Xbox Expunging

The last installment of Switched On discussed the merits of Microsoft divesting itself of Bing. While Bing is still firmly embroiled in a duel with a company that has seen tremendous momentum in the past decade, the case is very different for Xbox.

Few products within Microsoft have as colorful a history as its home video game console. While Xbox stands out as an exception at the company today, it is in many ways a model of its future: an internally controlled hardware platform that supports a robust library of software titles from first and third parties with tight integration to Microsoft services.

Microsoft may not have been an early entrant to the video game market, but it was early and ambitious when it came to tying physical media to the cloud via broadband. While the original Xbox was derided for its chunky profile and the console never really took off in Japan, Microsoft hit its stride in the US with the Xbox 360, which consistently topped sales charts after Wii euphoria subsided.



But that climb has required significant investment. Calls for Microsoft to sell off Xbox have been particularly vocal from Nomura equity analyst Rick Sherlund, who estimates that the gaming group has lost $1 billion, covered up by royalty payments from Android sales.

While Bing was developed to counter Google, a company that threatens Microsoft's core businesses, the Xbox's main rival was and remains Sony's PlayStation. Sony poses no competitive threat to Microsoft. Indeed, it has been one of the few Windows PC makers to not jump into the Chromebook market.

As with Bing, the Xbox's competitive landscape is changing, albeit less dramatically.
As with Bing, the Xbox's competitive landscape is changing, albeit less dramatically. While Xbox remains far ahead in terms of any efforts by Apple or Google to infiltrate the living room, both competitors have clearly been stepping up their efforts there with broader, less-expensive TV efforts beyond gaming. Against a background of more serious TV efforts, Apple has been steadily beefing up its support of third-party video services around Apple TV. Meanwhile, Google has been making waves with Chromecast, which costs less than a tenth of the new Xbox One.

Then there is the broader question of what the potential of TV as a platform is, beyond extended choice for video. Tellingly, Samsung -- one of the earliest and most prevalent backers of smart TV -- has redesigned its user interface to focus more on "channels" of video and less on apps. Even here, living room gadgets like smart TVs face competition from mobile devices accommodated by Apple TV, Chromecast and others.

Having a successful game console might not be the first priority in the war to control multiple screens and is certainly no substitute for an improved position in mobile, tablets and the next wave. But Microsoft can ill-afford to discard the one integrated model that's had some marketplace acceptance at this point. If it can strengthen Windows' tablet and mobile positions to the point where they become more credible conduits back to the TV, then the Xbox may not seem as core to its competitive quest.

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