Tomorrow marks the launch of the latest update of the Xbox user interface, the first such makeover since the NXE was launched. Having been a member of the Preview Program, I can assure you it's worth updating to, especially if you own Kinect.
One of the features most touted during its announcement was the addition of live TV to the Xbox. With partners like ESPN, HBO, Verizon, and many more, Microsoft proclaimed themselves the herald of a new generation of TV. That may be what they said, but the reality is that they're simply propagating the current stranglehold of restrictions on video content that already exist.
You've seen it already. The ESPN app on the Xbox only works if you already have a cable/satellite subscription, and it's on a provider that supports watchespn.com. The new apps are no different. HBO Go? Gotta have a subscription. Verizon FIOS? Subscription. Maybe I'm missing something, but can someone please explain to me why the ability to watch the same channels you already pay for, on the same TV you already own, but via the Xbox instead of a cable/satellite box is a big deal? And before anyone says "You won't need to own a cable/satellite box now!" remember that A) You can't get all of your provider's channels, and B) There's no way in the world that you won't be charged a fee of some sort for this "privilege". There's no way the company will give up the box rental revenue.
Microsoft seriously missed the boat here. They could have changed video content distribution forever by making this offering "rogue". What do I mean? Give me the ability to say: "Hey ESPN, I'll buy your channel for $4.95/month. HBO, I'll pay for your channel too. Verizon FIOS offering? Sure, I'll take that as well. By the way, I'm a Time Warner Cable Internet subscriber, and you're going to stream your stuff to me on their network without me subscribing to their video offering."
Now THAT would have been revolutionary. To break free of the traditional mold and let the content live wherever someone wants it. I'm not trying to be a pirate about it, you still have to pay for the content. The idea that I can just pay the content provider directly rather than the middle man is the key. And Microsoft could have done this! Let's look at this objectively. The only value add for existing subscribers is that now they could pair Kinect with the video offering. While that's nice and all, it's nothing most people would pay extra for, as is rumored with the Verizon FIOS offering. Since the service Microsoft is offering isn't doing anything different, they could have approached content providers from the standpoint that Apple approached the music industry. This pitch could have went something like this:
"The times, they are a changin boys. You can either be in on the revolution or swept under by it. We're planning to begin a new service that will deliver subscription video content via the Xbox Live service and we want you in on it. This will give you access to an installed base of 55 million consoles worldwide, and 35 million current (as of June 3rd, 2011 according to Xbox Live's Larry Hyrb) Xbox Live subscribers. You win because subscription fees go directly to you, we do not control any price, and you get to eliminate the middle man and make more profit. Our subscribers win because they get access to the content they want, don't have to subsidize content they don't want, and aren't tied to a specific provider in order to get it. We win because we feel this will drive more desire to own an Xbox with a Live subscription. Whadda ya say guys?"
And I think at first, there would be resistance for sure among the big content providers. But what you would see immediately is the little guys JUMPING at this opportunity. Content providers such as G4 that recently got dealt a huge blow last year by not being renewed by DirecTV (the largest US Satellite provider) could give them the middle finger and get to far more households (35 million versus 18 million as of the research done for this article) than DirecTV could hope to give them. Content providers wanting to get in the game that could never hope to even get past negotiations with content delivery networks could ply their wares to millions without ever having to negotiate a contract. Then at some point, one of the big boys finally sees the market they're missing out on, and the rest fall like dominoes.
This will happen eventually. It's just a matter of time. It's unfortunate that Microsoft with both the power and opportunity to effect change wasted both. The new Xbox Live experience will certainly carry a lot of positives, but it sadly fell short of the revolutionary offering that it could have been.
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