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Xbox TV deal no solution for cable cutters

Xbox or cable box? Whatever it is, the Microsoft video console that just licensed content from 40 TV content suppliers isn't a Netflix killer.

Microsoft handed Xbox owners a way to connect with a score of different TV shows including HBO's hit "True Blood."
John P. Johnson

commentary Microsoft just turned Xbox into the Swiss Army Knife of cable boxes.

Forget calling Xbox a game console. That doesn't go far enough. Microsoft today announced licensing deals with 40 television content suppliers, including Comcast, HBO, Verizon and even Vevo, a music-video service.

Microsoft can tell consumers, any kind of entertainment you want--games, movies, music--we got it. One important caveat: the price isn't cheap. To watch shows from HBO or Comcast on the Xbox, you have to subscribe to those services.

If you're one of the cost-conscious people who railed against Netflix after the Web's No. 1 movie rental service raised prices and you were waiting for some rival to come riding over the hill to undercut Netflix, the Xbox is not it.

What did you expect? An a la carte channel system, where you could subscribe to ESPN, USA, Bravo, or CNN at $2 to $4 a pop?

Or perhaps you were looking for Microsoft to follow such services as Zediva or FilmOn and try to exploit a copyright loophole so it could offer content dirt cheap?

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Not a chance. Microsoft has a solid track record of playing by the rules laid down by content owners. And remember, Zediva and FilmOn were sued out of business.

No, more likely you were hoping for a new subscription service to hit the scene, a Netflix competitor that charged $10 a month for streaming and DVDs and offered ESPN and HBOGo to boot. Doesn't that sound cool?

Quit dreaming. You see, at this point, Hollywood is doing all it can to reduce Netflix's influence. Film and TV execs don't want another subscription service to offer its content at cut-rate prices and help consumers grow more accustomed to paying pennies per viewing. The major film studios, TV networks, and sports leagues have shown where they're making their stand.

Traditional distribution partners, such as pay TV, basic cable, and broadcast are getting content and Netflix, GoogleTV and Hulu are struggling to build their libraries.

It comes down to this: Selling through Netflix just isn't as profitable in the long run for the big content owners--especially when it means alienating other partners who pay big bucks. Some of the bigger studios are more than happy to release some of the less popular content through Netflix's online streaming service. But content suppliers are unlikely to help a new low-cost subscription service get off the ground anytime soon.

Don't get me wrong. These content deals were smart for Microsoft. If you own the Xbox and want to catch HBO's "True Blood" or "Game of Thrones," Microsoft just gave you another way to access the shows.

For TV networks, the deal is smart because they have a powerful new distribution outlet, one that doesn't alienate other partners too much but may also introduce their content to a younger generation. Studies show younger audiences haven't shown much interest in subscribing to cable, or for that matter, even owning a TV.

As for Reed Hastings, Netflix's CEO, I don't think he'll be losing too much sleep over the Xbox/cable box. He knows that price is always going to be a powerful selling point and Netflix is still the low-cost leader.

He also knows that Netflix has been available on the Xbox for years.

John Falcone, a CNET editor, contributed to this column.