Microsoft Corporation Just Switched Off Xbox TV

Satya Nadella’s new direction for Microsoft Corporation means cutting back on original programming for Xbox TV.

Jul 20, 2014 at 7:30AM

Xbox Originals Logo

Mr. Softy is, for now, giving up its Xbox TV ambitions. Credit: Microsoft.

Xbox TV doesn't matter as much to Microsoft Corporation (NASDAQ:MSFT) as it did just a few months ago. Xbox chief Phil Spencer said as much in an email to employees earlier this week. Here's the most relevant excerpt for investors, brought to you by way of the gaming site Kotaku:

I am pleased that ... members of the [Xbox Entertainment Studios] team remain committed to new, original programming already in production like the upcoming documentary series Signal to Noise, whose first installment takes on the rise and fall of gaming icon Atari, and of course, the upcoming game franchise series Halo: Nightfall, and the Halo television series which will continue as planned with 343 Industries.

Rewind to move forward
So if you bought an Xbox One on the promise that you'd have access to exclusive programming, you'll soon be out of luck. Xbox Studios isn't going to produce anything past its original commitments.

Yet that may be more than enough. April's announced programming slate included not only the Halo series but also the fantasy series Deadlands, a survival thriller titled Winterworld, and an adaptation of Warren Ellis' detective novel Gun Machine. Any or all of them could still come to Xbox TV, presuming they meet the "already in production" caveat Spencer included in his email.

And those that don't? Expect Mr. Softy to take a hard line. CEO Satya Nadella's 3,100-word missive outlining Microsoft's new direction doesn't leave much room for the sorts of experimentation XES President Nancy Tellem had in mind. "We don't necessarily know what approach will work, and we don't necessarily know what approach won't work," Tellem said at the unveiling for Xbox Originals.

Playing the content game poorly
Much as I've come to like Microsoft's newfound diversity of ideas and experiments, I can also appreciate Nadella's desire to focus on Mr. Softy's unique qualities. And Xbox TV is anything but unique; and Netflix already have plenty to offer consumers looking to stream original shows.

Meanwhile, content is getting expensive. Look at Outcast. Cinemax engaged in a bidding war with AMC Networks and others over the rights to adapt the new comic book from Robert Kirkman, co-creator of The Walking Dead. Microsoft needn't waste tens or hundreds of millions competing with networks whose very survival depends on making great TV and movies.

Why the new Xbox TV strategy is good for investors
Importantly, Nadella's strategy doesn't preclude future bets on programming. Shrinking his bets now gives him and the XES team time to evaluate, as Tellem put it, what works and what doesn't.

Let's also remember that Sony (NYSE:SNE), Mr. Softy's primary console competitor and a company with far more experience developing and distributing entertainment, is starting small by focusing on Powers. The forthcoming adaptation of the beloved comic book from writer Brian Michael Bendis and artist Michael Avon Oeming will effectively launch the company's PlayStation TV efforts. And if it doesn't work? Sony has plenty of other pre-produced content to fall back on. Microsoft doesn't have that luxury, which makes a smaller bet on programming the smarter play.

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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Netflix, Apple, and Google (A and C shares) at the time of publication. Check out Tim's Web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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