Sony’s new video is great, but the silly rabbits over there still think the Natal is for games. While the game world continues to try to figure out how to turn us all into Marcel Marceau in front of our 360s, linear content creators are recognizing the real value. Natal is not an attack on the other game consoles. It is an attack on the remote control. The natural input to drive your television experience is just one more reason my wife will be willing to use the Xbox, and maybe even more than me. I know I said it a lot before, but the 360 is cable and every move Microsoft makes moves them one step closer.
This is why the smarter agents in Hollywood are pitching content to Microsoft. This may be a surprise to those who view the Xbox 360 as just a game console or the three people who heard of the Zune. It could also be viewed as a step back to those who pitched content to MSN and other Microsoft incarnations in dot com days, but they better take another look if they want their clients to be in on the first wave. Through Xbox Live, Microsoft now has access to 20 million television screens through a closed, proprietary network – and the network is expected to grow to over 100 million worldwide before Microsoft replaces the Xbox 360 with the next console. As Netflix explained in their most recent announcement of record earnings, subscribers are watching a lot of movies and television shows on these boxes. Microsoft wants them to watch even more. For the past year senior executives discuss a growing interest in linear content and set top box-like services and recently the New York Times reported on rumors of discussions with Disney for ESPN content.
To put it in perspective, if Microsoft was a cable company this subscriber base would put them just behind Comcast’s 24 million subscribers and well ahead of Time Warner’s 13 million, placing them in the number two position in the United States. However, from a content creator’s perspective, the closed, IP addressable, broadband, bi-directional, commerce enabled, proprietary media network with high-powered computers and mass storage makes them much better. This network makes Microsoft the only distribution partner who can put content on the screen it was meant for, while providing all the viral, commerce and direct measurement advantages of the Web. Because the programming is all on demand, unlike network or cable with a limited amount of slots, content can remain available until it finds an audience, even if the audience is very small. It also means Microsoft needs the creators. Microsoft is not preaching user generated content they need content from people who know how to make it.
This may sound familiar to folks who did AOL deals in the mid to late nineties, and that would be a good thing. Content creators allowed into AOL’s walled garden moved much higher up on the revenue ladder and made significant amounts of money as direct gross participants. Microsoft has not publicly disclosed the nature of the content deals moving forward. In the past they have done everything from paying for content creation, to time buys to straight distribution. Currently, the Xbox Live service offers free original video, sponsored content, music videos for sale, films for purchase and rental, the Netflix service, and access to Facebook and Last.fm. Like Google, the company also has the ability to sell sponsorship into everything from the search term identifying your content to the web page displaying and into the video streaming it. Unlike Google, it can also sell space into a console game and display it in the living room. Good luck to Google playing catch up with its rumored set top box.
For linear folks this is great news. They no longer have to choose between the networks or posting on youtube next to a dancing cat with the hope it will catch on. There is a real, grown up business out there ready to deliver content in a user-friendly format, into a user-friendly environment.
For game folks, it starts to get a bit troubling. Not only are we competing with other games for consumer time and attention, but we are competing against cheaper to make, faster to market content with a deep, deep, deep, library of content on the very box – make that the only box into which we sell.