This week at the E3 expo, Microsoft made several new product announcements related to the Xbox.Two of those could have an impact on the mobile industry: SmartGlass, which will allow Xbox users to control games and other features from a tablet or smartphone, and the new Xbox Music service, which claims a world-beating library of 30 million titles and will be available from Windows Phones and PCs.
Specifically, they show how Microsoft could use its growing Xbox installed base to drive sales of its mobile products.
Microsoft’s strength in the living room is underappreciated. While Apple CEO Tim Cook recently boasted of selling 2.7 million Apple TVs in the first five months of 2012 (up from 2.8 million in all of 2011), Microsoft now says it has sold more than 67 million Xbox 360 game consoles, making it the top-selling current-generation game console worldwide. Microsoft also has more than 40 million users of the related Xbox Live system, and claims that those users spend an average of 84 hours per month on the service.
The Xbox 360 continues to evolve from a game console to an all-in-one entertainment source, with a wide variety of music and video content available. This content often costs extra, and some of it requires a cable subscription — Microsoft is NOT positioning the Xbox as a “cord-cutting” device, but rather as an all-in-one command and control centre for the living room. But nonetheless, it has made the Xbox the top non-PC device for watching online video, ahead of the iPad and mobile phones. (See chart 1.)
But Microsoft’s smartphone market share is less than 2% worldwide. (See chart 2) Microsoft is also nowhere in tablets, although its upcoming Windows 8 operating system is an attempt to change that.
So how might these upcoming Xbox additions boost Microsoft’s mobile position?
- SmartGlass will allow users to control Xbox content from a smartphone or tablet. Microsoft says that users of any Windows Phone or Windows 8 computer (including tablets) will be able to control SmartGlass-enabled games and content apps that run on the Xbox. Microsoft confirmed that developers will have to revamp their apps to support SmartGlass, but Microsoft will undoubtedly seed that market by working closely with a few key video content partners — Paramount was mentioned in the demo — and by building it into Microsoft-produced Xbox games. Microsoft says that SmartGlass will also be available for iOS and Android, but it’s likely that Microsoft will support its own platforms first, and with more features. Notably, there’s no effort by Microsoft to make SmartGlass work on Windows 7.
- Xbox Music has built a huge music library, and will be built into Windows 8. One big improvement: Microsoft now says that the service will have more than 30 million songs available. That’s a big gap over iTunes and Amazon MP3, both of which boast more than 20 million song titles. This music service is built into every Windows Phone — just as iTunes is built into the iPhone and Google Play into most Android phones — and will be built into Windows 8 as well (on older versions of Windows, users must download the Zune app separately). Like its predecessor, the new music service will also continue to offer an all-you-can-eat subscription version (similar to Spotify), which could be more attractive now that the same service will be so readily available from all these different kinds of devices. The rebranding itself could also attract users who were reluctant to try any product associated with the Zune, Microsoft’s failed MP3 player.
A lot of details about these services are still not available — Microsoft hasn’t publicly released developer information for SmartGlass, or pricing information for the Xbox Music subscription service, for instance.
Will this strategy work? Not by itself — Microsoft also needs to improve its mobile platforms and convince its hardware partners to build great hardware.
But it shows why Microsoft should not be counted out in mobile, despite its weak showing so far.
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