Microsoft Targets Connected Entertainment with Xbox/TV Integration

In its effort to control the world of entertainment in the home, Microsoft Corp. has announced plans to merge its IPTV software into its widely popular Xbox 360 gaming system.

Microsoft calls the resulting entity IPTV on Xbox 360. With Xbox Live, the vendor said, consumers will be able to watch TV, use community-based features such as voice chat, and send and receive text and voice messages. The plans were announced at CES in Las Vegas.

The move is aimed at expanding Microsoft’s burgeoning presence in the home by connecting the Xbox with IPTV software inside set-top boxes that telcos such as AT&T Inc. are using to deploy their consumer video services.

“We think service providers will see this as a way to differentiate their [IPTV] offering,” said Ben Huang, director of strategic business planning for Microsoft TV, adding that the company will first work with a small set of operators in advance of general commercial availability much later this year.

In addition to grabbing a larger share of the consumer electronics market, Microsoft seeks to control the market for connected home entertainment systems, as some vendors now call them.

That was the overarching theme discussed by Microsoft founder Bill Gates and company entertainment executive and corporate strategist Robbie Bach in a dual show-opening keynote late Sunday night.

Microsoft said the integration will enable, for example, a family with multiple TV sets to use the Xbox gaming platform as multifunctional system through which they could also watch TV and communicate via VoIP.

Further down the road, Microsoft execs said they see this Xbox-TV platform as being integrated with other entertainment devices and eventually becoming the next-generation set-top box of the home, operating as the hub for the house.

Industry analysts believe Microsoft’s strategy is a powerful first move in the battle to control home entertainment, perhaps providing telcos rolling out IPTV with an opportunity to differentiate their offerings with those of incumbent and heavily entrenched cable operators.

“Microsoft is a home player, and they need to leverage their presence in the home to create opportunities for themselves in the provider space,” said Tom Nolle, president of CIMI Corp. “This is a smart move on their part, and it would be even smarter for them to integrate Vista and Zune with IPTV offerings as well. Microsoft could promise providers complete control over the content experience, from where it’s hosted to where it’s consumed.”

Microsoft Corp. www.microsoft.com

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