Microsoft's cunning plan to save the Xbox from Apple
It's seen by many, including the New York Times, as a move to push the Microsoft Xbox One and Sony PlayStation 4 video game consoles out of the living room.
The good news for gamers is that Microsoft has already put its cunning plan to save the Xbox One from Apple into motion.
The bad news is that it means killing the very concept of the game console as we know it.
The threat from Apple
While the new Apple TV is definitely not a guaranteed hit, it has a real shot.
Smash hits like Fruit Ninja and Angry Birds have already proven that Apple's roster of iPhone developers can deliver blockbusters that go way past the core gaming demographic, the same way that Tetris sold the original Game Boy to non-gamers everywhere.
Combine that with Apple's unbeatable roster of music, movie, and TV show content, including deals with juggernauts like HBO and ESPN, and it looks like the blueprint for success.
The fact that the Apple TV will likely cost $149, versus the Xbox One's $349 and PlayStation 4's $399 doesn't hurt, either.
Microsoft's main edge over Apple is its relationships with the major video game publishers. Big-budget releases like Tomb Raider, Call of Duty, and Destiny - gorgeous, complex games with strong online components - are still the main province of the game console. The Xbox One and Sony PlayStation 4 are built for high graphics performance, responsive input, and online competitive gaming.There will likely always be a market for these kinds of games, especially since they're such brisk business.
But Microsoft and Sony are the biggest fish in a pond that's getting smaller.
The Sony PlayStation 2, the most successful video game console of all time, sold over 125 million units worldwide in the 13 years it was being manufactured. The current best-selling console, the PlayStation 4, has sold 25 million in just under two years. The Xbox One has sold about 15 million over the same time period.
By way of comparison, Apple sold 47.5 million iPhones in the last quarter, and that was considered a whiff.
With a living room box that can play games from the iPhone's App Store, it extends all of its massive cross-demographic appeal to the biggest screen in the house. And developers are likely to follow the money all the way to Apple TV.
As Google Ventures partner MG Siegler predicts in a recent blog entry:
And so, my ultimate prediction is that this is going to be death by a thousand slices in Fruit Ninja. The consoles will remain for a decade at the high end?-?maybe one more cycle. Then the "hardcore" gaming moves solely to PCs (including Macs, by the way). Meanwhile, casual gaming takes over. And I wouldn't bet against iOS powering that in the living room.
Microsoft's cunning plan
In the next few weeks, Microsoft is planning on releasing Windows 10 as a downloadable update to every single one of the 15 million Xbox One consoles it's sold.
To understand why this is so diabolical, here's a little Microsoft history lesson: The whole reason that the Xbox came into being in the first place was to make it super simple to take a console game and also sell it on Windows.
In practice, it didn't work that way, much to Bill Gates' chagrin. But the concept of taking a game once and selling it on the PC and the console stuck around.
Now, with the pressure of the Apple TV and a changing gaming demographic, Microsoft is feeling the pressure to follow through.
The Windows 10 update will be mostly under the hood: The actual experience of using the Xbox One console isn't expected to change much. Put in a disc, or download a game from the Xbox Store, and play.
The biggest benefit for gamers will be the ability to play some last-generation Xbox 360 games on the Xbox One for the first time ever. Windows 10 itself comes with a killer feature: Stream games from an Xbox One to your desktop over the network. It works really well, and can come in handy when the TV is in use.
With an Xbox One that's also a Windows 10 PC, it means that it's a games console that could theoretically run any Windows 10 game, too - though Microsoft hasn't yet shared many details on what Windows 10 will enable on the new console.
In other words, the Xbox One won't just be a games console. It's your new living room PC - just like Microsoft wants the Surface to be your laptop. If there was any question whether Microsoft was serious about becoming a PC maker, that question should be long gone.
At first, Xbox gamers won't notice much difference, except that Microsoft may add a Windows Store that would let you download casual, smartphone-style games from its own cross-platform app store.
But over the next few years, if the Apple TV does diminish the demand for a dedicated video game console in the living room, the Xbox One (or its successors) could turn from a game console into a cheap, effective PC, optimized for gaming and multimedia.
And with the Xbox One-to-Windows 10 streaming, it means that the console is well-positioned to turn into your home's gaming hub.
It means you don't need a super-high-end PC to play the latest titles: Just stream them over the network to your Surface Pro tablet or Lenovo superthin ultrabook and you're playing this year's Batman: Arkham Knight with the best of them, without compromises.
The real loser: Sony
Even if the Apple TV does take over the living room, Microsoft-owned iPhone games like Minecraft: Pocket Edition and Halo: Spartan Strike will probably be just as successful there as they are on smaller device.
Just like Microsoft has been winning with Office by offering it on the iPhone and Android right alongside Windows and Mac, Microsoft can succeed by offering Apple TV games to a more casual audience, while selling the full Halo experience on the Xbox to the core gaming demographic.
The only real company poised to lose here is Sony. The Sony PlayStation 4 is leading this generation of video game consoles, with 25 million units shipped. But if Apple does lead the video game console into irrelevance, Sony's invested so deeply into PlayStation that it doesn't have much to fall back on.
Microsoft did not return a request for comment.