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Why Did Microsoft Corporation (MSFT) Shut Down Its Xbox Entertainment Studios?

Xbox Entertainment StudiosMicrosoft Corporation (NASDAQ:MSFT) [stockdata ticker=”MSFT”] last week announced that it would shut down its Xbox Entertainment Studios, which has been involved in several movie and TV productions. Why did the software giant abandon its original content video strategy? Well, Microsoft Corporation (NASDAQ:MSFT) [stockdata ticker=”MSFT”] CEO Satya Nadella seems to have realized that the Xbox is a gaming device at its heart.

And that’s the reality, despite Microsoft Corporation promoting the latest Xbox One as a media device. The Redmond-based company’s push into the media has alienated its gamer loyalists, says The Wall Street Journal. It’s one of the reasons Xbox One sales have lagged far behind Sony Corporation (NYSE:SNE) [stockdata ticker=”SNE”]’s PlayStation 4 since the two products were launched in November of 2013.

However, Microsoft Corporation (NASDAQ:MSFT) recently shifted its focus regarding Xbox One to pure gaming. The software giant needs to sell more Xboxes,so, anything related to media or advertising was to be deemphasized or cut loose. Of course, it still allows marketers to advertise their offerings, but the options of advertisers have dwindled.

Though Xbox One was positioned as a media device, it came with fewer advertising opportunities. Marketers could no longer place ads on the digital dashboard. In contrast, the Xbox 360 allowed brands to place ads on the digital dashboard, build custom games and contests, and even offer video ad spots.

Microsoft Corporation (NASDAQ:MSFT)’s goal with its original content strategy was to steal TV ad dollars, but it never got off the ground. Microsoft Corporation’s ad caution with Xbox One provided an early clue about the company’s commitment to the original video strategy. Ogilvy & Mather Worldwide chief digital officer Brandon Berger says an ad platform is less of a priority for the Xbox One team. It has to get more consoles into homes.

There isn’t a big audience size for Xbox One,which makes delivering ad campaigns a bit more challenging. Many brands still like advertising on Xbox, but Microsoft Corporation (NASDAQ:MSFT) [stockdata ticker=”MSFT”] doesn’t want to alienate its hard core gamer audience who paid a hefty sum to play games. Of course, they watch movies and shows on Xbox, but their primary reason for buying the console is gaming.

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3 Comments

3 Comments

  1. Timothy Collins

    Jul 21, 2014 at 10:07 am

    I am kinda bummed about that… I mean, I figured it was destined to not work out well but one did have to admire the balls it took MS to decide to directly compete with Netflix and all.

    • coip

      Jul 21, 2014 at 10:22 am

      I really have enjoyed Every Street United so far and I don’t even like soccer, so I’m especially disappointed about this closure: Xbox Entertainment Studios had a lot of potential.

      • Timothy Collins

        Jul 21, 2014 at 12:07 pm

        It did… I mean, using the Xbox as a distribution platform for a TV channel makes some sense. It’s able to much more highly target what a person is interested in and could be a lot of fun…

        And I agree on “Every Street United” – as a rule I am not a big sports fan, but this has been a decent show so far.

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