Published November 08, 2006
REDMOND, Wash. – Microsoft Corp. (MSFT) has teamed up with a handful of Hollywood studios to sell TV shows and rent movies that can be downloaded through the software maker's Xbox Live online video-game service and beamed straight onto television sets.
The company announced Monday that beginning Nov. 22, Xbox Live users with the latest console — the Xbox 360 — will be able to choose from shows including "South Park," which airs on MTV's Comedy Central, and CBS Corp.'s (CBS) "CSI," and movies including Warner Bros.' "V for Vendetta" and Paramount Pictures' "Mission Impossible III."
In addition to CBS, Warner Bros. Home Entertainment and Viacom Inc.'s (VIA) Paramount Pictures and MTV Networks, Microsoft has signed agreements with Turner Broadcasting System Inc. and Ultimate Fighting Championship, a privately held Las Vegas company that primarily broadcasts pay-per-view fights.
Financial terms of the partnerships were not disclosed.
Ross Honey, senior director of Microsoft's media, content and partner strategy group, estimated that 750 hours of programming would be available as soon as the service launches and roughly 1,000 hours by the end of the year.
The programming — most of it in standard-definition format and some in high-definition — will be available through the Xbox 360 console to any user of Xbox Live's free or paid online service, which allows gamers with broadband connections to send text or voice messages to each other, and watch movie trailers and other product demonstrations.
Microsoft hasn't said how much the downloads will cost, only that prices for programs broadcast in standard definition will be "competitive" with those offered by competitors, including Apple Computer Inc.'s (AAPL) iTunes store, Movielink, CinemaNow and Amazon.com's (AMZN) Unbox.
TV shows through those services generally go for $1.99 per episode, while movie rentals generally cost about $3.99. Microsoft will sell TV shows for purchase only, and the only option for movies will be a rental that expires 24 hours after you start watching it.
High-definition content will cost more than standard-definition programming, Honey said, because it requires a lot more bandwidth to broadcast in the higher-quality format.
A key advantage Microsoft is hoping will play in its favor is that consumers will be able to watch the content on their TV sets rather than on computers or portable digital devices, the standards for most of the competing services.
"Being able to watch on your TV, yeah, that's a pretty big deal," said David Cole, president of DFC Intelligence, a market research firm based in San Diego.
IPods and other devices can be plugged into TV sets with optional cables, though the picture quality usually suffers a bit. A handful of gadgets that act as a bridge between computers and TVs also are available but haven't gained much consumer traction.
Apple's chief executive, Steve Jobs, recently showed off a compact set-top box, dubbed iTV, that will allow consumers to wirelessly send movies purchased online — as well as other digital content stored on a computer — to a television set. He said it will be available early next year.
Much like the Media Center edition of Windows XP, which Microsoft touts as an all-in-one PC and home entertainment center, the new Xbox service aims to bolster Microsoft's presence in the living room. Nevertheless, industry analysts aren't predicting it will drive hordes of people to buy the Xbox console.
"This is already a game system — so it's really going to sell to a presold audience," Cole said. "People aren't going to be buying it for these features, I don't think."
Some analysts said the initial variety of Xbox TV and movie programming struck them as a bit thin.
"The size of the launch library did feel a bit too small to be able to make a huge immediate impact," said Jason Anderson, director of research at San Francisco-based International Development Group. "But what it does is send out a signal flare to the rest of the industry that there's a commitment from Microsoft to be able to sell multiple types of content through the Xbox."
Analysts are not predicting that the new service will steal much business away from Sony Corp.'s (SNE) market-leading PlayStation franchise, but the consensus seems to be that it will help Microsoft remain competitive.
The Xbox service will launch less than a week after Sony's PlayStation 3 video-game console hits store shelves in the United States.
Sony has not said whether it will sell TV shows and movies through PS3, though company officials last month said the forthcoming online PlayStation Store is being set up so users could potentially download movies through the PS3.
It would be easy for Sony to sell TV and movie downloads, given its ready access to shows and films produced by its Sony Pictures division.
"Sony has a wealth of entertainment content available to us at our fingertips, whether it's movies, television or music. It's just a matter of us tapping into that content, and we will be making an announcement about that at some point," said Dave Karraker, spokesman for Sony Computer Entertainment America.
The PS3, due out in U.S. stores on Nov. 17, will be able to play games and DVDs at 1080p, which is the highest-definition resolution currently available.
Microsoft has developed a high-definition DVD drive that can be added to the Xbox 360. It will hit store shelves in the U.S., Europe and Japan in the coming weeks.