Xbox Entertainment Studios Post-Mortem – History Repeats Itself; Newfronts Foreshadow Imminent Fold

/ Jul 18, 2014

Xbox_Tellem

Microsoft’s Xbox announces it will invest in producing original content. The company locks meaningful deals with content creators who pack the proven track record, the TV and studio clout to bring the brands, and the skill to make “original programming” meant for digital distribution matter.

PAUSE. Did you think I was talking about Xbox Entertainment Studios? Wrong.

REWIND. I’m actually referring to the Xbox Independent Video Channel, the deal with Felicia Day to syndicate season one of “The Guild” and fund season two, and the content produced by horror film bigwigs like James Wan (the “Saw” franchise), James Gunn (“Slither”), and David Slade (then “Hard Candy” and “30 Days of Night,” now “Twilight’s Saga Eclipse”).

I had the pleasure to work with the then-head of the initiative, Scott Nocas, in launching the program. It was the “early days,” pre-financial crisis, when the pulse of the online video space was much like now — studios, talent agencies, brands were pocket-heavy and digital video hungry.

“We saw great success with Felicia and ‘The Guild’ but Microsoft at the time was not ready to invest in original content. They saw financial benefit but wanted to be able to do that at scale and wanted to be able to build interactive programming,” Nocas told me over the phone as we reminisced.

But that wasn’t all so easy, even back then — “Microsoft has always been a technology-first company and always had a complicated relationship with Hollywood and entertainment.”

FAST FORWARD.

Xbox 360 announces a new “a new LA-based studio called Xbox Entertainment Studios, where the mission is to create true interactive content for Xbox and other devices that will change the way entertainment content is experienced and delivered” — with Nancy Tellem at the helm, in Feb. 2013.

Then the president of Microsoft’s Interactive Entertainment unit, Don Mattrick departs in summer 2013, followed by CEO Steve Ballmer in the fall. And so starts the inevitable demise of Xbox Entertainment Studios under the new leadership.

According to sources who worked closely with XES over the course of the past year, while the content strategy was being developed and deals were locked down, it quickly became a nightmare to work with them — not because the team was poor but because of constant changes in the strategy.

Changes that would become symptomatic of a larger internal disconnect at Microsoft. Like the younger sibling the big brother doesn’t want to hang out with, Xbox Entertainment Studios had to be reactionary, constantly shifting objectives from devices and services to mobile to the cloud — all XES’s big(money) brothers. Regardless, the video content business wasn’t ever a part of Microsoft’s core strategy under the new leadership.

And from the industry murmurs following the Newfronts, attendees of that presentation could already feel the inconsistency and lack of focus on video. While XES frontmen Nancy Tellem and Jordan Levin did showcase the full slate to media in advance of the 2014 Newfronts, brands and Newfronts attendees were given a watered down “here’s everything Microsoft has to offer” presentation that left many feeling that the content strategy was frivolous.

Another source familiar with the company reiterated Nocas’ point about Microsoft’s internal disconnect between the tech space and Hollywood.

And when you have 20 million paid subscribers tuning in primarily for gaming and access to Netflix, Hulu, and other OTT offerings, why should original content take precedent? Xbox, after all, is a platform, a highly interactive platform that supports itself through subscription and by granting users access to premium gaming, TV, and film titles. It’s not beholden to Madison Ave. and it’s clearly not in the “deficit financing” game.

“[Xbox Entertainment Studios] was taking a big swing in the space, and I think we were all rooting for them. When people try to take unique approaches to content and try to do interesting types of creative, it’s good for the industry,” added Nocas.

While yesterday’s news rippled across the online video industry, the most important takeaway is that Silicon Valley and Hollywood have still not learned how to effectively co-exist and as an influential platform with a connected community, I think this move is a loss for more than the 18,000 that will be laid off by Microsoft.

But hey! Xbox has “an incredible opportunity ahead of [it] to define what the next generation of gaming looks like for the growing Xbox community.” Hmmphh. Gaming! Who does that anyways? Touche.

So what will happen with the Slate of Originals? I tell you the answer over here.

 

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