Market Insight

Microsoft's Windows 8 announcements: Xbox Live Integration & Windows Store

September 19, 2011

Want to learn more?
Have an expert contact you.

At the recent BUILD Windows developer event, unveiled the preview version of Windows 8 the next version of its PC operating system. Windows 8 brings with it a number of changes and enhancements, among the most notable are

- the 'Metro' user interface which has been built with touchscreens in mind represents Microsoft's answer to the rise of tablets, by adding a touch-friendly environment on top of a regular windows interface. The result is that both tablets and more conventional PCs can both be served with the same OS.

- reconfirmation of Microsoft's intention to incorporate Xbox Live (XBL) functionality into Windows 8 The introduction of XBL into Windows follows Microsoft's addition of partial XBL functionality into the completely re-imagined Windows Phone 7 operating system.

- Windows Store for the sale of both Metro-style and conventional apps, which will include games. The store will be available across all territories where Windows can be sold.

The Windows 8 is expected to hit the market some time in 2012.

Despite being a big early proponent of tablet computers Microsoft has, so far, failed to have a compelling alternative to either iOS or Android. Metro in Windows 8 is the company's next major push into the space building on the user interface introduced with Windows Phone 7 and bringing with it the promise of being the same underlying OS as a regular PC. While IHS Screen Digest expects Windows 8 to sell well (in part as a result of being bundled by default into many new PCs); its future as a dedicated tablet OS is far less certain. At this stage it seems likely that Windows 8 initial tablet home will lean towards hybrid PC/tablet devices, rather on dedicated tablet devices. The challenge for Microsoft in tablets echoes its position in mobile where Windows Phone (which must be paid for by OEMs) is competing against Android (for which Google charges no fee). However, in the grand scheme of things, handset makers, being already subjects to many other license fees, are not massively turned-off by the fee imposed by Microsoft. The software giant's response has been to both start chasing Android OEMs with patent fees (which means that Android is no longer free to deploy) and offer substantial co-promotional funds to its Windows phone partners. To date neither has put much of a dent in the rise of Google's smart phone OS, but upcoming devices from Nokia could give Windows Phone a much-needed boost.

Full details of XBL functionality and content support within Windows 8 are thin on the ground. However, taking into account XBL 360's Kinect-based interface shift in late 2011 to match Windows 8's Metro-style UI, we expect XBL on Windows to be a major focal point for consumption of entertainment media, whether it be games, movies or music. Using the XBL platform, brand and userbase to further Microsoft's ambitions with regards to building an ecosystem of touch points for its entertainment offering is a sensible strategy. The latest efforts on the PC with Games for Windows and Zune marketplace have been disjointed and limited in their success. In contrast, XBL already successfully brings users together around different types of content - a capability Microsoft wants to extend to the PC.  IHS Screen Digest forecasts active XBL accounts to reach 38m by the end of 2011, a substantial base on which to build upon with the addition of PC and Windows Phone platforms.

This more integrated and expansive effort to build on the successful XBL platform will give content companies a growing addressable market to target. In the last 18 months Windows 7 OS has sold 350m units and the company expects more from Windows 8. To put this installed base into context, the installed base for Xbox 360s is expected to reach 58m by the end of 2011. The XBL userbase increases could therefore be significant if Microsoft is able to deliver the required strategy to prompt existing users to access XBL on the PC, while also convincing entirely new users to sign up to XBL via Windows.

By tying Xbox 360, Windows Phone and PC-based platforms together into an XBL-enabled entertainment ecosystem, Microsoft aims to deliver substantial service synergy, become more relevant to today's entertainment consumer across PC, tablet and mobile devices, to develop its competitiveness in the face of multi-platform music and video-based services and even compete more directly with PC games download platforms such as Valve's Steam and EA's Origin. There is also an argument to suggest that the geographically wider distribution of XBL across Windows PCs and tablets may also prove to be a worthwhile impetus for the Xbox console business beyond its core markets of USA and UK driven by in-service advertising and social interaction across Xbox-based experiences.

Share facebook Twitter Google Plus Linked In Add This Contact Us