Microsoft Beats Apple to the TV

It has been some time in the making, but Microsoft has finally announced their online video entertainment strategy for the Xbox 360.

Beginning on November 22, Xbox 360 owners will be able to buy and rent over 1,000 hours of programming using the new Xbox Live Video Marketplace. The Marketplace will see Microsoft selling programming from CBS, MTV Networks, Paramount Pictures, Turner Broadcasting, Ultimate Fighting Championship (UFC) and Warner Bros. Home Entertainment. "CSI," "South Park," "Batman Forever," and "Nacho Libre" are a few of the titles that will be offered by year's end. At launch, TV shows will be offered as download-to-own, while movies will only be available as 24-hour rentals.

"This groundbreaking announcement is a win for everyone," said Peter Moore, corporate VP of the Interactive Entertainment Business at Microsoft. "It connects our partners with one of the most coveted audiences in entertainment today, and provides even greater value to our Xbox Live community, allowing them to enjoy the games and entertainment they want, when they want it."

A hot market taking shape
Microsoft's arrival in this emerging market brings with it some impressive firsts. The company has narrowly beaten Apple in the race to find a practical set top box-like solution to get commercial video downloads to the family room TV without having to move hardware around. Apple is expected to launch its own wireless set top box solution, dubbed iTV, some time in the first quarter of 2007. Apple has already announced a retail price of $299.

Microsoft's plan to combat Apple's offering rests in the added value of the complete Xbox 360 package. iTV's features are not yet known, but a premium Xbox 360 with an additional wireless network adapter is $480, $180 more than iTV, but considerably more capable. Recall that Apple is likely selling iTV with a considerably cushy margin, while Microsoft is losing money on every Xbox sold. The Redmond giant is hoping that many consumers will opt for the game-playing, HD DVD add-on sportin', 1080p playin' Xbox 360. While Microsoft isn't likely to publicly bill the Xbox Live Video Marketplace as a console sales generator, the fact remains that Microsoft's chief console competition is all about being a Jack of all trades (Blu-ray, downloads, etc.). And Apple is busy making the online movie and music business look simple. Microsoft needed to make a strong move here, and they have. Yet, even if they have beaten Apple to the punch, Microsoft's biggest concern will be deflating Sony's offering which will likely debut next year.

There's another trick up Microsoft's sleeve, as well. The company says that much of the content will eventually be available in High Definition—a welcome development for those of us who don't like paying full price for low resolution video. No other commercial service currently sells HD video, although sources have told us that Sony is planning to launch with HD. Microsoft says that 20 percent of the offerings will be in HD at launch, with more to follow.

Microsoft did not announce pricing, but the company did say it would be competitive. This suggests TV downloads in the range of $2 and rentals for anywhere between $3 and $7, based on offerings out there now.

The coming accessory boom
Microsoft has been telling the press that it has no plans to sell a larger Xbox 360 hard drive, despite a mock-up suggesting otherwise. With the launch of Xbox Live Video, you can bet that the 20GB drive that's currently offered is about to get a big upgrade. Why? 20GB is simply too small. If used for nothing else but video, the 20GB hard drive can only store approximately 24 forty-minute standard definition TV shows, or 4 hours of HD video. We expect a 60GB or 100GB add-on in the not-so-distant future.

Microsoft has also said that users will be able to re-download content for free, in the event that users delete content to make space for new purchases, or even if users want to sign in to Xbox Live and download the show on another console. Shows will be attached to a user's Xbox Live gamertag.

For now, the service will launch in the United States, but Microsoft plans to expand it to other territories over the coming year.--arstechnica.com