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Microsoft Enters Movie Rental Market

6 Nov, 2006 By: John Gaudiosi

Microsoft Corp. is firing the first volley in the digital distribution content battle on the next generation game system front.

Xbox Live Marketplace, the digital distribution network for Xbox 360, will begin offering movie download rentals from Warner Bros. Pictures and Paramount Pictures Nov. 22. Gamers will be able to rent movies for an unannounced fee and download them to their 20 GB Xbox 360 hard drive in either standard or high definition. (HD movie rentals will cost slightly more.) Initial movies for rental include V for Vendetta, Batman Forever, Nacho Libre and Jackass: The Movie.

Microsoft Director of Platform Strategy Scott Henson said this rental model will follow existing models in price and usage. Once a movie is downloaded, it will be stored on the hard drive until played. From that point on, the gamer has 24 hours to view the movie as many times as he or she wants.

Henson said more than 1,000 hours of entertainment content will be available by year's end.

Microsoft will also unleash a wave of TV content as part of its entry into digital delivery of entertainment. Networks such as CBS (“Survivor,” “CSI,” “Star Trek”), MTV (“Pimp My Ride,” “Real World”), Nickelodeon (“Avatar,” “SpongeBob SquarePants”), Turner (“Aqua Teen Hunger Force,” “Robot Chicken”), SpikeTV (“Disorderly Conduct,” “TNA iMPACT!”) and VH1 (“Surreal Life,” “Hogan Knows Best”) will provide content out of the gate.

Unlike movies, TV shows will be purchased by consumers and can be downloaded to a hard drive as many times as a gamer wants. Henson said pricing will be comparable to other TV shows currently sold digitally. He said how shows are released will be up to each network.

“We have the ability to support the sale of entire seasons of TV shows, but it's up to the content providers to decide how to sell their shows,” Henson said. “I think initially you'll see individual downloads.”

The Xbox Live Marketplace — which has already had more than 70 million gaming and entertainment downloads in its first 11 months (many of which were free offerings) — will offer networks individual pages to promote their brand. Each individual show will receive a separate branded page and gamers can scroll through the TV content to search for specific shows in multiple categories. Some shows will be offered in both standard and HD.

“A key part of this is choice,” Henson said. “If people want high definition, they can get it. If they want the quicker, standard definition, they can get that as well. It will depend on the program.”

Henson said that while watching “South Park” in HD won't be a big deal for some gamers, a film like V for Vendetta is something that should appeal to HD fans. He also added that the latest update of Xbox Live, which offers the ability to watch games and entertainment content in 1080p, allows for streaming of content from Windows XP and Windows Media Center PCs to Xbox 360. Content purchased on Xbox 360 will not play back on PCs.

“For the folks who don't want to have the Media Center experience and they want to have the direct-to-console experience, I think the Xbox Live Marketplace will be excellent for that,” Henson said.

Microsoft is currently talking to every Hollywood studio about content. The game maker has established relationships with Hollywood, which has been using Xbox Live to market new films and TV shows.

“No other game console has ever done this, so we're pioneering new territory here,” Henson said. “Hollywood sees the opportunity, and I think it will be successful, and as it is successful, more content providers will jump on board.”

From the very beginning, Microsoft made its 20 GB hard drive upgradeable. Over time the company could release larger hard drives to hold more entertainment content, should gamers want it.

“One of the great things about having a managed network is the ability to have a really intimate relationship with your gamers,” Henson said. “They're very vocal, and we'll get a lot of feedback of what does and doesn't work as we move forward.”

Entertainment content also is another way for Microsoft, which has a one-year head start on the competition, to diversify its next generation offerings.

“This is a great way to give more value-add to our Xbox Live members, whether they're Silver (free) or Gold ($50 annual subscription),” Henson said. “This can help bring kids and wives into the gaming fold. There's a tremendous amount of upside here.”

Microsoft currently has 4 million global Xbox Live members, and that number is expected to reach 6 million by June 2007. This entertainment service will only be available in the U.S. at launch, although Microsoft is expected to roll out the movie and TV offerings in other countries over time.

“This is one of the first steps that Microsoft needs to take to skew the demographics older and younger,” said PJ McNealy, videogame analyst, American Technology Research. “I don't think this will be people's automatic first choice for replacing iPods or the cable clicker, but it's an incremental positive for Xbox Live.”

Sony will launch its PlayStation Network Nov. 17. Although games will be the focus of this digital distribution and online gaming network at first, Peter Dille, EVP of Marketing at Sony, said music, movies and TV content would be part of the service moving forward. One advantage Sony has in this area is synergy among the entertainment companies in film, TV and music divisions.

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