Microsoft to shut down Xbox Entertainment Studios

Microsoft has thrown in the towel on television. As part of the company's restructuring, which will see 18,000 people laid off over the next year, Microsoft is shuttering the 2-year-old Xbox Entertainment Studios to focus more exclusively on gaming.

The 200-person studio, located in Santa Monica, Calif., will be closed in the coming months, with employees staying onboard to finish projects currently in production under its Xbox Originals brand. That includes "Halo: Nightfall," the digital feature planned for later this year, as well the Halo television series produced by Steven Spielberg. The documentary series "Signal to Noise" -- the first episode of which features the Atari E.T. video game dig in New Mexico that Microsoft helped pay for -- will also be completed.

"Xbox will continue to support and deliver interactive sports content like 'NFL on Xbox,' and we will continue to enhance our entertainment offering on console by innovating the TV experience through the monthly console updates," Xbox head Phil Spencer said in a statement.

"Additionally, our app partnerships with world-class content providers bringing entertainment, sports and TV content to Xbox customers around the world are not impacted by this organizational change," he added.

The news won't surprise those who have long been scratching their heads over Microsoft's foray into original television programming. The company announced more than a dozen shows in production and development in April, slated to start as early as June, yet with little to say on the ultimate goal. Spearheading the effort was former CBS TV President Nancy Tellem, who courted fellow TV veteran Jordan Levin to help Microsoft compete with the likes of Netflix, Amazon, and Hulu in a crowded arena that now includes Yahoo and AOL as well.

Tellem herself expressed the difficulty of trying to steer a gaming brand and its core audience toward non-gaming-oriented programming. "We don't know," she said in a round-table discussion in April when describing the potential appeal of Microsoft's TV lineup. "Knowing our audience, we'll know pretty soon once we put it up if they'll respond positively."

The goal was always to offer gamers, which Tellem cited as predominantly male between the ages of 18 and 34, programming on their primary entertainment hub that could be enticing enough to pull their attention away from surfing Netflix. Years ago, that activity began capturing more of Xbox users' attention than the games themselves. Both executives will stay on at Microsoft, the company said, to oversee the Halo projects and "Signal to Noise." However, the fate of numerous other Xbox Originals programs -- from the adaptation of the Swedish series "Real Humans" to the Seth Green-produced "Extraordinary Believers" to the Michael Cera and Sarah Silverman comedy series -- is unclear.

Still, Microsoft gave clues to its quickly eroding faith in Xbox Entertainment Studios in the run-up to this year's Electronic Entertainment Expo. Not only did Tellem and the studio's efforts more or less disappear from the spotlight after the lineup reveal, but Microsoft began scaling back nearly every aspect of its Xbox platform that was peripheral to games. Most significantly, the company unbundled the Kinect motion camera from its Xbox One console. The Kinect was positioned as a linchpin of Xbox Originals' interactivity features, meaning you would be able to use the camera and motion control features in a way that would help differentiate Microsoft's TV programming from other offerings.

Microsoft then spent the entirety of its E3 press conference focused on games, with neither a single mention of Kinect nor any of its television programming. "Every Street United," the reality television series that was set to kickoff Xbox Originals, debuted the following week on June 15, three days after the kickoff of the FIFA World Cup, though few took notice.

The strategy shift on Microsoft's part was born from last year's fumbled Xbox One unveiling, in which the company didn't adequately communicate crucial new policy features of its next-gen console and made the decision to price it $100 more than its primary competitor. The company is still playing catch-up. It has yet to come close to Sony's PlayStation 4, which has, as of June, sold 8 million consoles directly to consumers, at least 3 million more than the Xbox One. Yet Xbox One sales doubled in June after the unbundling of the Kinect, so its efforts appear to be closing the gap at a quicker clip.

When CEO Satya Nadella outlined Microsoft's vision in a 3,100-word manifesto last week, he made little mention of Xbox beyond its importance as a gaming hub."I'm so glad to have Xbox as a franchise, especially at a time when gaming is becoming even more important -- as a digital life category and in the mobile world," he told CNET in an interview. "The most time spent? Games. The most money spent? Games. Xbox is one of the most revered, loved brands in games."

Games, it would seem, are still important to Microsoft and its Xbox brand. Original television, not so much.