Comes With Content Making a Comeback

One year after shutting down its Ovi Music Unlimited streaming service that came bundled with its smartphones, Nokia is trying again. On Tuesday, just ahead of its official unveiling of its first Windows Phone 8-powered Lumia handsets, Nokia announced a new music streaming service that will come bundled with its devices. Unlike Ovi Music, however, the new service will be free — no ads, no subscription fee. While the idea of bundling content with devices is not new, increasingly, content services are integral to device makers’ hardware strategies.

Nowhere is that more true than with Amazon, whose Kindle e-book readers and Kindle Fire tablets are essentially portable front doors to Amazon’s digital content stores. And sure enough, Amazon on Tuesday, just ahead of an expected announcement regarding a new-generation Kindle Fire,  announced a new deal with Epix to bring new-ish Paramount, Lionsgate and MGM films to its Prime Instant Video subscription service that comes bundled with the Amazon tablet.

The trend is becoming so pronounced that some analysts are speculating that content service providers will need to start building their own hardware to remain competitive. Simulmedia CEO Dave Morgan, for instance, makes the case of a Yahoo-branded TV in the current issue of Ad Age. Conversely, Brian Lowry of Variety wonders whether even Apple can remain competitive without its own subscription-based iContent services.

Here’s our prediction: The new Microsoft Surface tablets will come bundled with Xbox Live, giving the tablets their own, closely linked content service and taking the highly popular Xbox Live platform beyond the game console.

 

 

Microsoft Adding Access to TV Programming for Xbox 360 Subscribers

Microsoft seeks to further establish the Xbox 360 as an access point for all forms of home entertainment, announcing plans to integrate content and services from the likes of cable operator Comcast and networks such as HBO into the Xbox Live dashboard. The integration does not represent a consolidation of consumers’ cable bills, however (via the Seattle Times); access to cable programming, for example, will require subscriptions to both cable (and Internet) service and Microsoft’s $60-per-year Xbox Live Gold package.

Technicolor, Microsoft Sell Stakes in DRM Developer ContentGuard

Intellectual property company Pendrell Corp. plans to acquire 90.1 percent of digital rights management (DRM) developer ContentGuard Holdings, in a deal with Microsoft, Techicolor, and Time Warner valued at $90.1 million.

Time Warner, which in 2005 jointly acquired ContentGuard with Microsoft and Technicolor, will retain a 9.9 percent stake in the firm. Technicolor announced the sale of its stake on Thursday; although Microsoft has not commented publicly on the transaction, a filing with the Securities and Exchange Commission confirms the company as a majority shareholder in ContentGuard (via TechFlash).

Originally spun out of Xerox PARC in 2000, ContentGuard has developed content protection technology for a range of connected devices, from DVD players to mobile phones. Approximately 50 percent of mobile handsets worldwide license ContentGuard, according to Pendrell.

Pendrell and Time Warner said they would work together to accelerate growth of ContentGuard’s technical solutions and licensing programs.

Technicolor in a statement said that the sale was in line with its corporate strategy “to focus on the monetization of its IP assets”; the company added that it will record a capital gain estimated at $11.5 million at the closing of the transaction.

E3: Hardware Makers Look to Extend Current Console Brands

Highlights from videogame console makers’ press events at the E3 Expo in Los Angeles:

Sony: In welcome news for 3D home entertainment developers, Sony Computer Entertainment said it planned to “break the mold on 3D pricing this year” with a $499 bundle that includes a 24-inch, PlayStation-branded 3D display, along with a pair of active-shutter glasses, an HDMI cable, and a copy of the upcoming “Resistance 3” videogame (via PC Magazine).

In related news, analysts are anticipating that Sony’s forthcoming “Uncharted 3” could be the videogame industry’s watershed 3D title (via The Hollywood Reporter). The game, developed by Sony-owned studio Naughty Dog, is set for a Nov. 1 release.

Sony Computer’s Jack Tretton also took time during the company’s press conference to reiterate his apology for the data compromises that the PlayStation Network suffered from hackers in May.

Nintendo: The company’s “Wii U” system, set for release in 2012, will employ a motion controller that itself houses a 6.2-inch touchscreen. Nintendo thus looks to add new second-screen functionality to game developers, while incorporating some tablet-to-TV tricks for sharing photos and online videos.

Wii U games will ship on high-density, 12cm optical discs, but the disc format will be proprietary and not based on Blu-ray, according to reports.

Microsoft: The Xbox 360 maker has offered few details of its promised live TV integration later this year. The company also plans to offer YouTube video playback via the system, along with voice-activated Bing searches for TV shows and other entertainment content (via Variety).

Microsoft Pumps Xbox as Pan-Entertainment Brand

Microsoft hints that it has more than just video game announcements in store for next week’s E3 Expo, as it touts its Xbox console as an increasingly popular hub for streaming video and other home entertainment content.

In fact, “40 percent of all Xbox activity now is non-game,” says Frank Shaw, Microsoft’s VP of corporate communications, in a corporate blog post. “Put another way, we’re seeing an average of 30 hours of video consumption per month per Xbox, a number that is growing fast.”

The company now claims sales of 53 million Xbox 360 consoles to date, along with 30 million members of its Xbox Live online services.

Game Software Sales Up 26% in April; Xbox 360 Hardware Outstrips PS3

Packaged video game software sales in April increased 26% year-over-year to $503 million, according to the NPD Group. But Sony’s April 20 shutdown of its PlayStation Network appears to have had some impact on the market.

While Sony sold 204,000 PS3 consoles during the month, representing a 13% increase over sales in April 2009, rival Microsoft sold 297,000 Xbox 360 consoles during the month, a 60% increase from last year.

As CNBC reports, the newest installment of Sony’s popular “Socom” franchise also failed to chart with the month’s 10 best-selling games. That is likely due to the game being released one day before Sony shut down its network to assess the extent of hackers’ attack.

Microsoft Says It Will Integrate Skype Into Xbox

Making the announcement today that it would acquire Internet communications company Skype for $8.5 billion in cash, Microsoft said that Skype would support a range of products, including Kinect video game sensors and Xbox consoles connected to the Xbox Live service. Skype currently counts 170 million monthly users worldwide, although The Wall Street Journal points out that not all users make video phone calls with the company’s voice-over-Internet-protocol technology.

More Clouds, 3D Optimism at NAB

More highlights from the National Association of Broadcasters convention in Las Vegas:

• Microsoft Corp. announced today a “partner ecosystem” to develop cloud distribution solutions for the media and entertainment sector, using the Windows Azure platform. A slate of companies have joined the Microsoft initiative, including Digital Rapids and Origin Digital for cloud-based content processing; Arvato Digital Services, DAVID Systems, Harris Broadcast Communications, Polycom Video Content Management, Sitecore, and TechPath for cloud-based content management; Aspera, iStreamPlanet, MPS Broadband, and Signiant for cloud-based content delivery; and BuyDRM and Cognizant for cloud-based content protection.

• Meanwhile, “Avatar” director James Cameron announced a new venture with the blockbuster film’s cameraman, Vince Pace, to design 3D camera systems, creative tools, and services for television producers. Unveiling the Cameron-Pace Group at NAB, the director told Reuters that he expects 3D productions to take hold on the small screen within five years. “3D is just how all broadcast entertainment will be done. Sports, episodic drama, scripted and unscripted — we haven’t seen anything yet that doesn’t have a great degree of value added by being in 3D,” he said.

Microsoft To Test ‘Disc Format’ Update for Xbox 360

Microsoft issued on Tuesday an open call for participants in a public preview of “an updated disc format” for its DVD-based Xbox 360 game console.

The company did not disclose specifics of the update. Gamasutra speculates it could entail a new approach to securing the content of the DVD-9 game discs. A source tells Digital Foundry that game developers could gain 1 GB of storage capacity on the discs — a significant increase, given the discs’ maximum capacity stands at about 8GB — if Microsoft implements the new change.

In a post on the company’s Major Nelson blog, Microsoft’s Larry Hryb says that the Microsoft is seeking “multiple thousands” of Xbox Live users for the beta program.

PlayStation’s Digital Game Sales Gain on Xbox: Research

Sony’s PlayStation Network chipped away at the Microsoft’s lead in digital videogame sales during the second half of last year, with the online network grossing an estimated $49.4 million between July and December of 2010, according to research firm Forecasting & Analyzing Digital Entertainment (FADE).

PlayStation Network posted 40% sales growth during the six month period (compared with 2009), outpacing the concurrent 18% increase at Microsoft’s Xbox Live Arcade. The Sony network, which pulled in an estimated $9.3 million in December alone, now counts more than 100,000 monthly users.

The top-selling digital title on PlayStation during the period was Ubisoft’s “Scott Pilgrim vs. The World,” for which Sony snagged an exclusive release window, with 190,000 copies sold.

For titles sold via multiple digital platforms, PlayStation is approaching sales parity with Xbox, FADE adds. “In 2009, Microsoft enjoyed a 2:1 sales advantage for multi-platform titles launching simultaneously. Today, that advantage is nearly even with first-month typical sales being 55/45 among new titles like ‘Costume Quest,’ ‘Pac-Man CE DX,’ and ‘X-Men Arcade,’” says Benjamin Schlichter, FADE director of research & analysis.

Apple Still Sits Atop Digital Movie Market

Apple’s iTunes store accounted for nearly two thirds of U.S. electronic sell-through and Internet video-on-demand consumer spending combined in 2010 (64.5%), according to new research from IHS Screen Digest.

While Apple’s total market share declined from 74.4% in 2009, the research firm notes that the company’s continued dominance coincides with a 60% revenue increase in the overall EST/iVOD movie business during the year.

IHS research director Arash Amel notes that while competing services proliferated in 2010, “iTunes managed to grow because of the introductions of the iPad and the second-generation Apple TV, which have spurred the company’s movie rental offerings and have invigorated the iTunes multi-screen ecosystem.

“We expect that in the United States, Apple’s strong performance in iVOD will allow it to continue to bypass the video on demand services offered by many major cable operators,” Amel adds.

Microsoft’s Zune video platform claimed the No. 2 spot for EST/iVOD consumer spending in 2010, with a 17.9% share, followed by Sony’s PlayStation store (7.2% share).

More details at iSuppli.

‘Call of Duty’ Installment Tops $1 Billion in Sales Worldwide

Activision Publishing announced Dec. 21 that its “Call of Duty: Black Ops” videogame has crossed the $1 billion mark in sales worldwide since its launch in November, according to internal company estimates.

To date, players have logged more than 600 million hours with the game, Activision says. The average “Black Ops” player on Xbox 360 logs on more than once a day and plays for more than one hour each seasion; over half of that time is spent playing online with and against friends, according to Microsoft.

NPD: Kinect, ‘Call of Duty’ Lift Game Industry Sales

Sales of Xbox 360 consoles increased 68% year-over-year in November, thanks to Microsoft’s introduction of the Kinect motion sensor accessory, according to new data from the NPD Group (via Information Week). Meanwhile, Activision’s “Call of Duty: Black Ops” rung up sales of 8.4 million units during the month, accounting for an estimated 25% of all November’s videogame software sales.

Total game software sales (not including downloads) topped $1.46 billion in November, up 4% from 2009. Total hardware sales increased 2% year-over-year to $1.08 billion.

Separately, NPD reported that retailers sold some 400,000 Blu-ray players during the week encompassing Black Friday, an increase of more than 50% from the corresponding period in 2009 (via Home Media Magazine). The median price per unit during the week was $113, down 23% from the median player price of $145 last year.

Videogame Software Sales Up in October, says NPD

Videogame software sales for the month of October rose 6% year-over-year to $605 million, while accessory sales for the industry increased 18% on the introduction of Sony’s PlayStation Move motion controller, according to NPD (via Bloomberg).

The gains were not enough to offset a 30% annual decline in both console and portable hardware unit sales, which brought overall industry revenue down by 4% during the month.

The Xbox 360 system, however, did see a year-on-year sales gain in October — perhaps in anticipation of Microsoft’s Kinect, which went on sale Nov. 4. Microsoft separately reported that sales of the Kinect topped 1 million units in the device’s first 10 days (via Information Week); the company expects to sell 5 million Kinect systems by year’s end.

Microsoft Ups Kinect Outlook

Microsoft expects to sell 5 million Kinect motion controllers for its Xbox 360 game system this quarter, Bloomberg reports. The company had previously expected to sell 3 million units of the Kinect accessory, which goes on sale today. But it revised its forecast in the wake of strong consumer pre-sales and retailer orders. Review of the Kinect system at The New York Times.

Distributor TuneCore Sings Digital Music’s Praises

“Unit sales are up, not down — that means people are buying more music, not less,” says Jeff Page, chief executive of digital music distributor TuneCore, in an interview with the Los Angeles Times. TuneCore’s business model is accordingly looking up: the company charges a flat fee to send song and album files to digital retail, as opposed to the conventional practice of taking a percentage of sales. Since the company’s 2005 founding, TuneCore has grown to distribute as many as 30,000 songs each week, from both aspiring and established artists, to the likes of iTunes, Amazon.com’s MP3 store and Microsoft’s Zune service.

Halo: Reach Nets $200 Million On Day One, Microsoft Says

With the standard edition of Microsoft’s “Halo: Reach” selling for $60 and a premium version selling for $150, the total number of copies sold likely ranges between 2 million and 3 million, estimates the LA Times.

Microsoft had expected that the new videogame, released Sept. 14 exclusively for the company’s Xbox 360 console, would best the first-day performance of 2007’s “Halo 3.” But it’s unclear whether it did so.

The $200 million figure — announced by Microsoft Game Studios VP Phil Spencer at a Tokyo videogame conference (via Joystiq) — includes European sales. Following the launch of “Halo 3,” Microsoft said that game had done $170 million in sales on its first day in the U.S. alone.

‘Halo: Reach’ Expected to Surpass Sales of Series Predecessor

“Halo: Reach” developer Bungie tweeted yesterday afternoon that the new videogame had already surpassed the previous franchise installment’s record for concurrent unique users on Xbox Live (via PC World). The company did not disclose a specific number. Publisher Microsoft expects “Reach” to surpass disc sales of the previous game in the series, “Halo 3,” which moved some 5 million units during its first week of availability in 2007.

Microsoft: ‘Gold’ Level Xbox Price Hikes Take Effect In November

Microsoft is raising prices of several Xbox Live subscription levels in the U.S., Canada, Mexico, and the UK by as much as 25% beginning November 1.

“Gold” level subscribers in the U.S. will pay $2 more for a one-month subscription ($7.99), $5 more for a three-month subscription ($24.99) and $10 more for a 12-month subscription ($59.99). However, current subscribers have the opportunity to secure a 12-month renewal for $39.99 before the price changes take effect.

“Since launching Xbox Live in 2002 we have continually added more content and entertainment experiences for our members, while keeping the price the same,” said Larry Hryb, Microsoft’s Director of Programming for Xbox Live, in a blog post. “We’re confident that when the new pricing takes effect, an Xbox Live Gold membership will continue to offer the best value in the industry.”

The Gold subscription level offers members network-based multiplayer videogaming, along with access to other entertainment such as streaming movies from Netflix (provided the member has a Netflix subscription) and sports coverage from ESPN 3 (provided the member’s broadband service provider is affiliated with the sports network).

Jesse Divnich, Director of Analyst services for game market research firm EEDAR, said that inflation — along with Microsoft’s offering of additional entertainment services via Xbox Live — justifies the price increase.

“When originally launched in 2002, a Gold subscription cost the same as an AAA video game, $49.99,” Divnich said in a statement. “When taking into account for inflation ($50 in 2002 is roughly $60 in 2010) and the additional services available to Gold subscribers in 2010, such as ESPN, Facebook, Twitter, Netflix, Last.fm and Video Kinect, a $10 price increase still represents an incredible value to consumers.”

Perhaps unsurprisingly, subscribers reacted differently to the announcement. “You don’t even give us enough content to justify $50 let alone $60,” reads the first comment following Hyrb’s price-hike post. “Glad I’m paid up for the next year and a half.”

Hackers Claim To Have Purloined Pre-Release Digital Copy of ‘Halo: Reach’

Microsoft’s decision to distribute review copies of its hotly anticipated “Halo: Reach” as secure downloads via the Xbox Live Marketplace appears to have had unintended consequences.

A hacking team claims that it was able to circumvent security on the Xbox Live servers to gain access to the videogame’s full download, according to game site Joystiq. The hackers have no plans to distribute the leaked copy to the public, according to the report. But other game sites have spotted BitTorrent versions of the game being shared on several P2P portals.

“Halo: Reach” is slated for official release Sept. 14. Microsoft posted the game to its Games on Demand service on Aug. 16, according to Joystiq, making “Reach” available in its entirety to select media reviewers who received a 25-character “pre-paid token” from the company.

A Microsoft spokesperson tells Joystiq that it is “aggressively investigating” the purported security breach.

As Joystiq and CNET point out, the incident would be the latest in a line of pre-release leaks surrounding the “Halo” franchise. Previous incidents include the theft of “Halo 2” codes from a disc manufacturing plant in 2004, and the early release of “Halo: ODST” by a retailer in 2009.

Xbox Games Are ‘Killer App’ For Microsoft’s Mobile Phone OS

Microsoft says it will offer some 60 Xbox videogames on mobile phones running its Windows Phone 7 operating system, as part of a holiday-season push for mobile content. Wedbush Securities analyst Michael Pachter tells the International Business Times that games are the “killer app” for smartphones in general, and are driving user upgrades; in terms of the number of game titles offered and downloaded (including free titles), the overall mobile games market is on par with the packaged videogame market, Pachter says.

Windows Phone 7 users will be able to connect to their Xbox Live profiles and play games against friends on the cell network. Engadget has a hands-on preview of the service.

Analyst Raises Sales Projections For Microsoft’s Kinect

Lazard Capital market analyst Colin Sebastian is looking for Microsoft’s Kinect motion sensor to sell four million units worldwide in the fourth quarter of 2010. The analyst said in a note to investors (via MCV) that the videogame accessory, which Microsoft plans to release Nov. 4, is building more buzz in the marketplace than Sony’s competing Move motion controller (which is due in North America Sept. 19).

Sebastian also noted that with Microsoft ramping up its Kinect manufacturing to some two million units a month, price promotions on the $149 sensor could be in the offing.

Microsoft Prices Kinect Game Accessory At $150

Microsoft says it will market the Kinect motion/voice sensor in November as a $149.99 accessory for the Xbox 360 console. The company also will sell a new version of the Xbox 360 system bundles with Kinect for $299.99.

The pricing matches pre-announcement reporting by game blog Gamasutra – which earlier this month quoted analysts as stating that a price point over $100 has potential to “severely limit sales.” But the price might be OK, Wedbush analysts Michael Pachter and Edward Woo said, if Microsoft expects constrained supply during launch.

Sony’s rival motion control platform for PlayStation, the Move, arrives in September with a price point of $99. That price includes a camera, controller, and Move-enabled videogame.

Netflix Crosses Into Canada; Microsoft Bringing Zune Pass Across The Pond?

The leading entertainment subscription services in the U.S. have long had their sights on expansion into international territories. Netflix takes a step in that direction today,  announcing its plans to launch a streaming-only video subscription service in Canada this fall. Other companies may deem the timing to be right for venturing abroad: Microsoft, for example, seems to be developing a UK extension of its Zune Pass streaming music service, according to paidContent.

Interoperability Standards Group DLNA Names Nokia Exec As New Chair

The Digital Living Network Alliance (DLNA), a 7-year-old trade group dedicated to developing standards for sharing content across devices, has elected Nokia’s Nidhish Parikh as its new president and chairman.

Parikh, who is Nokia’s director of personal media industry collaboration, has pushed for industry adoption of the DLNA standards since the group’s inception in 2003.

Research firm In-Stat says that with Microsoft supporting DLNA technology in Windows 7, shipments of DLNA-enabled devices will surpass one billion units by 2014. That number also includes more than 85 million DLNA-enabled Blu-ray players/recorders.

The group also elected Microsoft’s Bob Brummer as VP and Technicolor’s Peter Kaars as standing director. Brummer is also involved with fellow interoperability initiative, the Digital Entertainment Content Ecosystem (DECE). Kaars, who been a DLNA member since 2005, chairs the group’s content protection subcommittee.

Microsoft ‘Probably’ Topped $1 Billion In Xbox Live Biz: Bloomberg

Microsoft has confirmed that sales of entertainment content and virtual goods over Xbox Live have surpassed the game network’s subscription business. That likely means the company earned more than $600 million in movie and TV show downloads, as well as purchases of avatar accessories for games, in its fiscal year ended June 30, Bloomberg reports (via BusinessWeek).

As Forbes did last month, Bloomberg bases its estimate on Microsoft’s statement that half of the company’s 25 million Xbox users pay $50 a year for a premium subscription to the Xbox Live service.

When combined with subscription revenues, entertainment downloads would put Microsoft’s Xbox Live revenues past $1.2 billion for the most recent fiscal year, exceeding analyst expectations.

The company will report its annual earnings July 22.

Microsoft Revamps MP3 Store In Tandem With Bing Upgrade

Those who use Microsoft’s Bing search engine to look for digital music can now stream song results for free and purchase track downloads with a credit card, in an expansion of the company’s Zune brand. Previously, consumers had to use Microsoft’s “point” currency to purchase music via Zune. paidContent has the details.

Digital Distribution On Xbox Spells $625M A Year For Microsoft: Estimate

How much is digital distribution worth to videogame console makers? Forbes “conservatively” estimates Microsoft, for one, to be earning at least $625 million in annual revenues from sales of virtual goods and entertainment content on its Xbox Live network.

The magazine’s math is as follows: Microsoft told a Forbes reporter at E3 that sales of virtual goods such as avatar accessories on the Zune Marketplace — along with sales of music and movie downloads — had recently surpassed the company’s Xbox Live subscriptions business. From previous company statements — as well as a February, 2009 report from Seattle’s Post-Intelligencer newspaper, citing an internal Microsoft document on the percentage of paid Xbox Live members — Forbes reckons that 12.5 million Xbox Live members each pay $50 a year for subscriptions. Therefore, Forbes says, $625 million would be the number to beat.

Microsoft’s ‘Kinect’ Kicks Off E3

Microsoft and other videogame publishers are expected to unveil more than a dozen titles this week for Kinect, the hands-free motion-control platform for the Xbox (formerly known as Project Natal). On Sunday, Microsoft revealed the Kinect brand name, promising more details at its e# press briefing today. In the meantime, PC World has a roundup of Kinect news tidbits — including a report that the platform will launch in November.

Gamer Survey: Purchase Intent For Sony, Microsoft Motion Controllers In Single Digits

Game industry pundits expect the arrival of motion controllers from Microsoft and Sony to be among the biggest announcements at next week’s E3 Expo in Los Angeles. Research firm OTX recently conducted a purchase-intent survey among console gamers for the new hardware: 8 percent of the Xbox 360 market intends to purchase Microsoft’s Natal controller, while 6 percent of the PlayStation 3 market intends to purchase Sony’s Move. But as Gamasutra points out, those percentages may rise as game publishers release more details of Natal- and Move-compatible titles.

Research: Competition Heats Up For Online Video Logistics

Global logistics management services for online video sites has grown into a substantial business sector, already generating hundreds of millions of dollars a year, according to a new report from Strategy Analytics. The research firm predicts that online video platform providers will collectively generate more than $1 billion in revenue over the next five years.

“As tech giants such as Cisco, Microsoft and others increase their efforts in the fast growing online video platform market, incumbent market leaders, such as Brightcove and thePlatform, will come under considerable pressure,” says Martin Olausson, the firm’s Director of Digital Media Research. “The key to long-term prosperity for online video pltforms will be the ability to offer flexible and increasingly sophisticated solutions to a progressively divergent set of customer needs.” Strategy Analytics

Building Net Neutrality Consensus Outside The Beltway

Rival tech giants including AT&T, Comcast, Google, Microsoft, and Verizon announced earlier this week that they are joining together under the newly formed Broadband Internet Technical Advisory Group (BITAG) to “develop consensus on broadband network management practices or other related technical issues that can affect users’ Internet experience.” Chairing the group is a former chief technologist of the Federal Communications Commission. CNET reports that the formation of the group signals a political détente between the companies over net neutrality, as well as a bypassing of Washington regulators. By CNET

PlayStation Store Shifts DLC Release Day

Online PlayStation 3 gamers will now have a day’s jump on the Xbox 360 audience for new downloadable content, as the Sony-owned digital distribution network moves its release date from Thursday to Tuesday. First content to be released under the new schedule next week includes an expansion package for Activision’s “Call of Duty: Modern Warfare 2” and a downloadable game for Sony’s PSP device. By Kotaku

Estimate: Xbox Live Arcade Posts Its First $10M Month

Sales at the Xbox Live Arcade, Microsoft’s digital distribution network for classic videogames and other casual titles, were up 41% year-over-year in March, with the company passing $10 million in game sales within a month for the first time. So estimates FADE LLC, a research firm focusing on digital and mobile entertainment distribution platforms.

The firm attributes the growth to Microsoft’s “Block Party” promotion for Xbox Live, which touted the release of four major titles. The top seller for the month, Signal Games’ “Toy Soldiers,” moved an estimated 209,000 digital units at $15 a piece. FADE LLC

Xbox 360 Users Top 40 Million Worldwide

Following Microsoft’s announcement that it has surpassed sales of 40 million Xbox 360 consoles worldwide, PC World breaks down the platform’s U.S. installed-base relative to the Nintendo Wii and Sony PlayStation 3. In the U.S., Xbox 360 still trails the Wii by some 10 million units – but it continued to maintain a nine-million-unit lead over the PS3 audience. By PC World

Chernin Pitches Microsoft On Xbox TV Channel

Bloomberg reports that former News Corp. President Peter Chernin has discussed with Microsoft the possible creation of a television channel delivered over the Xbox Live videogame network. The channel, according to the report, would offer a mix of acquired and original programming.

From the perspective of a potential audience, the proposal is certainly plausible: at last count, Microsoft had 20 million Xbox Live users, 10 million of which had logged onto non-gaming applications. But the company has not yet responded to Chernin’s pitch.

For Chernin’s part, the executive’s publicist says, “Peter is talking to lots of people about lots of ideas in the digital space.” By Bloomberg

Research: Three Quarters Of PS3 Consoles Are Online

Research firm The Diffusion Group (TDG) finds that one-third of U.S. broadband households now use a game console that is connected to the Internet. Sony’s PS3 tops the list with 78% of consoles being connected to the Internet, followed by Microsoft’s Xbox 360 at 73%, and Nintendo’s Wii at 54%.

The data, TDG says, supports the firm’s position that game consoles are best positioned to become the first mainstream over-the-top (OTT) video delivery platform. The Diffusion Group

Microsoft Shows Prototype Netflix Streaming App

At Microsoft’s recent Mix10 conference for developers, Scott Stanfield, CEO of Vertigo Software came on stage to show a prototype of Netflix for Windows Phone 7. Stanfield, who is working with Netflix on the app, showed off footage from the show “Rescue Me” streaming to his Windows Phone 7 handset. It’s unclear whether the Netflix app will launch alongside Windows Phone 7 devices this holiday season. By the San Francisco Chronicle

Microsoft Eyes Entertainment With Windows Phone 7

Microsoft unveiled its new mobile phone operating software at the Mobile World Congress in Barcelona, introducing a range of music, gaming and networking features aimed at expanding its appeal beyond its core business customers. The world’s biggest software company, which is trying to wrest back market share from Apple’s iPhone and Research in Motion’s BlackBerry, said new phones featuring Windows Phone 7 would be in stores by Christmas. By Billboard

Xbox Live Emerges As Would-Be Cable Competitor

Having amassed deals for Netflix streaming and video-on-demand downloads via its Xbox Live network, Microsoft is looking to play a bigger role in consumers’ TV and movie watching at home. Among the programming deals the company is currently mulling is one with Disney’s ESPN for live streams of sporting events to Internet-connected videogame consoles, The New York Times reports.

Microsoft tells the Times that Xbox Live, which has 20 million members, regularly records more than one million concurrent users. On its face, the audience numbers put Xbox Live in league with top cable channels such as Cartoon Network and TBS. But Microsoft does not break out — and audience research firms such as Nielsen do not measure — how many users at any given time are watching movies and TV shows on demand versus playing videogames. By The New York Times

Price Cuts Spur Videogame Console Sales: NPD

The current generation of videogame console hardware has outsold the last by more than nine million units to date, according to the NPD Group.

Overall console hardware revenues declined 13% during 2009, a year that saw significant price drops on Sony’s PlayStation 3, the Nintendo Wii, and Microsoft’s Xbox 360. The price cuts have spurred unit sales growth, however: overall hardware sales for the month of December increased 16% year-over-year.

The month was the first in which Sony — which reduced the price of the PS3 by $100 in September, to $299 — sold more than one million PS3 consoles. The Wii, whose price fell to $199 ahead of the holidays,  also experienced its biggest-ever sales month in December, with 3.8 million consoles sold. NPD

Microsoft’s Owen Roberts On Syncing Software And Hardware Supply Chains

The synchronization of videogame hardware and software supply chains has become a unique operational challenge, considering the high costs and long lead times of game development, along with increasingly shorter product life cycles and shifting retail marketing strategies.

Owen Roberts oversees North American Operations of Microsoft’s Entertainment and Devices Division as General Manager. During his 11-year tenure with Mircosoft, Roberts has spearheaded the European launch of the Xbox console, and bridged gaps between the company’s various business units and worldwide retail teams as head of the Redmond-based “WW Retail Go to Market” initiative.

Roberts will address entertainment supply chain issues in greater detail as a speaker at the GameSupply conference in San Jose, CA Feb. 10. For more information, visit www.gamesupplyacademy.com.

MESA: How did the economic crisis impact supply chains in 2009, and how did you meet these challenges?

Roberts: The number one challenge was inventory management, as retailers shrank their open to buy and managed inventory down. Clearly we did not want to lose sales, so we had to engage with the retailers to ensure we had sufficient inventory on shelves. Intense collaboration between the supply chain team, sales and category marketing, and the retail buyers themselves resulted in high in stock percentages while turns increased.

Obviously this could have had a negative impact on our fulfillment costs, as we were essentially doing smaller deliveries more frequently. However by planning with our warehouses and logistics each week we were able to adjust picking patterns that ensured no cost increases.

How do you synchronize the supply chains of the consoles with games from product development to delivery to retail?

We have a function within our Supply Chain team called Launch Management. This team has a critical role for all our significant launches as they act as the one central point where all of our various functional teams — Manufacturing, Planning, Sales, Retail Ops, Distribution, Trade, etc. — come together as frequently as necessary to ensure the flawless launch of both software and hardware across the channel.

The key is frequent good communication and the ability of our launch team to have a 360-degree view of having the right product on shelf at the appointed date. Some of the volumes we are moving are staggering at times, thus tight coordination is critical across all elements of our supply chain.

We of course also avail of Microsoft Project a great deal, as there is no better tool to ensure we have identified the correct critical path of every launch.

How do you integrate retail distribution with online and digital delivery of videogames?

Right now I would say we are at the beginning of this journey. Clearly the conundrum we all face is how to optimize for our customers in such a way that enables all channels to be effective and efficient. Microsoft’s stated objective is to be the leader in connected entertainment – another way of thinking about this is three screens connected in the cloud. With that as our guiding star we need to collectively figure out how we deliver content, services and subscriptions wherever and however the consumer would like to consume it.

We need to be able to offer choice to our customers – where they buy and how they buy. My biggest focus right now is ensuring we have the correct infrastructure to identify and recognize a customer no matter what channel they elect to buy through. At the end of the day they are a Microsoft customer and we need to ensure their buying and consumption experience is best in class, thus ensuring a loyal and valuable long-term relationship.

Tell us a real-life story from your own enterprise about how the supply chain performed well (or poorly) and what lessons you learned.

This year we made some significant adjustments to our supply chain supporting the Americas. At the same time, we had some very large launches including Windows 7 and the opening of our own Microsoft Stores. The ’09 calendar year saw us migrate our entire Distribution and Logistics network to a new partner, CEVA Logistics. As part of this we brought up a green-field site in California that coincided with the Windows 7 launch, the peak sell in month for our Xbox business, and the MSFT stores opening on October 22nd. With perfect hindsight, it was not the smartest decision I ever made as the potential for something going wrong was probably pretty high!

That said I was blown away with how well the team performed. The key to our success was great planning and great collaboration across our supply chain teams and our IT team. We have of course planned before and collaborated before, but this time it went a level deeper.

For the first time, I saw a complete blurring of the lines between our outsource partners and MSFT. I have long strived for getting the entire supply chain team to act as one. This is hard when you outsource every aspect of the business, but I was happy to see with the right partners, the right leaders on both sides, and a common customer view just what we were able to achieve. Was it easy? No. Was it perfect? No. Was it transparent to our customers? YES, and that was really all that mattered.

We certainly over-communicated throughout the process and our senior management team worked hard to lead the huge amount of change that was necessary to ensure the successful launches.

Microsoft Drops Idea Of Paid Bing Exclusives

Microsoft’s top search technology executive has all but dismissed the likelihood that the company would pay newspaper owners and other publishers for removing their content from Google and listing with Microsoft’s search engine, Bing. By the Financial Times (registration required)

Xbox Deal Nets Last.fm A Million New Subscribers

The deal between CBS and Microsoft to sync CBS’s Last.fm music streaming service on Xbox Live is already bearing fruit. The companies say the partnership has already netted Last.fm more than one million new subscribers. What’s more, Xbox Live users have already streamed more than 120 million minutes worth of music since the service launched on the network last Tuesday. By paidContent

Would Search Engines Pay To Index Exclusive Content?

Seeking to bolster its Bing search engine, Microsoft has held talks with News Corp. for the media company to “de-index” its news websites from Google. By the Financial Times

Facebook, Twitter, Last.fm On Xbox 360

In further integration of digital media platforms, a firmware update will bring Facebook, Twitter, and Last.fm to Microsoft’s Xbox 360 console tomorrow. Users must have an Xbox Live Gold membership ($50/year) to access the services from their console; both Twitter and Facebook require users to be at least 18 years of age. By CNET

Gamers Banished From Xbox Live

Microsoft has banned thousands of gamers from its Xbox Live network after determining that their consoles had been modified to play pirated content. The bans are “permanent,” Microsoft tells the BBC, and render the consoles functional only for offline play. By BBC News

Microsoft, MySpace In Talks For Music Tie-Up

MySpace Music could serve as the backbone of Microsoft’s own music offering on a redesigned MSN portal, according to the Wall Street Journal’s All Things Digital blog. By All Things Digital

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