XBox Live to Offer Movie Rentals and TV Purchases - First Take

Michael Gartenberg | November 06, 2006, 08:18 PM

Microsoft just announced that XBox Live will be offering a download service for TV shows and movies. Movies will be for rent and TV shows for purchase. Content will be in standard and hgih definition, with HD coming at a premium. Prices are not public at this time. Content is XBox only, no links to the PC or more notably no trasfer to the Zune (for now). So what does it mean? Three things.

1. XBox is still about one thing in this part of the cycle. It's games, games and games. Gears of War will sell more consoles than this will. This is purely a secondary, but important function.

2. It does help provide another clear difference against the other consoles as a purchase driver and at that same time, provides a reason for other family members to start engaging with the XBox and Live. Both are important to driving market share and generating longer term revenues beyond games (see our Connected Console Forecast)

3. It's not a direct competitor to iTunes for now. But, there's no doubt that XBox, as a conncted device that's hooked up a to the TV will be important for Microsoft as a core endpoint in the digital home. Look for larger drive capacities as well as integration with Zune and the PC in the not too distant future.

Net? A good move for Microsoft and XBox to add functionality without compromising anything related to game play. Don't be fooled by the limited content (although current content maps to the gamer demographic well). Like iTunes, we'll see more stuff coming to Live pretty quickly.