Microsoft to Shut Down Xbox Entertainment Studios

Studio Boss and Former CBS Exec Nancy Tellem to Remain for a Time

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An Xbox home screen.
An Xbox home screen.

Microsoft has decided to shut down Xbox Entertainment Studios, the company said today, just one month after the digital video studio premiered its first original series. The move coincides with the company's announcement that it will lay off 18,000 employees, the largest cutback in its history.

Microsoft originally created Xbox Entertainment Studios as part of its effort to position Xbox as an all-in-one entertainment device, rather than simply a gaming console. Former CBS executive Nancy Tellem was hired to develop original shows that would draw the attention of Xbox Live's 48 million subscribers to the console's non-gaming entertainment. Now Microsoft is recalculating.

"As part of the planned reduction to our overall workforce announced today and in light of the Xbox vision to focus more on games and gamers, we plan to streamline a handful of portfolio and engineering development efforts across Xbox," a Microsoft spokesperson said in an email. "One such plan is that we will expect to close Xbox Entertainment Studios in the coming months."

Re/code first reported the news of Xbox Entertainment Studios' shuttering on Thursday.

Ms. Tellem will remain with the company to oversee the roll-out of shows already in production, including two upcoming "Halo" programs, one of them produced by Oscar-winning director Steven Spielberg. Jordan Levin, the former Warner Bros. TV CEO who joined Xbox as Ms. Tellem's second-in-command in February, will also stay on. It's unclear how long either will remain with Microsoft after the existing programming slate premieres.

Microsoft's advertising team will continue to sell ads against the shows already in production, according to a person familiar with the matter, and the company will continue to try to increase its hold on the living room beyond gaming.

"Xbox will continue to support and deliver interactive sports content like 'NFL on Xbox,' and we will continue to enhance our entertainment offering on console by innovating the TV experience through the monthly console updates," Xbox head Phil Spencer said in a staff memo Thursday. "Additionally, our app partnerships with world-class content providers bringing entertainment, sports and TV content to Xbox customers around the world are not impacted by this organizational change in any way and remain an important component of our Xbox strategy."

Ms. Tellem left CBS in September 2012 to join Microsoft and create Xbox Entertainment Studios. "We're not bound by any of the rules legacy media companies are subjected to …. It's probably the most liberating opportunity I've had," she told Ad Age in an interview earlier this year.

But it wasn't until last month that the studio streamed its first show, which was tied to the Bonnaroo music festival.

During a press briefing in April, Ms. Tellem detailed several shows on the studio's slate. Microsoft was committed to six of the programs with another six in development, she said at the time. "Halo: Nightfall" -- a digital feature film produced by "Gladiator" director Ridley Scott that was to begin production later that month -- was "furthest along," she said. Others, such as "Jash in the Box" from Sarah Silverman's comedy network Jash and "Extraordinary Believers" from Seth Green's production company, had received pilot commitments but were not yet in production.

At the time Ms. Tellem was unable to say how the studio planned to make money from the original series or how they would be distributed.

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