Although Windows 8 is off to a rocky start, Microsoft (MSFT) still has a winner in its Xbox brand and the company seems ready to exploit it for all it is worth. According to an article by The Verge, the company has confirmed production of a set-top box that will provide a low-cost alternative to its Xbox console and access to entertainment services, such as Netflix (NFLX), Hulu, and YouTube (GOOG). The new product is most likely designed to increase Microsoft's presence in the living room, while curbing anticipated competition for Apple's (AAPL) Apple TV and Google's own set-top box plans.
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The "Xbox TV" is said to be part of Microsoft's dual-SKU strategy for its next-generation Xbox hardware, the second half of which is scheduled for a 2013 pre-holiday release. Currently sales for the Xbox are strong; some 70 million consoles have been sold since 2005, which has helped the tech company secure its commanding lead in market share. However, those sales numbers pale in comparison to Nintendo's (NTDOY) Wii, which has sold almost 100 million units in roughly the same amount of time, due to its appeal with younger and more casual gamers.
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While tech enthusiasts are probably more excited by Microsoft's plans for its next "true" Xbox and its proposed features, consumers might be interested in the Xbox TV's abilities. The device will run on the core components of Windows 8 and support casual gaming titles rather than the full retail releases found on its dedicated console.
This emphasis on casual gaming might help Microsoft with the demographics it lost to Nintendo in the last console generation, leading to a greater dominance in the next console generation. Furthermore, if widely accepted, Microsoft could stop any momentum being gained by Apple TV, and greatly discourage Google's Smart TV, streaming devices, and set-top box ambitions.
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The system's hardware has yet to be confirmed, but The Verge reports that Xbox TV will have a chipset to enable an "always on" device that boots quickly and provides near-instant access to entertainment services. It's also possible that the company might combine its core system for its Xbox with the systems for its phones to deliver a phone capable of running a full version of Microsoft's Xbox Live services. Such technology might help Microsoft branch into the handheld market, which it has left practically untouched so far. Either way, adding scalability to the Xbox brand is sure to help the company reach consumers who are looking for better entertainment services and wider options, but are not willing to put down the money or time on a separate video game console.