The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
On Tuesday, Microsoft’s (NASDAQ:MSFT) Xbox One next-generation console was finally unveiled. Key features of the new console were largely in line with our expectations, but many unknowns remain. The new console will launch around the world later this year.
Xbox One will be an all-in-one entertainment system controlled through a new controller with forty design innovations, Kinect, and built-in Smart Glass. In addition to built-in Skype, the new console will feature an updated version of the Kinect sensor built in to every box that allows the user to control his entertainment experience in a number of ways.
Voice will become more conversational on Kinect, with 1080p resolution as well. When the user enters a room, Xbox One instantly responds to the user through Kinect, eliminating the sometimes tedious log-in process. In addition, system or game updates will automatically process in the background, eliminating waiting time.
Through voice commands, the user can turn on the Xbox One (through saying the “Xbox On” command), and is taken to a personalized home screen that presents the user with what he was last doing, as well as a new “Trending” section for popular games, TV, movies, and music, and a “Favorites” section for items that the user has personally pinned. The Xbox One Guide aggregates these features.
A variety of voice commands then allows the user to select his next entertainment experience through instant switching. Commands highlighted in the presentation included “Xbox Game” (brings up the last game the user was playing), “Watch TV” (brings up live television), “Go to Music”, “Watch Movie”, “Xbox Trending”, “Xbox Favorites”, “Xbox Show the Guide”, or “Go to Internet Explorer”, among others.
In addition to voice control, the user can also manipulate his entertainment experience though a new set of universal gestures for Kinect, similar to those used for mobile phones and tablets. When the user would like to return to the home screen, a simple “Xbox Go Home” command will bring the user back to where he began his entertainment experience.
In addition, the user can do multiple things on his TV through snap mode, which brings up programs next to each other. For example, the user can play a game on one portion of his TV, with Skype positioned elsewhere for live communication. HD Skype in widescreen mode is available through Kinect’s high resolution camera and the “Xbox Answer Call” command. When the call is over, the user simply needs to say “Skype End Call” to hang up. Smart Glass allows the user to utilize his mobile phone or other smart device as a controller.
Sports were a key theme throughout the presentation. Andrew Wilson, Electronic Arts (NASDAQ:EA) Sports’ Executive Vice President, announced a new and broad relationship between Microsoft and EA Sports that includes the development of four games for Xbox One: next-gen versions of FIFA, Madden, NBA, and UFC. He also announced the new EA Sports Ignite game engine for human intelligence, true player motion, and living worlds, with 4x more calculations per second and 10x more animation depth and detail. He also announced that FIFA Ultimate Team will be an Xbox exclusive.
In addition, on Tuesday, Microsoft announced a partnership with ESPN (NYSE:DIS) that will allow users to watch a new sports offering through the “Xbox Watch ESPN” command. In addition, fantasy sports will be layered onto the entertainment experience, with the user able to see the fantasy impact of the sports he is watching on TV. Microsoft also announced a partnership with the NFL for exclusive content related to fantasy football and interactions with others.
The Xbox One presentation centered around the console’s all-in-one entertainment experience as opposed to specific games. In addition to the aforementioned EA Sports games, Forza Motorsport 5 will be available at launch. Remedy’s Quantum Break was shown next. Currently, the Microsoft game studios have more games in development for Xbox than at any other time in history.
Over fifteen titles are expected in year one, eight of which are new franchises. The presentation ended with an array of Call of Duty: Ghosts content from Activision Blizzard (NASDAQ:ATVI), including the disclosure that Ghosts downloadable content will launch exclusively on Xbox One for an unspecified period of time. After Tuesday’s presentation, EA announced that Battlefield 4 will be available for Xbox One and PS4.
Michael Pachter is an analyst at Wedbush Securities.
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