The latest update to Microsoft's Xbox 360 video game system is making it easier for users to access video content, including video streaming services like Netflix, Hulu, ESPN, TMZ and HBO. It's great for consumers who want one box for all their home entertainment, and it's even better for marketers who have been waiting for connected TV to take hold.
While Microsoft may chafe at the comparison to Apple, this could very well end up being connected-TV's "iPhone moment" -- the product launch that blasts new technology into the mainstream and makes everything that preceded it pretty much irrelevant. Kinda like what Apple did to the lowly cell phone in 2007. Apple ushered in the current smartphone revolution with the iPhone by re-imagining the interface, usability and form-factor of the cellphone. Similarly, Microsoft just fired the starting-gun on the connected TV revolution simply by updating its existing product and the fixing the sloppy interfaces that plague other connected TV offerings.
Xbox was designed from day one as a video-game system, and has gradually added internet-features like streaming Netflix movies and music from Last.fm over the past few years. With these features, Xbox had already earned a place as an entertainment hub in millions of living rooms, giving it a significant head start against the array of competing devices vying to be the internet gateway for TV. With nearly 58 million devices already sold, Xbox has the install base to change the way consumers view streaming video on their TV sets.
With such a large number of consoles sold, it would only take a fraction of users to adopt Xbox as their primary video-delivery platform for Microsoft to find itself the proud owner of the country's largest "cable network" – without the cables. Traditional operators like Dish and DirectTV boast subscriber numbers in the sub-20m range, so Microsoft's install base alone gives it the footprint to rapidly become a significant player in TV.
To achieve this goal, Microsoft doesn't even need to deploy a new physical device, but has demonstrated that a software update pushed to its network of connected devices can re-invent their primary purpose. Xbox's internet-connected, HD-capable hardware, combined with a superior interface for discovering and controlling on-demand video content makes it a natural breakthrough product for the medium. The Xbox can be for IPTV what the iPhone was for smartphones.
Of course, just like the iPhone, the new Xbox interface comes with ad opportunities. As users scroll through the Xbox dashboard, there are multiple ad opportunities in the form of video and interactive ads, both in the interface and before or during the streaming video content. Microsoft has played with advertising on the Xbox before, but the arrival of video apps opens the console to the brave new world of in-stream video advertising and provides content owners a gateway to deliver advertising to their viewers.
The arrival of HD, full-screen video on such a user-friendly internet-connected device creates an incredible opportunity for advertisers. Marketers can leverage the granular targeting and real-time bidding technology of online video in a full-screen, HD, lean-back environment that looks and feels exactly like TV. This combines the best of both worlds, enabling advertisers to deliver relevant, high-impact brand advertising to far more engaged and relevant viewers and achieve the measurement and accountability of digital. To say that marketers are excited is an understatement.