Market Insight

Xbox SmartGlass: Multi-Screen Vision Reaches Out Beyond Windows

June 13, 2012

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Microsoft used its E3 press conference to announce a new initiative, Xbox SmartGlass, a PC, smartphone and tablet second or multi-screen software and services platform that enables value-added services, content and platform extension for Xbox 360 users. This evolved offering builds on the company's existing Xbox Live apps for smartphones and tablets and promises enhanced capabilities and better integration between its streaming-to-Xbox-360 software and second-screen companion offer.

Xbox SmartGlass will be available on Windows,  Android and iOS devices although, according to Microsoft, it is likely that not all platforms will enjoy the SmartGlass' full feature set. The company expects to roll-out the application before the end of 2012 and the full details on operating system and feature set support will be made available in the coming weeks and months.

Xbox SmartGlass represents a watershed development in Microsoft's multi-screen strategy for Xbox Live. The company's decision to formally widen its scope of multi-screen services beyond Windows devices reflects a competitive landscape where the mobile multi-screen environment is dominated by devices and platforms not controlled or owned by Microsoft. With this platform agnostic strategy, Microsoft is giving itself the best opportunity to drive uptake of Xbox Live multi-screen services in a post iPhone/iPad market.

The announcement confirms Xbox Live's role as Microsoft's core multi-screen entertainment platform with Xbox devices at the centre of this vision. This multi-OS support is an admission that Windows has so far failed to deliver in the smartphone and tablet arenas and it is clear that without support for competitive platforms that SmartGlass' impact would be significantly downplayed.

Under these conditions, SmartGlass is more comparable to pay TV operator multi-screen strategies, which hinge off core proprietary platforms, such as Sky in the UK for example. Sky has a core addressable market of subscribers that connect to the TV through its STBs, but subscribers now get access to content on a variety of other screens and devices through Sky Go. Microsoft has made a strategic decision to extend from its core Xbox platform outwards to build its multi-screen offering and not rely only on a Windows device-led strategy. 

This has both limitations and obvious advantages. Xbox SmartGlass on non-Windows devices will not act as a significant user acquisition tool for Microsoft devices, because it depends on having access to the Xbox 360 platform to make it relevant. In contrast, Apple is well placed to use its strong smartphone business and dominance of the tablet sector to drive users to its expected advanced connected TV solution when it eventually hits the market. Yet, opening up SmartGlass to competitive platforms strengthens the consumer positioning of Xbox Live and Microsoft's existing and upcoming console platforms by providing engagement across a wider number of user cases. The company hopes this will maintain the relevance of Xbox devices in the coming years.

The success of this strategy really rests on the extent of content that is enabled for access on non-Windows devices. At this stage it remains unconfirmed that Apple, the key platform manufacturer for mobile content distribution, will allow, as it has for other distribution platforms such as Netflix and LoveFilm, the ability to access Xbox Live content on its devices. IHS expects iOS devices to allow access to multi-screen content, but like other content services on the platform, all purchases would realistically need to take place through Xbox devices, unless Microsoft was willing to concede 30 per cent of its sales on iOS platforms to Apple. This factor will inevitably limit the potential of iOS devices as customer acquisition channels for Xbox Live content.

Beyond multi-screen, Microsoft's move to make a more evolved statement in the emerging second-screen and companion app segment of the market should not have come as much of a surprise. There are a number of significant initiatives taking place in the second-screen arena, which will have caught the eye of Microsoft. Namely offerings from start-ups such as Zeebox, with its social TV platform, broadcasters with synced PC, tablet and smartphone applications especially for play-along dynamics and also from CE vendors, through evolving remote apps on mobile devices. These developments underline the increasing importance of second-screen initiatives in engaging and acquiring users for primary screen content.   

On the games front, the second-screen value-added content play undermines and competes with the positioning of Nintendo's upcoming Wii U. Nintendo's Wii U offers a unique controller which incorporates a 6.2" touch screen for integrated second-screen content and is expected to launch in November 2012. During 2011 we tracked Microsoft's erosion of Nintendo's market share with its Kinect strategy and Microsoft wants to maintain this competitive momentum. Between Sony's wider ecosystem of CE devices and Nintendo's more games-specialist offering, with Microsoft currently  broadening the remit of its Xbox offering, the latter remains the more obvious competitive target even with the launch of the Wii U.

However, while SmartGlass may play in the Wii U's competitive landscape, the fact is that enhanced games content offered on the second screen will rely on publishers and developer initiative, and unlike the Wii U, this will be entirely optional. With no definite addressable market, it is unlikely additional content will have the effectiveness of Nintendo's second screen offering for its new platform. Kinect integration into third-party games also made for other platforms is suffering a similar fate, with most content now taking on voice control features rather than full Kinect gestures.

Microsoft also wants to remain competitive with other second-screen initiatives in the market. In this sense, SmartGlass is an important defensive move, which maintains the relevance of existing and upcoming Xbox devices and the Xbox Live platform in the market with regards to video and broadcast content. There is suggestion here that Microsoft will hold an advantage over its competitors in this space due to its interactive expertise. While Microsoft's ability to deliver interesting play-along content seems certain, it is clear that the company sees real potential in wrapping additional interactivity around sports content. It is no coincidence then that the company also announced a collection of major deals with US sports broadcasters at the same E3 event.

Overall, the SmartGlass initiative represents a coherent and well-considered strategy. Its positioning with regards to platform support is a fair reflection of how minimally entrenched Microsoft's products are with consumers in the smartphone and tablet device categories. Although full details are yet to be revealed, Xbox SmartGlass covers a number of competitive angles and demonstrates a clarity of executive vision, which is to be admired.


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