Xbox: Intriguing friend, foe to telco TV

When looking back at last week's Electronic Entertainment Expo (E3) in Los Angeles, it's hard to argue that announcements with telco TV implications took center stage. After all, the two surviving members of The Beatles showed up to unveil "The Beatles: Rock Band" video game, an event which pretty much guarantees smaller headlines for everyone else at E3--even Microsoft.

But, don't fear for Microsoft's self-esteem. New features for the Xbox 360 and new content partnerships designed to strengthen the Xbox platform's emerging position as a multi-purpose entertainment unit shined the spotlight back on the software giant. While many E3 attendees probably were most interested in the company's Project Natal gesture-tracking/skeletal-mapping/voice-recognizing controller-free gaming technology (We are not kidding), it's the content deals that telco TV providers will want to watch more closely.

Those deals include arrangements with BSkyB for live TV streaming in the U.K., for music streaming, as well as integration of Facebook and Twitter capabilities. Those partnerships, combined with Microsoft's existing partnership for Netflix movie downloads on the Xbox 360, continue the platform's gradual migration to the center of living room affairs. It's a migration that has been going on for more than two years, though it seemed hard to believe when it began. Now, as major U.S. telcos like Verizon Communications and AT&T look to add more capabilities to their own TV services, along the lines of the content and social networking features being incorporated into Xbox 360, the Xbox 360 could become the platform of choice for telcos who aren't big enough and don't have the resources to build their own IPTV offerings or do their own deals with Facebook and Twitter.

In that respect, it seems like only a matter of time before Microsoft forges an Xbox relationship with a U.S. telco TV provider--or perhaps a satellite TV player/telco partner will be first. The other possibility is that the increasingly talented Xbox 360 itself becomes the competition. This could happen if Microsoft makes deals with TV programmers, cable TV network operators or maybe a company like Hulu. If that happens, and throngs of potential customers more comfortable with their gaming platforms choose the Xbox 360 as their main entertainment unit, telco TV players could be the ones to suffer. Yet, Microsoft, who works with the telcos in plenty of other ways, probably will not let that happen.