Microsoft Touts "Entertainment" for the Future of Xbox

By Wesley Fenlon

Games? Yeah, we've got those--but check out these NUads.

Microsoft's successor to the Xbox 360 will play video games, but "gaming" won't be the word that we hear again and again as the company's marketing department pulls out all the stops to launch a new console. That word will be "entertainment." Microsoft published a press release on Monday titled "Xbox execs talk moment and the future of TV," in which the company announced the opening of Xbox Entertainment Studios in LA. They won't be focused on games, but on creating "interactive content for Xbox and other devices that will change the way entertainment content is experienced and delivered."

Microsoft's Yusuf Mehdi, vice president of interactive business entertainment, summed it up when he said "Yes, we started with video games, but we have been on a journey to make Xbox the center of every household's entertainment." What does that mean for the future of Xbox? Microsoft isn't talking about Durango, the codename for its next-gen console, but everything the company is currently saying about the Xbox 360 will likely roll over to its successor.

Photo Credit: Flickr user photographphil via Creative Commons

The 360's entertainment app usage grew 57 percent in 2012, which means we should expect stronger partnerships with cable companies and other traditional content providers, more interactive apps like the 2012 Elections Hub, and hopefully more social experiences like the beloved 1 vs. 100.

And Kinect--which will likely be bundled with the next Xbox--will play a big role in user interactivity. In fact, Kinect will play a key role in how Microsoft builds advertising into its new console:

"Mehdi called the launch of NUads – a new ad format that harnesses Kinect and natural user interface – an important moment for TV advertising. NUads deliver what is most scarce to advertisers today: consumer engagement. NUads enable natural interactivity using the simplicity of a spoken word or the wave of a hand. The first wave of NUads, which launched last fall with interactive polling, saw a record level of consumer engagement with 37 percent of people responding. With this model, passive TV advertising is transformed into engaging and actionable experiences."

The more Microsoft focuses on the Xbox as an entertainment hub rather than a gaming machine, the less sense Xbox Live Gold's $60 subscription makes; many households already have Apple TVs, Rokus or other devices that can play Netflix and Hulu and other video services for free. At the All Things D conference on Monday, Mehdi said that Microsoft plans to do things that are "big and premium." Since Xbox Live Gold members are exposed to advertising just like Silver members--and NUads are likely to make advertising an even bigger focus in the future--Microsoft's new "premium" offerings will have to be pretty compelling to justify that annual fee.