The Gaming Niche

Congratulations to The Guild and creator Felicia Day. The online mini-series, which premiered its first season last year to much acclaim and over nine million views, has worked out a very interesting deal with Microsoft for the second season. The show creators will retain rights to the content and revenue for non-game related channels, but Microsoft gets an early premiere of the content and rights to sell advertising with an unspecified revenue split throughout the initial series run.

This is but one example pointing to a very peculiar future for content. As Microsoft pushes the Xbox 360 as a home media center and with the new Dashboard further positioning those offerings, the foundation is being built for the next evolutionary step in media content. With over 14 million Xbox Live subscribers worldwide, there is an extensive reach for niche content - specifically the gaming enthusiast niche. As popular as it is, the Xbox 360's household penetration is still too small to become the primary focus of mainstream content; but the Independent video channel hits the right spot, opening the potential for niche independent content.

In many ways, this is the infrastructure the rest of the indie market would kill for. While online video networks can target a specific niche, the quality of the content is always limited because of the dependence on a PC or mobile platform. The Xbox acts as a set-top box, allowing indie distribution to home HDTVs. Additionally, Microsoft can syndicate the content through its MSN offerings to broaden the reach. And the cherry on top? Microsoft owns and runs the ad platforms for both the Xbox and the MSN player.

Honestly, I think Microsoft's biggest challenge as it build outwards is the established branding of the Xbox 360 as a game platform rather than as a hybrid media device. The foundation the company is laying today may very well be the next generation of TV, and it is going to take a lot of people by surprise as it continues to roll out. Consider the concern DVRs have caused with around 30 million units in the US. The Xbox 360 is currently in more than 11 million US homes and continuing to expand its market. In many ways the console is being set up as a sleeper agent, and there will be quite the shake-up once it awakens.

[Full Disclosure: Josh Lovison works for the IPG Emerging Media Lab, which works with Universal McCann. Microsoft is an agency client.]

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