Microsoft Shakes Up Advertising, Content In Xbox Live Service

msn video Microsoft is shaking up user-generated content and advertising on its Xbox 360 online service, Xbox Live. Players always had the opportunity to download add-ons to games sponsored by advertisers or watch video spots, such as movie trailers, but on Friday the company stepped up efforts to broaden appeal.

Content generated by Xbox Live gamers and advertisers is at the heart of this shift. For starters, Microsoft released the first downloadable user-generated piece of content for "Lips," the music video game for the Xbox 360. The grand prize winner's song was turned into a free downloadable karaoke tune for the Xbox 360 game and an original score for the Zune MP3 player.

ForeverGirl -- aka Craig DelBonis, 22, from Providence, RI -- won the Lips Open Mic contest. The song, which DelBonis originally wrote and produced, is available as a free download on Xbox Live. Three finalists squared off to become the first featured piece of downloadable music for the game. There were hundreds of entries submitted between Feb. 20 and March 13. More than 100,000 video views and votes were cast via AT&T text message or on Xbox Live and OpenMic.com. There were more than 42 million impressions delivered via Xbox Live and Xbox.com since December.

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Microsoft has turned greater attention to delivering advertising to the 20-million plus players on Xbox Live, according to Chuck Frizelle, director of Xbox advertising product strategy and planning. The plan is to develop programs that engage consumers and media to drive impact, but that impact will also come in the form of advertising. "If we can create more experiences that tie gaming, social and entertainment together, it creates a win for consumers and advertisers, and aligns with the strategy of Xbox Live," he says.

Plans to run other similar campaigns that connect brands to Xbox Live players through downloadable content, from cars to maps, are underway. Microsoft added "1 vs. 100," the live game show, on the Xbox last week. The show allows thousands of Xbox owners to respond to questions while listening to a live host provide commentary. The game adds 15- or 30-second commercials, or video pods, similar to the TV show. Lead sponsors also receive product placement in the game. "Think of it as the best of television meets the best of interactive gaming," Frizelle says. "We are seeing up to 100,000 gamers playing concurrently at any given time."

Perhaps user-generated content and live programming will pump up sales. The video game industry continues to struggle. U.S. video game sales dropped 23% to $863 million in May, compared with $1.12 billion a year ago, according to The NPD Group.

May is the first month that industry sales dipped below $1 billion since August 2007. In all fairness, the month typically has been known to generate the lowest revenue in any year, notes Anita Frazier, NPD Group analyst. Every category declined compared to a year ago. She says the exception is portable hardware sales, which received help from the combined sales of the Nintendo DSi and the Lite at 633,500 units in the United States.

Nintendo Wii, at 289,500 units, came in as the best-selling system in May, followed by Microsoft's Xbox 360 with 175,000 units, and Sony, which sold 131,000 PlayStation 3 and 117,000 PlayStation 2 consoles.

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