Market Insight

Xbox One update: Microsoft’s march to control your living room continues forward

August 21, 2014  | Subscribers Only

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At the 2014 Gamescom trade fair, Microsoft announced that the Xbox One would soon be updated in a number of ways, and detailed new features being rolled out first to members of its early access program.  Most prominently discussed was the ability to stream live TV content from the Xbox One over the local network to smartphones and tablets running the Xbox SmartGlass app.  Users would be able to play, pause, rewind, and change channels, without interrupting the gameplay taking place on the Xbox One.

This streaming functionality would only be available to users of the new  EUR 29.99 Xbox One Digital TV tuner, a peripheral allowing direct viewing of terrestrial free-to-air broadcasts without using the video from an intermediate device such as a set-top box or TV attached to the console’s HDMI pass-through. The tuner would also allow users to navigate free-to-air channels using the Rovi-powered OneGuide EPG.

Other new features of note that were announced were the enablement of DLNA support, increased file format support for MPEG 2 TS, MKV and other new formats, playable from USB or network shares, added ability to boot the console directly to TV viewing, and the inclusion of a new pop-up mini-guide during live TV viewing that serves as a compact version of the OneGuide EPG.

For regular users, these features are expected to be rolled out over a series of staged updates during the third and fourth quarters of 2014. TV tuner availability begins October 2014 in Western Europe, with expansion to other territories yet to be announced.

Understanding the broader context of these updates

With these changes, Microsoft is continuing to co-opt the traditional user experience of TVs and set-top boxes, and supplanting it with its own device and experience.

Prima facie, the addition of DLNA compatibility and new media formats rounds-out the Xbox One’s capabilities in the realm of networked digital media adapters (DMAs), and opens the door to a potential influx of new pay TV and TV Anywhere applications. Such an influx, on its own, would aid in turning the Xbox One from a device that sits atop the pay TV set-top into a more fully-featured, quasi-substitute.

The most consequential addition, however, is the enablement of live TV streaming to Xbox SmartGlass-equipped mobile devices on the home network. With the ability to boot directly into TV viewing, and the inclusion of a pop-up, miniature program guide, this triad of features achieves two things. First, the Xbox One’s evolution plays directly into Microsoft’s gambit to position the device as a multipurpose living room anchor, and as one that serves as a portal for consuming media in as many forms and formats, from as many sources, and across as many devices as possible. Second, Microsoft continues to refine the device’s ability to deliver a polished experience that replicates or approximates that of a pay TV set-top box, or Smart TV. In the same way that a pay TV box subverts the user experience of the TV it is connected to, the company is gradually stripping away the need to experience either the TV manufacturer’s, or pay TV provider’s user interface and user experience.

Nonetheless, bringing a Microsoft experience to the living room TV requires deft footwork, and the current end result is decidedly less cohesive and all-encompassing than it may first appear. TV streaming functionality, at this time, is still limited to the free-to-air TV tuner accessory. Microsoft could progress further, deliver a near-facsimile of the pay TV experience, and open Xbox SmartGlass streaming to premium content that is decoded by the pay TV box, and subsequently ingested by the console via HDMI, but herein lies the catch-22 that the company finds itself in.

The Xbox currently wears two hats – it is a device whose software ecosystem serves as a platform for app-based pay TV services, and in this sense, constitutes a non-rival hardware partner to the pay TV universe; it is a device whose HDMI pass-through features, and overlay of the Xbox UI, seek to subjugate the operator-branded experience to one that is distinctly Microsoft flavored. Were the company to go too far, and enable re-streaming of content that is ingested via HDMI, the Xbox One would quickly begin to tip evermore in the direction of a rival device, rather than a complementary one where the world of pay TV is concerned.

In this sense, and upon closer inspection, the current SmartGlass streaming implementation is something of a compromise. In addition to potentially reflecting concerns  around content reproduction and rebroadcasting – even if streaming premium content would be identical in function to currently-tolerated Sling products – the decision to limit IP streaming to over-the-air content likely reflects a conscious desire not to draw the ire of the pay TV universe that the Xbox One ultimately still needs to court. The Xbox One has been positioned as a digital media device, and disintermediating outright one of the largest pillars in the wider media ecosystem – operators – would be risky business indeed.

In totality, the Xbox One remains a device that offers three wide-ranging, but individually incomplete visions of Grand Living Room Experience – the device converts over-the-air content into an IP-based, multi-device experience; the device provides access to a premium, operator-branded pay TV experience where individual operators have chosen to deploy an application on the Xbox Live platform; the device wraps EPG data and linear broadcast outputted by a set-top box into a Microsoft UI and UX, but remains unable to re-stream this content, or access any of the interactive features, such as the VoD or DVR applications, that continue to confer tremendous value onto the pay TV box.

In a perfect world unconstrained by these risks and externalities, the logical extension of Microsoft’s vision would see the television become a mere display panel, the pay TV set-top box a mere content input source, and the user ensconced in a Microsoft-controlled experience that need not be exited to access gaming or video. In the real world, Microsoft’s hands are more tied. However, given the philosophical subtext of these Xbox One enhancements, operators and TV manufacturers may have reason for longer-term concern, particularly if – over time – Xbox Live’s lineup of 3rd party subscription and transactional video services, coupled with Xbox Video, partially erode the value of interactive set-top box services.


Western Europe
Microsoft Corporation
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