I recently wrote about Apple's most likely strategy to bring a compelling Apple TV to market within the next year. But I wanted to zoom out a little bit and take a look at the other elephant in the (living) room. Microsoft. Since the original Xbox released in 2001, there was little doubt that the software giant's gaming console was meant to be a trojan horse to get into the living room. This became even more apparent after they launched it's predecessor, the Xbox 360 and began to slowly add media features along side their Xbox LIVE subscription service. First there was NETFLIX, then ESPN, then overtime they added HULU, HBO Go, EPIX, NBC News, SYFY, Xbox Music, Amazon Instant Video and dozens of other apps and channels. Not to mention if you have Verizon Fios you can use your Xbox 360 as a cable box and access some (not all) of your cable channels directly through the console using Microsoft's user-interface. When you add a Kinect, a device that tracks your motions and voice, you can use gestures and voice to navigate and search for specific content. Pretty cool tricks for a box that came out in 2007, which in tech years is ancient history.
Now that the drum beat has began for the release of the Next Xbox console, (rumors point to holiday 2013) what is Microsoft's next move? They've made great in-roads in making the Xbox 360 the hub for entertainment in tens of millions of homes in the U.S. and around the world, how do they take it a step further? The Verge has confirmed from multiple sources familiar with Microsoft's plans that they are working on an "Xbox TV" to be released along side the new console. Sound familiar? It will allegedly be a dedicated media streaming device that will deliver TV and other entertainment content as well as casual games (think cellphone/tablet/arcade style). This is Microsoft's play to capitalize on the Xbox brand and expand it even further into a more mainstream direction. For those that don't want to spend the $400 on a new gaming console this is a great alternative to keep them in the Xbox ecosystem.
This is a brilliant strategic move on Microsoft's part and aligns them to directly compete with Apple and their obvious push towards the living room. The biggest question is who will get the better content deals? Which one can make the proper deals with the cable providers? Microsoft seems to have the advantage at the moment but Apple appears to be working on something. Another interesting point is, Microsoft charges $60/year for access to their Xbox LIVE content now along side the ability to play games online. Will they still charge a subscription fee to access content on top of the cable bill for the 'Xbox TV' as they have on the Xbox console? I'm not sure if they'll be able to get away with charging a subscription on a media streamer when the competition doesn't unless they're providing a truly unique experience or service. And just like Apple, until the networks are able and willing to do direct deals with them for their content, they will be under the thumb of the cable providers.
As Microsoft sheds some of its more in-depth gaming functionality to be more nimble and price sensitive, Apple appears to be moving from the opposite side of the spectrum. If Apple opens up the Apple TV to developers and allows an App Store for the Apple TV, you can rest assure that gaming will be one of the largest categories on the hockey puck sized box. They'll most likely integrate iPhones and iPads and possibly offer a bluetooth gaming controller if they seriously want to go after the gaming community. Touch controls are fine for certain types of games but having physical buttons eliminates the need for the player to constantly look down at the touch screen. One thing is for sure, Nintendo has to be shaking in their boots, hoping neither of these companies encroach on their family friendly turf. If Apple sales a $99 Apple TV with $29 controller and App Store, I believe they'll eat into a sizable chuck of Nintendo's market share. With most gaming apps on iOS ranging from free - $4.99, Nintendo will find it nearly impossible to compete with casual gamers. While Nintendo has shown their desire to enter into the media streaming fight with the Wii U's, Nintendo TVii, so far their offering seems somewhat tame compared to what the competition could bring this time next year.
There have been rumors of Microsoft possibly working with cable companies to offer the next-generation Xbox subsidized, similar to a cellphone plan. If they're able to make this happen and offer a new, state of the art Xbox for $99 along with a two-year contract with cable it could be huge. It allows price sensitive consumers to get in on the next-generation of gaming earlier than they probably would, which in turn allows Microsoft to sell more games. Another alternative is that Microsoft could similarly do what they're doing now and offer discounted Xbox's with a 2 year monthly fee that includes an Xbox LIVE subscription. With the Consumer Electronic Show coming in January and the gaming convention, E3 in June, the details of Microsoft's plans should start emerging soon. Not to discount Sony and the upcoming Playstation 4, but they don't seem to be as aggressive with locking down media deals as much as Microsoft has this gen. Sony Computer Entertainment has unfortunately been saddled with propping up Sony Corp. and their hardware ventures (Blu-Ray, 3DTV, and 4K) rather than creating experiences customer truly want. I don't see Sony making a major play to redefine television, which could make them more of a niche player this generation, at least in the U.S.
Both Microsoft and Apple have deep pockets to woo the cable companies to their respective sides, and I'd bet both are fighting to get exclusive rights to be next-generation's de-facto cable box. As a consumer I'd like both to have a shot at replacing the dreaded cable box and delivering content across the internet to my devices in a beautiful, intuitive user-interface. As Apple's CEO, Tim Cook recently told NBC's Brian Williams, “When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years,”. Me too Tim, me too.