Six years ago, when Microsoft launched the Xbox 360, people scratched their heads at the company's strategy.
Two notably different SKUs? Wouldn't that confuse people? Surely this was a stumble by Microsoft, which would hurt it at retail.
Of course, it wasn't long before Sony announced plans for a similar strategy -- and Nintendo eventually followed suit with the Wii U. And you don't have to look further than Microsoft's 20-month run as the country's best selling console to see the strategy worked -- and worked well.
Now there are whispers that Microsoft is preparing to do it all over again, only this time instead of differentiating its systems by the size of their hard drives, it's rumored to be preparing a low-cost alternative, dubbed "Xbox TV," to its next-generation console, which will focus on "core entertainment services" (aka, the kind you don't play with) and cater to a casual audience.
It's a bold move – and one that, once again, has people scratching their heads.
There do, however, seem to be four clear takeaways from the rumor, if it is, in fact, accurate:
Durango's gonna be pricey
For those that complained about the $300/$350 pricing of the Wii U, the cost of the new Microsoft (and likely Sony) system is almost certainly going to be a rude awakening.
While a lot of focus has been on the capabilities of Xbox TV, not enough attention has been paid to the words "a low cost alternative." The Xbox 360 has chiefly been a system for the core gamer. Certainly, there have been steps to entice and welcome the casual player in the past couple of years (we'll get to that in a second), but the system's big hits showcase its core roots.
That audience, historically, has been more accepting of higher console prices. (There's a reason, after all, that Microsoft is still commanding as much as $350 for a six-year old piece of hardware.) And if Microsoft's willing to sell a stripped down version of the new system on the cheap to keep the casual audience hooked, that implies Durango may come with a hefty price tag.
Speaking of which…
Microsoft's not willing to cede the casual market
For much of this generation, casual gamers were firmly in Nintendo's back pocket. But a dearth of good games created an opening for Microsoft and Sony. The PlayStation stumbled a bit in its attempt to woo that audience with PlayStation Move, but Kinect caught people's imaginations.
Never mind the peripheral's shortcomings, it was unique enough that some casual gamers were willing to give Microsoft's console a try. And as Nintendo tries to lure back that audience with the Wii U, Microsoft seems determined to hang onto them.
Every Gamasutra reader knows that games make the system. But for the mainstream market, it's price that drives the decision to buy a system in the first place. If Xbox TV's video game options are as low-cost as the system is expected to be, that could be a powerful magnet in not only retaining its existing casual audience, but attracting people who are looking for more than their phones or tablets can currently offer.
It's not all about games
- The Xbox has long since moved beyond the world of games. Entertainment app usage has more than doubled in the past year among Xbox Live Gold members in the U.S. And Microsoft says U.S.-based Xbox Live members now spend more time watching TV, music, and movies than they do playing multiplayer games.
Put another way, Microsoft has achieved the console world's Quixotic impossible dream: It has become that Trojan horse of the living room. And it's certainly planning to expand on that, since both casual and core players have shown an interest. Exactly what those "core entertainment services" will be, of course, is impossible to discern at this point. It could be a rehash of current offerings (the streaming trinity of Netflix/Hulu.Amazon). It could be something more advanced, like its growing deals with cable and satellite companies.
It could even be a proprietary entertainment channel. (Don't forget, Microsoft hired CBS entertainment president Nancy Tellem to form an Xbox studio in September – and it tried to convince Conan O'Brien to bring his show to Xbox a few years ago.) It's more likely, though, that that will be a part of the upscale Xbox – at least whenever Microsoft launches that programming.
Bracing for Apple
- There's a reason Xbox TV is being compared to Apple TV. The whispers about Apple entering the TV space have been around for a while – and by the end of next year or 2015 at the latest, analysts seem fairly certain that Apple will begin to make a bigger push into the living room.
The company's initial focus will almost certainly be entertainment programming – but history has shown that game apps tend to follow Apple. Nintendo wasn't prepared for the disruption in the portable market and took a hit because of it. Microsoft isn't likely to make that mistake.
A low-cost Xbox with the next generation label attached to it (remember folks, "next generation" is a marketing term) and a wide variety of entertainment and game offerings that cater to a mass/casual audience? That may actually help Microsoft stave off the very real threat Apple presents to its customer base.