• by Steve Smith , Staff Writer @popeyesm, April 27, 2010

Last week Nielsen Games released some research about the degree to which games consoles are intercepting viewers from prime time TV. And it seemed to rattle media types. I am not sure why anyone would be surprised at this news though. It was Microsoft and Sony's plan all along, and it was brilliant.

Nielsen finds that between 23% and 25% of all active Xbox 360 owners are tending to turn on their game machines during the prime time TV viewing hours. The install base figures I see most often associated with Xbox is about 18 to 20 million, so you could have 4 to 5 million people who are dropping out of TV viewing in order to play games or watch movies on their consoles. The only thing surprising about this concept is that anyone is surprised by it. This was the master plan all along. Both Sony and Microsoft built this current generation of machines to be set top boxes, not just game machines.

There are over 30 million Xboxes and Sony PS3s in U.S. homes right now, many of which are connected to the Internet and already pushing both long form and short form video into the living room. All of those "streaming media boxes" that came at us for years from other manufacturers could only dream of penetration like that. These are numbers that approach MSOs.

The issue for video content providers and advertisers is not whether game consoles erode TV viewing. Duh. They have been doing this in most households all along. The issue is how to bets leverage the video capabilities of the platform. This migration of Web video to game consoles is in its infancy, and right now much of it is poorly executed. But there is monstrous promise here.

On my Xbox, amidst all of the other thumbnails for upcoming games, demo downloads and films, I get a novel Old Spice widget. In effect, it is a mini-site for the "Survival of the Freshest" promotion. An animated armpit pops up different deodorant scents. The interface lets me play and vote on indie games that Old Spice invited developers to make for the promotion. There is the requisite promotional silliness around each of the scents, but generally it is a goofy site that gets your attention and pays you back with slight entertainment. Of course, the video ads for the brand are available too. T-Mobile also has a widget in the Xbox deck that includes downloadable games, theme packs for the console, etc.

The idea is evolving that the console is a sponsored entertainment experience with multiple kinds of video and gaming assets to explore. On Xbox, for instance, there are videos from MSN, including animated Dilbert and New Yorker cartoons from the Ringtales production group plus episodes of the web series The Guild and clips from NBC programming.

Both Xbox and PS3 have had their own games-related video series, usually promoting new titles. But this season Sony initiated a new made-for-game-console reality series called The Tester. About a dozen participants vie for the dubious honor of becoming a games tester. According to Sony, the series produced nearly 2 million video views before the recent finale episode.

Susan Panico, Senior Director for Playstation Network told USAToday earlier this month, "We have a captivated audience of male gamers, 18 to 35, with a pretty huge audience that rivals something like, say, a DIRECTV, and (we were) able to do something different and creative but that still was very much infused with what our DNA is all about, and that's gaming and entertainment." http://content.usatoday.com/communities/gamehunters/post/2010/04/a-winner-crowned-on-sony-playstation-networks-reality-show-the-tester-/1

Too much video material on the game consoles is too difficult to find. In most cases Sony and Microsoft appear to be regarding the content as an afterthought. But as we see gamers accustom themselves to their consoles as multimedia playback machines, this will be a platform that traditional TV networks may regard a s thereat, but Web video producers and marketers might see as a remarkable opportunity.