In yesterday's earnings call, Microsoft CEO Satya Nadella dropped a strong, but subtle, hint that Xbox Music and Video may be on the chopping block.
Quoting from the transcript, Nadella notes in passing:
"With our decision to specifically focus on gaming, we expect to close Xbox entertainment studios and streamline our investments in music and video. We will invest in our core console gaming in Xbox live with a view towards the broader PC and mobile opportunity."
The news of the Xbox entertainment studios shutting down came out last week as it was part ofthe general 18,000 layoffs from the company. The potential of Xbox entertainment studios was never realized, cut short before it had a chance to rise or fail. One could argue that Microsoft producing their own shows is veering dramatically off course for what is essentially a software company, making this the right – but tough – decision for Nadella.
However, the part where Nadella pronounces that they are streamlining their "investments in music and video" is troubling. As Microsoft watcher Paul Thurrott commented on Twitter on what "streamline" means he observes it "…doesn't mean maintain or expand, for starters."
Nadella seems to be pushing Microsoft back into its primary mission, and for Xbox One that ispure gaming. Microsoft shuttering Xbox entertainment studios is sensible, even if the prospect of a hit show is enticing (see Amazon and Netflix's success with producing their own series). Nevertheless, Xbox Music and Xbox Video, both of which grew out of Zune, seems like a natural extension of media in the living room and even more so for mobile. Nadella appears to be second guessing their investment in those services, calling into question their future. At the very least, Nadella is curtailing that group within the company.
Microsoft is undoubtedly in a tough position here. Companies like Amazon and Apple have already had a lock on streaming and music purchases. Toss in streaming juggernauts Spotify, or Pandora, and the argument for Xbox Music is a tough one to make. Is Microsoft stretching itself too thin just to reinvent the wheel? Better yet, what is the argument for Xbox Music and Video in terms of actual advantages to end-users (versus competing products)? Up until now Microsft has not differentiated themselves enough from their opponents, giving consumers little incentive to move forward.
