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Microsoft aims for the jugular with Xbox ecosystem

At E3, the company aimed its guns at its competitors -- including Apple -- as it unveiled new features and hot games. Group PR Manager David Dennis explains the company's plans.

Microsoft's SmartGlass was one of the biggest announcements at its Xbox 360 media briefing, which kicked off E3 this week. James Martin/CNET

LOS ANGELES--It's been a big year for the people behind Microsoft's Xbox 360 video game console, and its growing ecosystem. Month after month, the machine tops the console sales charts, and it boasts some of the most anticipated exclusive games in the industry.

This week, of course, the Xbox team is cheek-by-jowl with all of its partners and developers, and its competitors. It's E3 week, after all. And at its Monday media briefing, and at its mammoth booth at the Los Angeles Convention Center here, Microsoft has been touting its latest attempts at separating the Xbox from the pack.

Among the many things on the horizon for the Xbox and the Xbox Live service are the blockbuster Halo 4; its new SmartGlass system -- an initiative that is designed both to let users move a wide varity of media easily between devices, and which gives users metadata on content they're interacting with -- and Xbox Music.

As the famously intense trade show shook the convention center outside, Xbox Group PR manager David Dennis sat down with CNET for a discussion about the media briefing, the future of physical media, and how quickly developers are adopting Microsoft's much-heralded Kinect gesture control system. And much more.

Q: What's the top headline of E3 2012 from your perspective?
David Dennis: That there's a ton of great games coming for the Xbox this year. We're going to kick off the holiday with Halo 4, as you saw in the keynote. It's a great new installment in the franchise, bringing back Master Chief. There's also Call of Duty, Forza, and an amazing lineup of games like Gears of War coming, so if you're a core gamer, it's going to be a great holiday.

The only hardware news to come out of any of the three major E3 press briefings was Nintendo's Wii U. Without those big hardware announcements, or other major news, what's the rationale for continuing to have these huge press conferences?
Dennis: As you announce products, and provide updates, E3 remains an important beat on the development cycle. Having big events like this, where we can show off new games, and in some cases break news, and provide updates or new details on products gets consumers excited. It's not just about speaking to press. It's also about speaking to partners, retails, and other third-party developers about the Xbox platform and how we're setting it up to have a longer tail than any previous console generation.

And while you can't always break news at E3, given that it's six months ahead of the Holiday, you can certainly show new pieces of the story, like video of Gears of War, which was new, or updates on Halo, or news around Call of Duty and other things that haven't been shown before. It gets consumers excited. The last couple of years, we streamed our briefing on Spike TV, and got record viewership compared to other shows. We think consumers find it compelling, and media do too.

How do you think this year's briefing did with online viewers?
Dennis: It's interesting. We deliberately stage and shoot the briefing for a TV audience. We think of this as our Emmys or our Grammys, so we build and construct our show for that: We look to have peaks and valleys of news and consumer excitement. We can kick off things with that great Halo demo and close things out with an amazing Call of Duty demo and performance by Usher. It's really a way to get people excited and deliver great viewership for the TV audience.

Why would a consumer choose Microsoft's approach to the living room over Apple's?
Dennis: We've had a leadership position in the living room. We've got 67 million consoles out there, and 40 million of those are connected to Xbox Live, so they can rent and purchase movies, and use our existing music service, which we're also re-launching this Holiday as Xbox Music. You can have all your content unified under one entertainment brand -- Xbox Music, Xbox movies, Xbox TV -- and accessible from multiple devices. Part of SmartGlass is unifying content in the cloud with Xbox Live and delivering that to your phone, PC, or your Xbox, and letting you control it in an intelligent and rich way on your tablet, or your phone or just with your controller, if you find that's most convenient.

The real magic of SmartGlass is that when you're using those companion scenarios, your devices are intelligently talking to each other, and knowing what you're doing. It's one thing to be watching a movie on your tablet, and throw it to your TV, and start off right where you stopped. But the magic is when your tablet or your phone gets transformed, not only as a control mechanism, but also as a rich display medium, bringing you addition metadata and content. An example is the movie "School of Rock." As you watch, SmartGlass shows you what characters are on the screen. They pop up on your tablet as they come in and out of scenes in the movie.

It was an interesting choice to open up that ecosystem to iOS and Android devices. How was that decision made?
Dennis: It's a good long-term strategy to be open to all devices, and all ecosystems. We want to be device agnostic. There's some unique things we can do on Windows 8 devices and phones because we're closer to the bits of that ecosystem. For example, on a Windows 8 tablet, you could have music or TV content streaming, and you can pin that window over to the side, and keep it running while you open up a browser on the other half and surf the Internet, or do your email. But we want to be open and having people consuming our content, no matter what devices they choose.

It seems like where all this is going, that Windows and Xbox Live are kind of getting closer and closer together. It seems that someday they might merge.
Dennis: Windows is a great operating system to have in phones and tablets and PCs, but I think Xbox Live is more of the service layer and the entertainment service that can unify the entertainment experiences across that. But I wouldn't see it going beyond entertainment.

Xbox Live Gold membership costs $60 a year, and hard core gamers surely get their money's worth for that. But people who just want Amazon, Hulu, or Netflix, could just spend $60 on a Roku or something like that. What's your sales pitch to them?
Dennis: Sixty dollars a year is about a cup of coffee a month. We offer unique, premium entertainment, and additive enhanced services as well. Being able to control your entertainment using your voice, like being able to customize and personalize how you view ESPN content, choosing teams and sports you want to see, and not seeing others. And being able to enhance that with Kinect over Xbox Live using your voice to navigate and search. When consumers understand everything that comes with an Xbox Live paid membership, they don't find the cost prohibitive.

What's the long-term future for consoles? Technology is getting better and better, and consoles are expensive to manufacture. Will content move exclusively to set-top boxes, or TVs with everything baked in, so the console becomes irrelevant?
There's a lot of smart TVs, and I've seen lots of data showing that most people don't use the built-in functionality. They have bad UIs, and they're not very user-friendly. We've found people love the content we're delivering over the Xbox. It's very easy to find, and navigate. Plus, you can plug it in into any TV and make it a smart TV. Instead of paying more for a TV, we're essentially delivering a new Xbox and a new TV each year through software updates, and that's something consumers really like.

It seems like hardware without moving parts is a more efficient way to go.
Dennis: Hardware will evolve. You don't have to look beyond the music industry to see that consumers really love digital content. But some people love physical media, including a lot of gamers. We've been big investors in digital distribution and content, and having that flexibility is essential. But some people love lining up at midnight to get the shrink-wrapped box with the manual and extras, and some would rather just turn the console on and let it download. We want to offer multiple options for consumers.

What's the growth curve like for development for Kinect? Exponential or linear?
Dennis: I don't know if I can characterize the angle of the line. But we've really wanted to showcase Kinect's uniqueness -- fully tracking your body and your head. And we've seen games that take advantage of and leverage that technology. Last holiday, you saw more hybrid experiences, and what you've seen this year is a continuation of that. Sometimes, it's even just leveraging Kinect's voice-recognition technology that lets users do things like controlling squads in Mass Effect, or in the Splinter Cell demo, where you saw the guys who whispered over the wall, "Hey, you, come here."

We've said all along we don't want Kinect to replace the intense, button-mashing control games. My estimate is that something like 60 or 70 percent of games we're showing at E3 have some Kinect functionality.

Now playing: Watch this: Microsoft Xbox SmartGlass