Why Microsoft Closing Xbox Entertainment Studios Is the Right Call

Source: Thinkstock

Source: Thinkstock

The past decade has not been especially easy for Microsoft (NASDAQ:MSFT). The company has branched off in many directions, but was slow to adjust to the shift toward mobile. One part of its business that has remained fairly strong is Xbox, but even that has grown unwieldy. Things are changing at Microsoft now, thanks in large part to the new CEO Satya Nadella, who announced last week that he’s cutting 18,000 jobs in a major company-wide reorganization. One group Microsoft is closing its Xbox Entertainment Studios, which could spell bad news for anyone who had planned to use the Xbox One as the cornerstone of their entertainment center.

News of the closing came from Xbox chief Phil Spencer, who said in a statement: “As part of the planned reduction to our overall workforce announced today and in light of our organization’s mission, we plan to streamline a handful of portfolio and engineering development efforts across Xbox … One such plan is that, in the coming months, we expect to close Xbox Entertainment Studios.”

What exactly was Xbox Entertainment Studios? Formed early last year under the direction of former CBS Television executive Nancy Tellem, it was Microsoft’s in-house studio for creating television content. Just like how Netflix makes House of Cards and Amazon makes Betas, Xbox Entertainment Studios was conceived to produce original programming specifically for Xbox Live. The studio was a key part of Microsoft’s plan to have the Xbox One dominate the living room.

Reportedly, Xbox Entertainment Studios employed about 200 people, but it’s unclear how many will lose their jobs. They had been working on a wide array of content for Xbox Live, and had revealed a number of shows in development, as well as ideas for future shows. The programs that had been announced as definitely happening included a remake of a Swedish sci-fi show and two series based on Microsoft’s blockbuster Halo game franchise. A reality show about soccer players debuted last month to coincide with the World Cup. Potential future shows included a series based on the detective novel Gun Machine by Warren Ellis, as well as several series based on popular Xbox-exclusive game franchises like Gears of War and Fable. A full list is available here.

Like most business decisions, however, it all came down to the bottom line. It’s questionable how many Xbox One units such original programing would help sell, and whether it would be a worthwhile investment for the company.

The shuttering of the studio also indicates that Microsoft is serious about moving away from marketing the Xbox One as the key component of the entertainment center. Due to sales of the console lagging behind the PlayStation 4, Microsoft has released a competitively priced version of the Xbox One that comes without the Kinect motion sensor. At this year’s E3 presentation, the company focused its message on nothing but games.

However, not everything Xbox Entertainment Studios was working on will be scrapped. So far, Microsoft has confirmed it will keep working on the Halo television series, a separate episodic series called Halo Nightfall, and a six-part technology documentary series called Signal to Noise.

Also saved from the chopping block is a unique hybrid media property called Quantum Break. It will be composed of two entities: a live-action TV show, and a video game for Xbox One. The narrative will be split between the two mediums, so gamers will rotate between playing segments of the game and watching half-hour episodes of the show.

Microsoft said in a statement to the BBC that, “Xbox will continue to support and deliver interactive sports content like NFL on Xbox, and we will continue to enhance our entertainment offering on console by innovating the TV experience through the monthly console updates.”

Since times are tight for Microsoft, and Nadella wants to focus the company’s attention where it will do the most good, shuttering Xbox Entertainment Studios is probably for the best. Now Microsoft can rely on partnerships to get television content on the Xbox One, while focusing more energy and resources on getting great games on the system. Fans might lose out on some promising television series, but consoles live and die by the games they offer. Nadella is making a smart choice, at least for now.

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