So the world has had a week to digest E3, and the debut of Microsoft SmartGlass. The E3 press briefing, from a gamer’s perspective, was rather disappointing, but from someone watching the evolution of digital media, it was quite fascinating.
Microsoft has spent the last three or four years making sure that, when it comes to game consoles, they’re first wherever possible. They were the first to have Netflix after helping to develop that company’s streaming system for computers; they were the first console to have a cable channel toss them a lot of content; and they’ve worked extensively with the cable providers to get their cable box apps running, and to allow more and more content to stream to the console (like HBO GO).
And that is what may just let them beat Apple at Apple’s own game.
The entire industry is watching and waiting for an Apple iTV, and the most credible rumor as to why it’s floating in the Phantom Zone is because Steve Jobs thought creating à la carte TV in the App store was going to be a cinch.
The cable companies had other ideas.
They have a stranglehold on media. Not only do they own cable TV, but they own the majority of the broadband pipes that people use to get other forms of video over the intert00bz, and as Netflix has found out, they are very protective of their customer base, and none of the networks really wants to bite the hand that feeds them.
So in comes Microsoft, who seems seems pretty ecumenical in the providers it brings on board, and who has been quietly hooking up with as many cable providers as it could in the process. So when it comes time to throw their lot in with someone, or allow some channels to be offered in some kind of à la carte fashion, who do you think the content providers will hop in bed with? The company that has, in their eyes, tried to steal customer away from cable (that would be Apple), or the company that has been enabling cable companies to begin the long process of getting out of the set top box business (which they’d love to do)?
It’s virtually certain that HBO will be the first and best equipped network to take this step, probably with some kind of premium attached to getting HBO GO outside of the cable subscription (a fee that goes back to the cable provider). And while it’s unlikely that all networks will be able to move on this kind of model, what seems pretty certain is that SmartGlass is going to be a big part of the future of video entertainment.
SmartGlass allows the networks to turn your tablet into an interactive information device (Jeopardy questions anyone?), a channel guide (what’s next on Discovery?), or–and this is the big one–advertising space. Ad-skipping DVR? No sweat, you’ve been looking at Cheerios for the last ten minutes. We know you want to buy the sweater Matt Lauer is wearing, and that you want to know more about the place The Amazing Race landed in this week. Equally important to the ability to serve you ads is the royalties they can take from sales of merchandise.
And that is the entire key to Microsoft’s plan. By encouraging you to send every single piece of media you watch through the Xbox, they will have the kind of access that Google and Nielsen only dream of: complete demographics. Hell they can even have the Kinect finding out how engaged you are by how much you move around during the show (Please note, they are not doing this right now, but it’s what’s possible).
Sinister? It’s no more intrusive than the information websites, your cable box, and other services you use are already gathering about you. The difference is that, with something like SmartGlass, all of those data are interconnected, and the terms of their use can be put in an EULA.
One of the biggest rumors about Microsoft’s next console is that it features dual-GPUs, something that gamers are getting excited about. Personally, I don’t think that they can afford to put two high-class GPUs in there. Instead, especially given the advent of SmartGlass, I believe that the second, less powerful GPU is for serving video or another game feed to other connected devices, while keeping the Xbox as the central hub. It’s all about creating the ultimate media hub, and, since they own no content themselves (despite a long relationship with, and several rumored failed attempts to buy, Universal), by diversifying themselves across every aspect of media (watch the show, buy the previous season, download the game, and check out the app on your SmartGlass enabled tablet!)
Will it work out for Microsoft? I really don’t know, but I think it stands a way better chance than trying to convince the cable companies to get their claws out of the networks, and if that unlocks some networks for greater accessiblity than buying by the episode on iTunes ($50 a season for Mythbusters? Now that’s insane) that’s a good thing.