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Did Xbox Kill the Pay TV Industry Yesterday?

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During its E3 keynote address yesterday, Microsoft announced major new streaming video content offerings for the Xbox 360. Did it, as some pundits have suggested, kill the cable and satellite TV industries? Maybe, but it'll be a slow death.

The Xbox 360 is already the leading living room broadband device. Microsoft notes that it has 47 percent of the console market in the United States, has sold 67 million Xbox 360s worldwide, and currently counts over 40 million Xbox Live members. Compare that to Sony PlayStation 3 sales of around 64 million worldwide. Non-gaming devices don't even come close; the Apple TV, with 2nd and 3rd generation sales totaling about 5 million, leads the pack.

Soon the Xbox 360 will deliver even more sports content to viewers. At E3, Microsoft announced greatly increased sports options during its keynote, thanks to a partnership with ESPN. Xbox viewers will soon gain full access to multiple ESPN channels, including ESPN, ESPN 2, ESPN 3, and ESPN U. The deal includes Sportscenter and Monday Night Football.

There's more sports than just ESPN. Microsoft will also provide access to about 2,400 NBA games and more than 40 NHL games per week. And there's more to the announcement than just sports, as Microsoft announced content deals with over 35 content providers, including Nickelodeon, Comedy Central, Univision, and Machinima.

It's a major step, since access to live programming is one of the reasons people stay with pay TV services, and sports content is one of the few things people prefer to watch live. The move makes pay channels less necessary, while playing to the Xbox's core demo of younger males.

Microsoft's relationship with ESPN seems to be building, by the way. The big news from Microsoft's Advertising Digital Showcase in April was that ESPN is now an Xbox Live advertising partner, and that advertisers can now purchase 15- or 30-second spots on Xbox Live TV apps, which now include ESPN placement.

The E3 content announcements didn't stop at video: Microsoft gave a preview of its Xbox Music service, which will launch on the Xbox, Windows 8, and Windows phones. The service will offer a library of over 30 million tracks, the Zune Smart DJ feature, and a social component to connect with friends. Microsoft didn't say if the service will be available on other devices. It will launch later this year, but Microsoft didn't say exactly when.

Game consoles are the Trojan Horses of the streaming media industry, entering the living room as gaming devices but providing access to streaming movies, TV shows, and music, as well. It's hardly going out on a limb to say that the growth of the game consoles will be tied to a slow decline in the pay TV industry. It won't happen overnight and it won't happen for every customer. Despite much hand-wringing about cord-cutters, research has shown that most people are happy with their pay TV services and like the ease of standard delivery. 

However, the greater threat to the pay TV industry are the "cord-nevers," young people who have grown up streaming their favorite videos and like it that way. Cord-nevers have gone through college streaming video and they don't see the need for a big monthly cable or satellite bill after they graduate. For them, the increase in Xbox Live content will be most welcome. It shouldn't take long for the pay TV industry to feel the effects.

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