Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) have been trying for years to take over not just one portion of the living room with their gaming consoles, but all portions of the living. The Playstation 2, released 10 years ago last month, was almost single-handedly responsible for replacing VHS with DVD as the premier home video format, but the console still couldn’t compete with set to boxes as the center piece for living room entertainment. Microsoft’s original Xbox, celebrating its ninth anniversary this month, featured the same functionality as well as a built in hard drive to store media, but its multimedia capabilities were still too limited to make much of an impact.
Both the Playstation 3 and Xbox 360, successors to those consoles, were designed to act as the ultimate media centers, with access to online television and movie storefronts like the Zune Store and Playstation Network. Five years ago, when the Xbox 360 first launched, it seemed like positioning a gaming console as a competitor to set top boxes was still a pipe dream. Things are quite different in 2010. Microsoft and Sony have both enjoyed profitable relationships with video content providers like Lions Gate Entertainment (NYSE: LGF), NBC Universal (NYSE: GE), Fox (NYSE: NWS), and Viacom (NYSE: VIA).
At the end of 2010, as television network and cable companies alike rush to adapt to a consumer populace that increasingly gets its video entertainment from streaming sources on connected devices, game consoles are becoming an all too important component of reaching audiences. ESPN (NYSE: DIS) is running aggressive experiments through the Xbox 360 right now. The November software update for Microsoft’s console bought with it a new version of sports network ESPN 3 specific to the Xbox Live network. Paid subscribers to Xbox Live can watch live broadcasts of college football games and a selection of on-demand content through the channel. A rumor at tech blog Engadget this morning indicated that an ESPN-branded Xbox 360 would actually hit retailers later this fall. Though Microsoft later confirmed that leaked images of the ESPN Xbox 360 were mockups for promotional use only, it will not be surprising to see ESPN content expanded and further explored on Microsoft’s console in the next year.
The Playstation 3, meanwhile, has acted as a testing bed for the subscription-based Hulu Plus since the beta version of the streaming television service launched last June. Hulu Plus could only be accessed by subscribers to Sony’s paid Playstation Plus service, but it became open to all Playstation 3 users when it exited beta testing at the end of last week.
ESPN, Hulu, and those channels’ parent companies have watched Netflix (NASDAQ: NFLX) memberships surge in the two years since coming to game consoles, and they’re banking on that success being a template for the future of television consumption. While investors should undoubtedly be keeping tabs on the evolution of Google TV throughout the next twelve months, it would be wise to also note which networks and other television providers are finding new opportunities on high definition gaming machines.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
