The Experience

Today, Microsoft launched the much hyped Xbox Experience. The new Experience is an attempt to both improve gaming but as importantly, if not more sit will position the Xbox as more than just a gaming console. The decision to partner with Netflix to allow for streaming content to the TV is an example of such. The multimedia applications the new Experience affords will allow Microsoft to reach across the living room to non-gamers and convince reticent console owners to pay for annual subscriptions to Xbox Live Gold.

But all this goodness does come at a price. The partnership with Netflix is exclusive for game consoles which means the PS3 won’t be getting Netflix anytime soon. While this competitive advantage would be a feather in Microsoft’s cap there is one minor complication: Sony owns a number of movie studios. Movie studios have to license their content to Netflix for streaming approval. Anyone else see where this is heading?

Naturally, this dynamic – when announced in July was curious. Not only could a content war hurt the relationship with Netflix but it could hamper the service on the Xbox as well. However, Sony remained quiet. Until today when Sony’s Columbia Pictures no longer had content available for streaming on the Xbox. Yes, that is the sound of the other shoe dropping. While Netflix isn’t admitting to foul play by Sony, clearly the timing and decision by Sony is a warning shot to Netflix and a demonstration of power.

While the decision to pull content is likely not final (NBC did make up with iTunes after all) it does show the escalating importance of the console as a device for media consumption beyond gaming. Getting to the TV is tough and game consoles are the only consumer CE device which have successfully accomplished it. The situation demonstrates the power of owning content. Sony is in an excellent position when it comes to digital distribution because of the vast amounts of content it owns and can choose to license or not to license.

But there is a solution to the dilemma. Sony holds out their library from Netflix to eliminate the exclusive partnership with Microsoft. For its part, Microsoft would get the full slate of Sony content and Sony would get Netflix on the PS3. The concern about escalating the battle for exclusive content will result in less choice for the consumer. Lest we remember how well bidding for exclusive content worked out for Sirius and XM. Would Hulu make an exclusive pact with the PS3 leaving 360 owners out in the cold? Ultimately these devices will have to differentiate on the experience and not the content or in the end, the consumers will lose.

As an aside, the new Xbox experience is really quite good and the streaming works quite well. Now if they could just take a page out of Boxee’s book, the company doing amazing things to bring free content to the TV then the only thing a consumer will have to buy is a mini-fridge so they don’t ever have to leave the couch again.