Bloomberg News

Microsoft to Offer TV on Xbox Through Verizon, Comcast Pact

October 05, 2011

(Updates with Hulu in seventh paragraph.)

Oct. 5 (Bloomberg) -- Microsoft Corp. will offer television service to Xbox Live users through a partnership with Verizon Communications Inc. and Comcast Corp., a bid to use TV programming to attract more customers to its game console.

The Xbox service will offer content from almost 40 television and entertainment companies, Redmond, Washington- based Microsoft said today in a statement. In addition to Verizon and Comcast, the partners include AT&T Inc., Time Warner Inc.’s HBO, Sony Corp.’s Crackle and the BBC.

Chief Executive Officer Steve Ballmer wants to lure more families and casual gamers to the Xbox by making it an entertainment center, challenging TV services from Apple Inc. and Google Inc. Today’s announcement furthers a move started in 2008, when Microsoft added Netflix Inc.’s video streaming and the music service Last.fm.

“The vision of the Xbox back in 2001 was that it would be an entertainment hub,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles. “Until they launched Netflix on Xbox Live, it really wasn’t that. Today we go from Netflix and Last.fm to 40 vendors.”

Microsoft rose 55 cents, or 2.2 percent, to $25.89 today on the Nasdaq Stock Market. The shares have declined 7.2 percent this year.

Network Stations

The Xbox, first released a decade ago, accounted for 48 percent of all current-generation consoles in the U.S. between 2005 and June of this year, according to Microsoft data. Xbox Live, an Internet service with free and paid versions, already has more than 35 million members.

Microsoft didn’t announce any deals with U.S. network TV stations, though Comcast and other partners are “quite likely” to add that kind of content in the future, said Ross Honey, general manager of content acquisition for Microsoft’s Interactive Entertainment business. Some network TV content can already be viewed on Xbox using the Hulu LLC service.

Other partners announced today include Lovefilm in the U.K., a subsidiary of Amazon.com Inc.; Spain’s Telefonica SA; and Mexico’s Grupo Televisa SA.

Microsoft also plans an application for its Windows Phone mobile software that will turn phones into an enhanced remote control for the Xbox service. Users will be able to search for programs and then set them to play on the Xbox, as well as view additional information about the program, Honey said.

Apple, Google

The company intends to offer apps that work with the Xbox TV service for Apple’s iOS software as well, Pachter said, citing a Microsoft analyst briefing yesterday. Honey declined to comment on those plans, except to say that Microsoft has been expanding some products to both iOS and Google’s Android.

Some programming will require customers to be subscribers to Microsoft’s Xbox Live pay service. Other content, such as the BBC and other public television, will work with the free version of Xbox Live, Honey said.

Customers won’t have to know which channel or provider offers the show or movie they want. Instead they can say or type the name of the program and Xbox’s Bing search service will return all options for viewing it, including ones the customer doesn’t currently subscribe to, Honey said.

TV service efforts by companies such as Apple and Google have gotten little traction with customers. Apple Chief Executive Officer Tim Cook has said that his company’s Apple TV product remains “a hobby business.” In April, Logitech International SA cut the price of its Google TV device, citing slow initial sales.

Microsoft has some advantages over those companies, Pachter said. It already has a big presence in customers’ living rooms: A total of 55 million Xbox 360 machines have been sold worldwide. The company also can draw on its search engine, its Kinect motion-and-voice sensor technology and the new content agreements.

“Each of those guys has a strength, but nobody has hardware already in the living room, with voice command that works,’” he said. “Microsoft has a big advantage.”

--Editors: Nick Turner, Lisa Rapaport

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editors responsible for this story: Thomas Giles at tgiles5@bloomberg.net


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