'Halo' TV Series in Limbo Following Xbox Shake-up

XBox Entertainment

Showtime is still interested in the video game adaptation, but Xbox projects are now challenged by a reduced staff.

This story first appeared in the Aug. 1 issue of The Hollywood Reporter magazine.

Microsoft's July 17 decision to shutter Xbox Entertainment Studios is a warning for technology companies jumping into the original programming game.

The closure, part of a Microsoft-wide cost-cutting effort that could result in 18,000 layoffs, comes from new CEO Satya Nadella as he looks to transform the Redmond, Wash., company into a "more agile" operation. That means refocusing the Xbox One as a gaming console and not an all-encompassing entertainment hub as was once intended.

Insiders say Microsoft's disconnect from Hollywood was apparent from the beginning. The studio lacked focus, say several sources, and didn't have a clear programming strategy, leading to dealmaking delays.

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The challenges have only grown more apparent since the February departure of longtime CEO Steve Ballmer, who hired CBS veteran Nancy Tellem in 2012 to lead the 200-person studio's efforts to produce original interactive programming for a predominantly male demographic. Under Ballmer's leadership, Microsoft pursued premium advertising opportunities on the Xbox console and saw original content as a key piece of that strategy. But Pivotal Research analyst Brian Wieser says Microsoft appears to be minimizing its advertiser relationships by cutting originals.

"It's one of the areas where they had a really credible opportunity," says Wieser. "But they've decided against it. It raises questions about whether they want to be working with large brands."

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Microsoft followed digital leader Netflix into the original programming space along with Amazon, Hulu, AOL and Yahoo, among others. Xbox Studios was considered to have a distinct advantage because it boasted an established platform, which counts 48 million Xbox Live users. But despite its potential, the studio struggled to develop a programming slate in a timely fashion. After 22 months, it launched just two originals -- live broadcasts from the Bonnaroo music festival and a soccer reality series timed to the World Cup.

Now Tellem and a small team, including executive vp Jordan Levin, will remain for a time to shepherd the studio's final projects, such as Amblin Entertainment's long-gestating Halo series, which is expected to land at Showtime. Network president David Nevins told reporters July 18 that he remains interested in the project despite Xbox Studios' problems and what would be a hefty financial commitment.

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In another signal that Xbox is returning to its gaming roots, the remaining development execs have been instructed to focus on series based on existing franchises or dramas that have the potential to turn into franchises, according to one knowledgeable source. The studio is likely to scrap all other projects, including unscripted pilot Fearless, which a source says Xbox spent about $500,000 to produce. Some projects, such as Jash Presents Rubberhead, a variety show based on the YouTube channel from a group of comedians that includes Michael Cera and Sarah Silverman, are expected to land at new homes shortly.

"You might see a flurry of deals get closed," says one digital dealmaker, noting that there's no lack of buyers willing to "pounce" on available projects.