Why Microsoft Needs to Make Xbox More Netflix-Friendly

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The new generation of gaming consoles is only 6 months old, but so far Microsoft (NASDAQ:MSFT) has come up short against Sony (NYSE:SNE). The company wants to sell more Xbox One consoles, and to do that it will need to identify and remove as many obvious barriers as it can. One barrier Microsoft is on the verge of zapping, according to ArsTechnica, is the requirement to have a paid Xbox Live Gold account in order to watch content from Netflix (NASDAQ:NFLX), Hulu, and other media streaming apps on the Xbox 360 and Xbox One.

An Xbox Live Gold account costs $60 per year and is aimed primarily at gamers. By subscribing to the service, Gold members can play their games online,and download free games each month. Currently, though, Microsoft also locks Netflix, Hulu, and other streaming services behind the Gold paywall. The trouble for Microsoft is that neither Nintendo nor Sony require a paid account to access these video streaming services. So if a Netflix customer is looking to purchase a device to plug into his or her TV to watch content on, all things being equal, that person is more likely to pick a PlayStation 4 or Wii U. Other streaming media boxes, like the Roku and Amazon (NASDAQ:AMZN) Fire TV, also charge no additional fees for these features.

On the plus side for Microsoft, of course, is that it’s currently getting extra revenue from anyone who pays for a Gold membership to watch streaming media content, so it will be interesting to see how this decision — assuming it goes into effect — plays out.

Since the company would lose revenue from this decision, Microsoft probably has plans to make up the difference. One way it could recoup its losses would be to lock other services behind the Gold paywall, although that would seem counterproductive. It’s more likely that Microsoft will add new benefits to being a Gold subscriber.

For a while now, Microsoft has been planning to produce original programming specifically to be delivered through Xbox consoles. Like Netflix’s House of Cards and Orange is the New Black, these shows would be designed to appeal to a variety of audiences, although gamers would likely be the audience they’d target most. So far, Microsoft has announced a number of original series.

One is a reality show called Fearless, in which an Australian Navy Seal will travel around, finding and performing some of the most dangerous jobs in the world. Another, called Extraordinary Believers, is a stop-motion-meets-live-action show from the makers of Adult Swim’s Robot Chicken about characters from the Middle Ages trying to escape modern-day Los Angeles. Additionally, Microsoft plans to release series based on video games, including a Halo series and a Deadlands series.

Microsoft hasn’t announced how customers will access these shows yet, but one option would be to make them available only to people with an Xbox Live Gold account. After all, that’s how Amazon distributes its original programming — only subscribers to Amazon Prime can access those shows. Whether Microsoft’s shows will generate enough interest for the service to cover any losses from the Netflix and Hulu crowd remains to be seen.

All of this currently remains in the rumor stage. According to ArsTechnica, “multiple sources within Microsoft” have been clued in on this information based on the company’s planned announcements for its keynote presentation on June 9 at the Electronic Entertainment Expo. Plans could change, but it sounds like a wise move on Microsoft’s part if it wants to entice more non-gamers to buy Xbox One consoles. Microsoft has yet to comment on the story.

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