Microsoft adds studio content to Xbox Live

Campaign to appeal to families as well as core gamers

By Jennifer Netherby -- Video Business, 3/23/2007

MARCH 23 | Microsoft is stepping up its campaign to push the Xbox 360 to consumers as an all-in-one entertainment center that allows users to watch downloads on their TVs, just as arch-rival Apple begins shipping its Apple TV set-top box.

Microsoft is working to add more studio content to its Xbox Live Marketplace and playing with different pricing models to appeal not just to core gamers but also to their families.

The company is so far the only download player to have a deal with a major studio, Warner Home Entertainment Group, for high-definition movie downloads, and the two companies recently inked a deal for Microsoft to offer high-def downloads of the studio’s direct-to-DVD movies the same day they debut on disc.

Xbox Live will have an exclusive window on those downloads, Microsoft senior director of media and entertainment Ross Honey said.

About half of Xbox 360 owners have a high-def display, and Honey said that, of people downloading movies offered in high-def, 47% choose that format over the standard-definition version.

“They’re excited to use that investment on as much content as possible,” Honey said.

Microsoft is exploring other models, including subscriptions, ad-supported downloads and different a la carte pricing.

So far, download services have followed Apple’s lead in selling TV shows for $1.99 an episode. But Honey said Microsoft plans to test selling older shows for $1 an episode, about what they would be on DVD if they were split by episode. (Movies are available for rental only on Xbox Live, with the exception of Warner’s DVD premieres.)

“We’re saying, hey, let’s approach this just like the regular home video business,” Honey said. “We think that consumers are very accustomed to paying a variety of prices.”

TV episodes make up more than half of content (56%) downloaded through Xbox Live, but movies are catching up, Honey said.

Although the company is targeting its core gamer crowd, which tends to be 18-34 and male, it also is broadening its reach to gamer families, adding TV shows from Nickelodeon and family films such as Ant Bully and romantic drama The Lake House, which was a Top 10 download on the site, Honey said.

Microsoft also is in talks with other studios to add additional content to its service and is considering ways to get into the digital sell-through business.