Friday, June 8, 2012

Microsoft's Quest to Control the Living Room

This week's article "Competing Through Organizational Agility" reminded me of an article I recently stumbled upon about Microsoft's Xbox while I was conducting research for our group project on Nintendo.  The Forbes article (linked below) discusses how Microsoft has emerged as a leader in entertainment due in no small part to the success of the Xbox 360.  Although its previous identity was largely that of a video game console, Microsoft has managed to update and expand the Xbox's capabilities to become a hub for all the media a family could ever want in the living room.  The article states that "This Spring, for the first time, subscribers to Xbox's Live online service in the U.S. spent more time consuming video and music than multiplayer games," which indicates that the Xbox 360 has truly developed into a full-service media center for many Americans.  Furthermore, in the global market, "hours spent on Xbox Live have grown 30% year over year, including gaming and entertainment, while video consumption has risen 140%."  Microsoft has achieved such remarkable results with the Xbox 360 because it has utilized its organizational agility to identify and seize opportunities in the home entertainment industry quicker than the competition.

We can clearly observe Microsoft's use of strategic agility in the fact that it recognized the massive potential of streaming online video with TVs, and then it aggressively targeted companies and service providers like Netflix, HBO, and ESPN to team up with for inclusion of their services on Xbox Live.  One of Microsoft's strategies appears to be the diversification of features offered with the Xbox, as evidenced by the onslaught of innovative new products and services the company has announced.  Future plans include an interactive exercise program with Nike, an Xbox Music service, and SmartGlass, which will integrate PCs, smartphones, and tablets with the Xbox.  Stealing a page from Nintendo's book, the upcoming 'game' Kinect Sesame Street TV will provide interactive, educational entertainment for children by allowing them to participate in "a TV show you can play," according to the article.  Microsoft will go even further to disrupt Nintendo's business when the SmartGlass technology allows gamers to use tablets in sync with certain games--a feature which is essentially the main selling point of Nintendo's new Wii U console.

Microsoft demonstrates portfolio agility with its redirection of resources for the Xbox.  For example, the company took the resources previously assigned to UltimateTV, Microsoft's failed set-top box for DirectTV, and the Zune music subscription service--widely considered another Microsoft failure--and applied them to the Xbox to establish a more focused, universal entertainment center.  Microsoft's effort to offer a more streamlined entertainment experience seems to be paying huge dividends, and there is still a tremendous opportunity for additional growth, especially while cable-TV providers like Comcast and Verizon still control most of the TV market.  Microsoft's operational agility comes with the company's tracking of how consumers are using the Xbox, such as through paid Xbox Live subscriptions, online game play, and streaming video and music consumption.  Real-time data like these provide Microsoft with the advantage of knowing what trends are developing in the home entertainment realm, and this just puts the company farther ahead in the game of bringing all things media straight to your living room.

Do you think the Xbox will ever completely take over the living room as the average American's primary source of entertainment?  What would it take for cable services like the ones offered by Comcast and Verizon to become obsolete?

Forbes article:

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