Xbox Entertainment Studios is doomed, original online programming efforts are not

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Depending on your point of view, Microsoft’s decision to close down its Xbox Entertainment Studios barely two months after detailing launch plans for its original programming is a) a quick and cowardly rout, b) a wise strategic withdrawal, or c) proof that the company was never really committed to the online video space in the first place. You be the judge.

What the sudden closing of Microsoft’s Xbox Entertainment Studios should not be seen as is an indicator that other companies plan to dial back their efforts to develop more original online video.

Last week, Microsoft announced plans to shutter its fledgling effort to produce original online content for its Xbox consoles, instead choosing to refocus Xbox efforts on gaming. Some of the projects in the works will continue, most notably the live-action series based on Halo, and some of top executives will remain to see those projects through. But the ambitious programming plans Microsoft laid out earlier this year are dead in the water.

Other companies are preceding full speed ahead, though. Take Yahoo, which announced plans back in April to produce two original TV series for its Yahoo Screen service. Since that time, Yahoo has picked up the NBC-canceled series Community, with plans to develop a new season of the show for Yahoo Screen. The timing of when that sixth season of Community is uncertain at this point, but the show’s cast and creator were on hand at Comic-Con in San Diego on Thursday to promote the upcoming Yahoo-backed episodes. Yahoo’s been active on the distribution front, too, announcing the purchase of streaming startup RayV last week as part of an effort to get its content to more people, particularly via mobile devices.

Another tech giant with original programming ambitions, Amazon just announced plans to spend $100 million more on original programming in 2014’s third quarter. The reason: Amazon Prime members want it. “We’ve seen just more and more Prime members are streaming free content,” said Amazon chief financial officer Tom Szkutak during Amazon’s Thursday earnings call. “We really think it’s a great service and that’s why we’re investing in it.”

Given that Amazon reported a larger loss than analysts expected—$15 million versus an expected loss of $7 million‚and that its stock prices fell nearly 10 percent in the wake of Thursday’s quarterly earning announcement, Amazon’s decision to boost its online video commitment says how much it believes in video’s future. It also underlines how much Amazon views streaming video as being vital to its core business going forward.

So why did Microsoft abandon this sector, at a time when Windows-based PCs are increasingly looking as future-proof as VCRs? The answer may be found in the question. The Windows operating system that seemed indispensable a decade again has lost relevance in a world of mobile devices and cloud-based technology that it can’t easily monopolize. As a result, Microsoft is scrambling to reinvent itself for the future—and shedding 18,000 jobs—while conserving resources today. Companies that find themselves in this pickle typically react by cutting new and risky ventures: Xbox Entertainment Studios was both.

In other words, Microsoft’s decision to shut down Xbox Entertainment Studios so ignominiously speaks volumes about that company’s prospects, rather than the health of online video. Read what you will into the first situation, but not into the second.

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