With Netflix Deal, XBox Prepares to Own Your TV

July 15, 2008

This week’s announcement that XBox would stream movies from Netflix was a significant step in Microsoft’s bid to own the digital living subscription and, potentially, marketing dollars. In the Netflix deal, Microsoft got more than a movie partner, they got a brand. For consumers that have trouble seeing the XBox as a movie box, the Netflix association should help quite a bit.

The service, which launches as a free upgrade at no cost to Xbox 360 Live Gold members, will offer a social component to the Netflix’s streaming service. Members will be able to watch with friends remotely using avatars similar to those found in virtual words like Habbo Hotel. This is part of another new XBox service called Live Party. The avatar service will also be tied into game shows XBox is developing with Endemol (to be rolled out later this year).

The impact of these three new content areas - Netflix, Live Party and game show programming - sets up the XBox as a fully interactive video and entertainment platform. There are several key implications for digital media marketing. First, the type of sponsored programming and associated brand experience can be far more engaging. Endemol’s game show on the XBox may be an example of this (I have not seen a demo). Second, for media marketers, the social aspect means word of mouth about great content (including brand sponsored content) can spread quickly….likewise, it can quickly kill someones entertainment experience if a friend starts bashing - live - a show being watched. Finally, marketers will have a box that provides a cross-media branding experience as they deliver in-ad games, sponsor social activities and advertise against video entertainment. Whether or not all this happens depends on what Microsoft allows and how consumers and marketers interact. However, the Xbox is becoming a more interesting box of possibilities.

At the same time, the Playstation 3 should not be forgotten. They will be launching a video store and Second Life like social platform at some point. In addition, their web browser gives them a potentially huge advantage should they start pushing programming that way. As an audio and video capable browser, they can push users and marketers to use the Web platform to deliver unlimited video and social programming without the limitations of a proprietary platform like XBox. So far, however, there have been few hints about if and how the browser will be used.

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