Microsoft (NASDAQ:MSFT) made many Xbox One-related announcements at the recent E3, the Electronics Entertainment Expo, including a plethora of upcoming games, a new controller, and support for older Xbox 360 titles. Yet, from a broader living room perspective, the biggest change Microsoft made to the Xbox One came in May.

With the addition of a new feature, Microsoft's console is slowly realizing its potential as a true entertainment hub for the living room -- a space that Apple (NASDAQ:AAPL) appears destined to contend for.

Photo: Microsoft

Over-the-air channels come to the Xbox One
Last month, Microsoft partnered with Hauppauge to release a special digital TV tuner for the Xbox One. The tuner, which retails for $59.99, allows Xbox One owners to receive broadcast channels (Fox, NBC, ABC, CBS) through their game console. Although virtually all televisions come with built-in digital tuners, the adapter simplifies the experience significantly, allowing Xbox One owners to easily switch between broadcast channels and Internet-based video services -- including Netflix, SlingTV, and Amazon Prime -- on the fly. They can also pause live TV, and If they have Kinect, change channels with voice commands.

With this update, the Xbox One has become the single best device for cord-cutters, those who don't have traditional cable services. The only other device on the market capable of anything similar is the TiVo Roamio OTA DVR. The Roamio OTA DVR does offer the ability to record broadcast shows -- a feature the Xbox One doesn't offer -- but isn't compatible with as many Internet video services and requires a recurring $15-per-month subscription fee.

Broadcast networks may have held up Apple's big announcement
To some extent, Apple already competes in this segment, with its aging $69 Apple TV. The device remains among the most popular in its class, but has been overtaken by newcomers, including Google's Chromecast. According to a report from Parks Associates, Apple TV's market share fell to third place last year in the U.S., behind both the Roku and the Chromecast.

Ahead of Apple's Worldwide Developers Conference, multiple reputable media outlets, including The New York Times, reported that Apple planned to update its Apple TV. Rumor had it the new model would offer a redesigned remote control and a digital TV service that would compete with traditional cable packages. However, that announcement never came. According to Re/code, that  was due -- at least partially -- to the broadcast networks.

Apple wants to include local broadcast channels in its coming Internet video service, but was reportedly unable to secure the deals necessary to facilitate it. Broadcast channels remain among the most popular, and while current Apple TV users can still access them with an antenna, it requires multiple remotes and switching between TV inputs -- an inelegant solution, certainly not up to Apple's traditional standards.

The Xbox vs. Apple TV
The Xbox One's digital tuner accomplishes that feat, bringing broadcast networks together with other video inputs in the same box. An Internet-based solution could be superior -- not everyone lives in an area with strong broadcast signals -- but it may be more expensive. The head of SlingTV, Roger Lynch, said his service -- which could be similar to Apple's offering  -- would eventually add broadcast channels, but segment them in a separate add-on package, so that customers aren't forced to pay for them.

As of now, the Xbox One and Apple TV aren't true competitors. The former still remains primarily a game console, the latter is much cheaper. But as Apple pushes into the living room, the Xbox One could stand as its primary competition. With its digital antenna, the Xbox One has become a more compelling device.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.