Can Microsoft’s New Xbox Change Multimedia?

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Steve Ballmer was willing to lose money on the Xbox for years. The console and its add-ons are finally a mildly profitable business. But, as Ballmer often does, he will lose money again in the name of conquering part of the multimedia entertainment industry. Along with the new Windows 8 and Surface tablet, the Xbox plan is his last best chance to elbow into the age of digital content.

Microsoft Corp. (NASDAQ: MSFT) will release its Xbox 360 “Entertainment for All” with a product that costs as low as $99. The fine print shows that the price depends on an Xbox Live Gold Membership of $14.99 a month for two years.

Redmond describes the new features:

With Xbox LIVE, take your Xbox 360 online to play Kinect and controller games with friends wherever they are. Instantly watch HD movies, TV shows and sports, and with Kinect, your voice is the remote control. Not sure what to play or watch? Find the latest entertainment with your voice. You can even download new songs, workouts, or levels to keep your games fresh.

Ballmer has the huge challenge of showing consumers why his company’s hardware and interconnectivity are better than those of his rivals. Microsoft comes late to the digital entertainment game, at least as it is played among many devices from other companies that “talk” to each other to build the “content everywhere” model. Is the Xbox an ideal hub for these activities? So far game consoles have been left behind in the rush to get social network activity and digital content online.

Microsoft does have a single important advantage. Both the Xbox 360 and Xbox Live products have tens of millions of users around the world. That gives the new product a footprint. It may not be as big as the one Apple Inc. (NASDAQ: AAPL) has with the iPhone, iPad and iPod, but it is, based on size, formidable. Ballmer has to take this single advantage and hope he can turn it into a new, very large, business.

Douglas A. McIntyre

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