has both tremendous potential and an innate degree of risk. The series could be the perfect means of pitching interactive television to gaming enthusiasts, but the product must be correct so as to ensure that the strength of the brand is not damaged. Game-to-film adaptations have a turgid history when it comes to quality and a mediocre production could damage the brand at a pivotal moment in its lifecycle.

One of 2014's big games
"Halo" isn't the only big 2014 Xbox exclusive with a planned interactive TV tie-in. Quantum Break from Remedy Studios is a time bending third-person shooter that has been developed alongside a coinciding live-action TV show. The game disc will ship with episodes included, with further serialized content likely available through Microsoft's Live platform. The game's developers have stated that player actions will affect how events transpire in the TV show. Remedy and Microsoft could have a major hit on their hands if Quantum Break comes together in the right way.

In many respects, this most recent batch of consoles has done a poor job of introducing experiences not available on the last batch of hardware. Microsoft's ability to realize its vision for interactive television will play a major role in Xbox One's ability to compete with PlayStation 4.

Will Nintendo attempt to redefine movies?
Nintendo has recently announced that it will take a much more open approach to the licensing of its characters and properties. The company has stated that it will increasingly pursue partnerships to broaden the audience and appeal of its franchises. In light of severely disappointing Wii U performance and the ever-present threat of mobile's rising popularity, Nintendo must ensure that its fantastic characters do not lose their appeal.

Nintendo's legendary game designer Shigeru Miyamoto stated as recently as October that he and others were experimenting with the idea of an interactive "Zelda" movie. Perhaps now that Nintendo is pursuing licensing deals it can find the right partner to bring "Zelda" and other properties to the big screen in novel and engaging ways. The idea of a Nintendo and Disney collaboration seems rife with possibilities, but it's worth remembering that the Kyoto-based company has a notoriously rough track record when it comes to realizing successful partnerships.

Silent Sony
Interestingly enough, the console manufacturer that has been quietest on the interactive-movie front is Sony. While PlayStation 3 games like Heavy Rain and Beyond: Two Souls essentially function akin to playable movies, Sony does not appear to be as eager as Microsoft (or even Nintendo) about interactive video and some manner of crossover between two of its divisions.

The company's film branch has endemic issues that make pursuing a potentially gimmicky integration doubly risky. If the company does make a bid for the interactive video space, expect it to arrive through VR headsets. Sony has a display pedigree and Sony Online Entertainment President John Smedley unofficially confirmed that a head-mounted-display push is coming.

After these interactive messages...
Microsoft has publicly stated that we shouldn't expect its original content offerings to follow the same model as those of Netflix or Amazon, as much of its programming will incorporate interactive advertisements. Providing the content that steers consumers toward your ecosystem is key to success. If Microsoft can create the right content and deliver a true next-gen experience without letting ads get in the way, the company dramatically improves its chances of bolstering its service-based model and shaping the entertainment space. 

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  • Report this Comment On February 16, 2014, at 2:37 PM, KenLuskin wrote:

    >>>"Providing the content that steers consumers toward your ecosystem is key to success. If Microsoft can create the right content and deliver a true next-gen experience without letting ads get in the way, the company dramatically improves its chances of bolstering its service-based model and shaping the entertainment space."<<<

    The Google and Facebook ad supported "FREE" model is wildly successful!

    The "low cost" Netflix subscriber model is wildly successful.

    Both models are substantially different from of the TV broadcast model.

    MSFT's Xbox Live is a blend of both a subscription model and an add supported one.

    I think MSFT should allow users to choose BETWEEN ad supported, and paying for an AD Less model.

    Giving consumers choice is the best way to go, in my opinion.

    I think it is a mistake for MSFT to force ADS on people who are paid subscribers!

  • Report this Comment On February 16, 2014, at 5:32 PM, keithnoonan wrote:

    You raise a good point, Ken. Microsoft has already found considerable success with advertisements on the Xbox Live dashboard, but it has to be careful how it handles ads for its upcoming television-crossover ventures. A game like Quantum Break takes a different approach, but other original TV content runs the risk of being diluted by bad advertisements.

    I don't think Google and Facebook are really comparable in this situation. There's also a lot of question as to how effective Facebook's advertising is. There could very well be a bubble there.

    In many ways, Live is more complex than Netflix. It's also cheaper for consumers on an annual basis. How the two services stack up in terms of value is debatable. For the average person it's probably Netflix, but amongst dedicated gamers you might find a different answer. Of course, you'll need to buy Live on your Xbox in order to access Netflix, which is another issue entirely.

    From a consumer standpoint, Microsoft's current approach has a lot in common with the traditional cable model. Like you said, consumers encounter both subscription fees and advertisements.

    If I had to pick an online content distribution model to compare Xbox Live to, it'd probably be Amazon Prime Instant. Obviously this is not a one-to-one comparison, but Amazon's subscription based service brilliantly applies ads throughout the user experience with the intention of keeping users active within its stores.

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