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According to market research firm NPD, Xbox 360 has been the top-selling console in the United States for 11 of the last 12 months. Microsoft claims that about 55 million Xbox 360 consoles have sold since its 2005 launch, and the Xbox Live service, which lets players connect their consoles to the Internet to play with remote users, download games, and stream movies, has about 35 million subscribers. The Kinect peripheral has set sales records, selling over 10 million units since it became available in Nov. 2010. Microsoft believes that Xbox will become the number-one-selling console in the world within the next year, topping competitors from Nintendo and Sony.

At E3, Microsoft announced new content partnerships for Xbox Live. Live television programming from networks such as ABC will become available for U.S. customers potentially eliminating the need for a cable TV service, satellite TV service, or antenna, and a separate set-top box to view that programming. (Similar television services have already been available for Xbox Live subscribers in Australia, France, and the United Kingdom.) YouTube and UFC content will also join the existing services for Xbox Live subscribers, which include ESPN, Hulu, Netflix, and Microsoft's own Zune movie, television show, and music service. All of the content can be navigated using Kinect gestures or voice commands: for example, saying "Xbox Pause" lets users pause a video without using a remote control.

Bing's search services will also become accessible to Xbox users. The search engine integration will make it easier for users to find games, movies, television shows, and music that are available through one of Xbox Live's services or already downloaded to the Xbox hard disk. The exclusive use of Bing on the Xbox could help Bing gain search market share.

Kinect Emphasized

Kinect was prevalent throughout Microsoft's E3 announcements. The peripheral's capabilities will be integrated into more native Xbox user interfaces, such as a revised dashboard menu system that builds on the design elements used on Windows Phone 7.

Several new games with Kinect support will be published by Microsoft and third parties. The original wave of Kinect titles focused on family and casual players with dance, workout, and simple sports games. The next wave builds on this category with new dance and sports games and others based on Sesame Street and Disneyland experiences, but titles for "core" gamers are also coming. For example, the next version of the Forza racing game uses Kinect to track player head movements so that the player can peer around a turn coming up in the road, and a new Fable release will let players use gestures to drive a horse carriage and wield magical powers. Several new core titles will use Kinect's voice command feature. Electronic Arts announced that the next versions of four of its major sports titles will support Kinect, and Ubisoft announced that all of its future Tom Clancy titles for Xbox will support Kinect.

A set of simple Kinect-based applications called Kinect Fun Labs was also announced and is available now. The applications demonstrate Kinect capabilities by performing tasks such as generating an avatar that looks like the player after capturing his image and scanning objects that the player holds up to the Kinect camera so they can be rendered and manipulated three-dimensionally on the screen. New applications are expected to be added to Kinect Fun Labs, which could spark developer ideas for future Kinect titles.

Xbox as Living Room Hub

The growing catalog of movie, television, and music services along with the gaming experiences available for all types of players make Xbox a strong contender to be the central device that drives living room entertainment. However, as Xbox achieves this goal, other Microsoft technologies such as Windows Media Center and the Mediaroom platform may lose relevance and future development resources within the company.

Consequently, ISVs and other partners currently building on these older, overlapping technologies should be evaluating new opportunities in living room entertainment that may become available through the success of Xbox.

Resources

The Kinect peripheral is discussed in "Kinect Goes into Motion" on page 11 of the Dec. 2010 Update.

The Mediaroom platform is discussed in "Mediaroom 2.0 Extends IPTV" on page 18 of the Feb. 2010 Update.