With New Xbox, Microsoft Makes A Bigger Play For Living Room

May 20, 2013
Originally published on May 20, 2013 9:00 pm

Microsoft hasn't exactly had a great couple of years.

Its new Windows 8 operating system was held responsible for the drop in PC sales last quarter. Sales of its Windows Phones lag far behind both the iPhone and Google's Android phones.

The light in the darkness for Microsoft has been the Xbox 360, which has been the top-selling game console for over two years — beating out both the Nintendo Wii and Sony's PlayStation. On Tuesday, Microsoft is expected to announce a new version of the Xbox.

The new Xbox will certainly have plenty to entice hard-core gamers. Analysts say it will be faster, have amazingly realistic graphics and as much as two terabytes of storage. Fans of Call of Duty have already been getting tantalizing peeks at the new version and undoubtedly they will learn more about the updated game at Tuesday's event.

But, the new Xbox is going to be about more than hard-core games. Microsoft wants to be the center of your living room.

It's a strategy that's been working well for the company. According Microsoft, last year people spent more time on Xbox Live (the company's online service) watching TV and movies than they did playing games. Analysts say the new Xbox is going to move the console further down that road.

Michael Pachter, an analyst at Wedbush Securities who follows the game industry, believes that a deal is in the works that will turn the Xbox into a cable connection. That means you could switch from playing Call of Duty to watching Game of Thrones without changing boxes. However, Pachter says he isn't certain if Microsoft will announce that at Tuesday's press conference.

Pachter says most likely Tuesday will be a preview. Microsoft purchased Skype, so we are likely to learn about how you'll be able to see and chat with your friends while you're watching Game of Thrones or playing Call of Duty. The Kinect, Microsoft's gesture computing device, may be integrated into the Xbox rather than being a separate device.

Microsoft is the last entrant into the next-generation console wars.

Nintendo launched the Wii U last year. So far, the company that brought us Super Mario Brothers and Donkey Kong has seen disappointing sales. Nintendo does not appear to be making a big play for the living room. Sony has already previewed the PS4 but hasn't said much about whether it will go full force into turning the PlayStation into an entertainment center. Pachter believes Sony will follow Microsoft's lead and gear its new console toward more than games.

As technology marches forward, the big growth in gaming is going to be on mobile devices — the smartphone, the tablet — not on consoles. If Microsoft and Sony want to grow, they will have to turn the console into a device that has entertainment features that appeal to non-gamers. It needs to be a device that even grandma might want to buy.

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Now to news from another tech giant, Microsoft. The company hasn't had a great couple of years. Its new Windows 8 operating system was held responsible for a recent drop in PC sales and sales of its Windows phones lag far behind both the iPhone and Google's Android phones. The bright spot for Microsoft has been the Xbox 360. It's the top-selling game console and tomorrow, Microsoft is expected to announce a new version of the Xbox that's aiming to play a bigger role in consumer's lives.

Joining me now to talk about it is NPR's Laura Sydell. And Laura, what do we know about the next generation of the Xbox?

LAURA SYDELL, BYLINE: Well, it will be faster. It'll have more storage, better graphics, all that stuff that gamers really love. But I think with this version, in particular, it's going to be about a lot more than games. So it's going to be about entertainment. Check this out. So entertainment usage on the Xbox surpassed multiplayer game use last year. So that means that people are spending more time using their Xbox to watch movies and TV on Netflix, that they're actually using it less for games.

So I think that Microsoft is likely to find ways to make it even easier to access other forms of entertainment. And I don't know if they will announce all of it tomorrow, but before the Xbox actually hits the stores, I've been told by reliable analysts that the company is working on deals with cable companies that will turn the Xbox into a cable box. Microsoft is basically making a play to reign supreme in your living room.

BLOCK: Well, the big competition for the Xbox is Nintendo and Sony. So are they trying to do what this new Xbox would do as well?

SYDELL: So Nintendo already has the Wii U on the market and the sales on that device have been kind of disappointing and they really haven't made a big play for the living room. Sony announced the PS4. Not on the market yet. So far, they haven't talked about how it's going to be part of a wider strategy, but before it's released, it's possible they will.

Microsoft has some potential advantages. First off, they purchased Skype. So imagine now you'll be able to watch a friend as you're playing a game with them or chat with them as you're watching a television show. Microsoft also has the Kinect and the Kinect was an add-on to the Xbox that let you, say, walk in and just use a gesture and begin with the game and I imagine it's going to be fully integrated into the new Xbox.

So, like, you walk in and wave your hand and bring up the entire season of "Game of Thrones."

BLOCK: So why is this the strategy, Laura, that Microsoft is taking, rather than just sticking to games?

SYDELL: The reality for the game world is that consoles are becoming less and less important. The new frontier is really on mobile devices, so your phone, your tablet computer, are game centers. I mean, there's always going to be the hardcore gamers, but really, more and more people who play games are shifting to mobile devices. Most analysts will tell you that that's where the growing audience is, not really on the game console.

BLOCK: So the console has to fill other roles then to stay viable.

SYDELL: Exactly.

BLOCK: Okay. NPR's Laura Sydell. Laura, thanks.

SYDELL: You're welcome. Transcript provided by NPR, Copyright NPR.