Microsoft thinking inside the Xbox


Microsoft Corp. will unlock the digital-distribution capabilities of its next-generation console, Xbox 360, to Hollywood studios beginning Nov. 22.

Xbox 360 gamers in the U.S., totaling at least 3 million, will be able to purchase TV shows and download them to their gaming hard drive as well as rent and watch movies on their consoles.

The first wave of content will include dozens of high-definition and standard-definition offerings from such partners as Warner Bros. ("Batman Forever," "V for Vendetta," "The Nine"), Paramount Pictures ("Nacho Libre," "Jackass: The Movie"), MTV Networks ("South Park," "SpongeBob SquarePants"), CBS ("CSI: Crime Scene Investigation," "Survivor") and Turner Broadcasting ("Aqua Teen Hunger Force," "Robot Chicken").

Xbox 360 represents the first video game console to secure programming from major content providers as well the opening of a new front in digital-media distribution alongside the likes of Apple's iTunes and Verizon's VCast.

Microsoft director of platform strategy Scott Henson said there will be thousands of hours of television and movie content available on the console's virtual storefront, Xbox Live Marketplace, by year's end.

"The reason the Hollywood studios are excited to partner with us is because we have this 18- to 34-year-old demographic that's extremely valuable and attractive to the networks and content providers," Henson said. "This is a great opportunity to reach them in a different way. I think you're going to see because of that a lot of other studios jumping on board over time with additional TV shows and movies."

Microsoft isn't divulging pricing yet on TV shows or movies, but Henson said it will be competitive with other digital offerings, with HD content slightly more expensive than standard definition.

TV episodes will be updated on a regular basis and available for purchase as early as the day after they air.

"TV shows will follow a purchase-to-own model," Henson said. "Consumers can download a show as many times as he or she wants and from anywhere in the U.S., including on other Xbox 360 consoles."

Movies will follow the rental-download model. Once a movie is purchased and downloaded to the Xbox 360's 20GB hard drive, it remains there until played. Once played, the consumer has 24 hours to watch it.

In addition to TV shows and movies, there will be sports content, including NASCAR races from TBS and more than 80 Ultimate Fighting Championship matchups.

The new Marketplace programming will only play on Xbox 360 and not be transferable to a PC or other device -- at least for now.

"Certainly as we think about this stuff longer term, that's certainly an interesting scenario," Henson said.

Microsoft has 4 million Xbox Live members worldwide that have downloaded more than 70 million pieces of gaming and such shortform entertainment content as music videos and movie trailers during the 11 months Marketplace has been available.

The addition of full movies and TV episodes will enable Hollywood studios to target gamers first with theatrical releases and then with direct-to-game console rentals.

Microsoft has sold 6 million Xbox 360 units globally to date and expects to reach a worldwide installed base of 10 million units by year's end.

Although the target Xbox 360 gamer skews older than the 18-34 demo, Henson sees TV and film content as another way to attract younger household members to the console as well as a female audience. He said such shows as "SpongeBob" and "Survivor" appeal to these audiences and that this service could help attract other members of a household with Xbox.

Henson said the U.S. market will be the first to receive film and TV content but that additional international markets will come online in the future.

"No matter what you do in entertainment -- movies, music or games -- you have to make sure the content is relevant to the region," Henson said. "We're going to start with the U.S., learn from the U.S. and then grow and continue to extend that. (We'll be) in 25 countries with Xbox Live by the end of this year, so there's a great opportunity to extend this service."

Sony Corp., which ships its PlayStation 3 on Nov. 17 with its own digital-distribution network, PlayStation Network, also will look to movies, TV content and music down the line but has not yet announced specific deals. Games will be the first focal point, as they have been for Microsoft during the past year with its Xbox Arcade service.

"Sony has natural in-house advantages with Sony Pictures film and television units and music divisions, which they haven't taken advantage of with PlayStation 2," said PJ McNealy, video game analyst for American Technology Research.

"Microsoft has their work cut out for them," McNealy added. "They've taken the highlights from what has worked with the iTunes model and are incorporating them into Xbox Live Marketplace. Imitation is the greatest form of flattery."

Xbox 360 and PlayStation 3 are viewed as Trojan horses that will enter homes around the world as gaming machines but will unlock additional capabilities through digital distribution and next-generation technology. PS3 ships with Blu-ray Disc technology, and consumers can buy a $200 add-on HD-DVD drive to play next-generation DVDs on Xbox 360.