Opinion: Microsoft Squandered Opportunity For Xbox Live TV

Since Microsoft first announced vague plans to add live TV options to its Xbox Live service at E3 this year, industry watchers have been heralding the move as a potential death-blow for standalone cable boxes, and even for separate pay TV service itself. Those cries have only increased with Microsoft's announcement today of dozens of major partnerships with various media companies to bring video content to Microsoft's online service. Microsoft itself is selling it as "the best way for you to interact with TV, video, movies, sports and music" and "a WHOLE LOT more enjoyable and engaging" than current TV options. As announced today, though, Microsoft's Xbox Live TV plans seem like a squandered opportunity to extend the company's strong position in online gaming into a foothold in the burgeoning IPTV market. Let's start with the most significant of the partnerships announced today -- those with major cable providers Verizon and Comcast. First off, it needs to be made clear that these partnerships are about providing additional hardware options to cable subscribers, not about providing additional content options to Xbox Live subscribers. Those trying to "cut the cord" and go without cable TV aren't going to suddenly get free access to anything from these cable providers through their Xbox Live subscriptions. Even for those who subscribe to Verizon or Comcast, though, the Xbox Live partnership seems of limited value. Verizon says that its customers will have access to "a selection of popular live TV channels" through Xbox Live, implying that they'll have to return to their cable box for the full lineup of channels they subscribe to. Comcast customers, meanwhile, will get access only to previously aired content and movies offered through its On Demand service, with no live content at all. True, Xbox Live provides functions like Kinect speech control and Bing searching that are not available on a standard cable box. But "content is king," as the saying goes, and cable customers seem unlikely to give up a good chunk of their live TV content just for a few new control and search options and the ability to get rid of a single box in their entertainment centers. Given the half-assed implementation of the cable TV connection, it's an open question why Microsoft decided to partner with these cable providers at all. Xbox Live currently has over 35 million subscribers, more than the roughly 26 million TV customers represented by Verizon and Comcast combined as of mid-2010 (but less than the 64.7 million households nationwide with a basic cable subscription). Theoretically, Microsoft could have leveraged this position into a significant subscriber base for its own video service, signing on with individual content providers to provide live and archived video content that doesn't need an outside cable subscription. The model here would be Amazon Prime's streaming video service, which offers subscribers a selection of over 11,000 movies and TV shows for $75/year. True, the selection is much smaller (though somewhat less expensive) than that of competitor Netflix, but that's because Amazon's service is primarily a sweetener offered on top of Prime's primary service -- free shipping for Amazon products. Similarly, an Xbox Live TV service could serve as a free (or cheap) sweetener for the already robust Xbox Live Gold service , whose primary purpose is still to play games online. Microsoft does indeed seem to be making small moves in this direction, announcing today partnerships with a number of individual cable networks -- HBO, SyFy and Bravo -- and even individual events and shows -- UFC fights, The Today Show and TMZ -- in the U.S. Of these, however, HBO has said its HBO Go service will still require an HBO subscription (on top of an existing cable subscription), and UFC has said its coveted live fights will be available on a pay-per-view basis. It's currently unclear precisely what content the other networks and shows will offer, and whether any of it will be made available live or for free to Xbox Live subscribers, but regardless, it seems an exceptionally small base for a viable, Xbox Live-based alternative to cable. Ditto to newly announced online video partners like YouTube, Crackle and DailyMotion, which are already available for free on PCs and an increasing number of connected TVs. Perhaps this is just the beginning, and Microsoft intends to expand the lineup of Xbox Live video content that doesn't require an outside subscription or pay-per-view pricing. Perhaps content providers are simply unwilling to play ball, and Microsoft has been forced to use these kinds of partnerships to get any video options on the Xbox 360 at all. Regardless, as it stands now, Microsoft seems to be positioning Xbox Live as primarily just another way to get video content you subscribe to elsewhere, rather than as a way to get new video content thrown in with your gaming membership.