Xbox360 – ready to replace cable?

NXE (Microsoft)On November 19th, Microsoft released an update to the Xbox360 platform dubbed NXE. The moniker is short for New Xbox Experience. The smooth, new interface deepens the integration with the Xbox Live Marketplace and brings to the platform similar graphical navigation found on Windows Vista. The remodeled environment presents a much more media-centric twist to the experience. Doubtless, this was the goal.

In the game consoles arena, the Xbox 360 has always stood out in terms of it’s use as a media content platform. Within the interface, as much real-estate is given over to media as gaming. This is especially true of the new NXE interface which does a superb job of blurring the lines between on-line media and locally available content.

By comparison, the Playstation3’s Avatar-based Sony Home, while certainly fun to use, is very game-like. And although that will probably appeal to their gamer constituency, it a little top-heavy for the average media consumer.

This divergence in experiences will likely further polarize the audience for the two consoles.

To further secure the Xbox360 as a media device, The NXE interface now includes Netflix capabilities which allow subscribers to stream premium movies directly to their screen. Couple this vast inventory of titles to the deep content well Microsoft has already established through partnerships with mainstream media owners, and the Xbox suddenly has a lot of appeal for replacing the standard set-top box. Certainly the platform is more capable than AppleTV or the PS3 in terms of it’s variable use in the living room.

However there is a downside to this aggregated content model: Cost. The current scenario is a mix of free content, micro payments and subscriptions. To add to the confusion, the monetary units for content vary between Xbox ‘Points’ and hard currency. The play is too new to clearly determine how the average costs will compare against a standard cable hookup.

Though consumers have been vocal that free, ad-supported content is preferable to micropayments, they won’t tolerate the conventional broadcast pod structure. 10-15 second pre-roll and occasionally some interstitials is about the maximum a consumer will put up with.

This has put brands and content producers in a challenging position to take advantage of the shift in media acquisition behavior. For a number of reasons the traditional Hollywood model hasn’t yet been able to scale to fully support these new distribution platforms. Though the needle is beginning to move, and we may ultimately wind up with an amalgamation of free, ad-supported media with low-cost premium content. Which should fit nicely inside the consumer comfort-zone.

Fortunately, because emerging platforms like the Xbox360 support dynamically placed, sophisticated ad content, they will be in the best position to offer reduced or no-cost media to the consumer. That is, if the monetization model continues the trend back towards the previously accepted (though abbreviated) ad-supported model.