Microsoft, Not Apple, Will Dominate Television Streaming

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March 27 2012 5:57 PM

Apple Doesn’t Need To Make the TV of the Future

The revolution is already here—and it’s called the Xbox.

Kinect for Xbox 360
Kinect for Xbox 360

Photograph by Jason Merritt/Getty Images for Xbox.

If the rumors are true, Apple will release a television set later this year that it will tout as the most amazing boob tube ever invented. Apple’s TV will be able to access shows from a variety of online sources, including its iTunes Store and streaming services like Netflix and Hulu. You can bet that it will be easy to set up—you’ll just plug it in, turn it on, and type in your Wi-Fi and iTunes passwords. And unlike most living room gadgets, it will be a pleasure to use. Apple’s ads will surely show off the many ways to find stuff to watch on its sleek screen—you’ll control the TV with your phone, your iPad, and, most promisingly, your voice.

The biggest selling point will be Apple’s promise to make navigating our viewing choices easier. Say you want to watch Tower Heist on a Saturday night. You’d first check Netflix, because if it’s there, it’ll be streamed free for members. If it’s not, and if you subscribe to Amazon’s Prime service, you ought to check there, because you might get a discount. If that fails, you’ll look for the movie on iTunes, Hulu Plus, or Comcast in whatever order is most convenient for you. The whole process is a frustrating mess, one that Apple will likely try to solve by building a cross-platform search engine into its TV. Instead of going to every service separately, you’ll just say, “Hey TV, I’d like to watch Tower Heist!” and the screen will show you where the flick is playing, and for how much. You’ll just have to choose one and press Play.

When CEO Tim Cook shows off Apple’s TV set this fall, I bet he’ll call voice-activated universal search a revolutionary way to interact with your television. What Cook probably won’t mention is that it already exists. Indeed, much of what Apple is likely to build into its TV is available today on a gadget whose interface is just as easy to use as anything Apple will cook up. The device is called the Xbox 360.

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Over the last few months, Microsoft has turned its video-game console into your TV’s best friend. Late last year, the company revamped the Xbox’s interface, adding a wonderful voice-search feature through the Kinect motion-gaming add-on. Microsoft also added dozens of entertainment services to its Xbox Live online plan, including Netflix, Hulu, ESPN, and on-demand video from cable and satellite services around the world. This week, the company is adding access to Comcast’s Xfinity on-demand service, as well as apps for HBO and MLB.TV.

The Comcast integration is particularly noteworthy. This is the first time the company’s on-demand service has been made available on a console, and it suggests that the cable giant realizes that it no longer rules your living room. Now, your cable subscription will sit alongside every other online service on your Xbox—it’s just another app in an endless stream of entertainment choices.

Microsoft says that since it added voice search to its interface last year, the number of hours people spend on Xbox Live every month has increased by 30 percent. On average, Xbox Live members spend more than 80 hours a month using the service. More tellingly, people now spend more time using Xbox Live to watch stuff than to play games. Those numbers suggest that Microsoft has broken a key barrier in the living room: It has transformed the Xbox from just another gadget connected to your TV into the gateway to your set, the first thing you check when you want to watch something.

Meanwhile, Apple’s own set-top box device—the $100 Apple TV—has failed to take that primary spot. I suspect part of the reason is that Apple’s device offers access to far fewer sources of entertainment; you can get iTunes and Netflix on Apple TV, but you can’t get videos from Amazon, HBO, Comcast, or many of the other sources available for Xbox. The Xbox also has a Trojan horse advantage—people bought it for video games, and now they’re using it for everything else. By only working as a television add-on, Apple TV feels like just another peripheral.

In February, I saw a demo of the Comcast service at Microsoft’s headquarters in Redmond. It was marvelous: When you’re looking for the latest episode of Mad Men, you just tell your Xbox to pull it up. There’s no fumbling with an on-screen guide, no searching the Web, and—best of all—no waiting. I’ve been skeptical of the idea of talking to your TV, but the Xbox’s voice recognition works well enough—and fast enough—that voice-search has quickly become the primary way people navigate through their entertainment choices, says Don Mattrick, president of Microsoft’s interactive entertainment business. “People appear to prefer to tell their TVs what they want,” Mattrick told me.

There’s also the matter of price: An Xbox console with a Kinect add-on sells for $250. A membership to Xbox Live’s Gold plan—which you need to access many of the system’s entertainment services—sells for about $40 a year. You also need to pay extra for each of the services you’re using—to watch Mad Men through Comcast, you’ll need to be a monthly Comcast subscriber. Apple’s television set will, of course, be an actual television, so it will probably sell for hundreds more. But why buy the TV when you’ve already got one? And, if you’re one of the millions of people who already own an Xbox and a Kinect, why buy anything else?

Given its price advantage and a head start in the market, Microsoft’s TV strategy will be difficult for Apple to beat. But there is still one path for Apple: corral all of the world’s movies and TV shows. The Xbox is wonderful because it’s an effective aggregator, pulling the Web’s competing video services into a single, simple interface. But that’s not perfect, because you still have to choose between Netflix, Hulu Plus, Amazon Prime, Comcast, HBO, et al. What if you don’t want to spend the time and money deciding which of these services is right for you? What if you just want whatever you want, when you want it, on a single device that doesn’t ask you to belong to other paid plans? If Apple can deliver that—if it can give me Mad Men, Tower Heist, Bergman’s back catalog, Seinfeld reruns, and sports on a single box—well, then I may have to stand in line.

But I doubt Tim Cook can deliver something that magical. As I’ve written before, there are too many legal and contractual battles in Hollywood for any one service to become the repository for everything. The studios are loath to give any company access to too much of their content for what they perceive to be too little money. It’s in the industry’s interest to ensure there’s vibrant competition between Netflix, Hulu, Amazon, and iTunes—if any one service gets access to everything, it would gain the sort of power that Apple wields over the music industry, and that Amazon now has in books.

In other words, the future of entertainment is bound to be fragmented. And in a fragmented world, the Xbox’s magical powers to cut through the clutter may be the best thing to happen to your TV.

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