Technology and gaming skeptics alike knew what Microsoft was up to when it announced the first Xbox. Bill Gates, as opportunistic as he is, wasn’t necessarily interested in videogames, even in spite of their revenue potential. He was more interested in creating a digital hub for the household, a living-room PC that would bring computer functionality to the sofa. The fact that the Xbox played games was gravy; Gates and Microsoft wanted to finally realize their joint dream of “owning” our digital lives.
With the Xbox 360 and Xbox Live Marketplace, Microsoft is taking the first steps toward that goal. But while gamers and technophiles watch Microsoft, Sony is quietly pursuing the same dreams — and perhaps more effectively. Skeptics viewed the Xbox as Microsoft’s Trojan horse into our living rooms, an analogy that may very well be true. But if the Xbox 360 is a Trojan horse, then Sony’s PlayStation 3 is the Trojan horse and the army, because Sony already has a library of content that’s ripe for digital distribution, and it’s no longer content owning just the living room.
Microsoft has struck deals with several major studios to deliver digital movies and 
TV shows via Xbox Live Marketplace, and the company’s certainly working with other studios on future content partnerships. Meanwhile, Sony is planning its own video service for the PlayStation 3 that will have much the same functionality. But where Microsoft is a software company finagling for deals with outside movie studios, Sony is an electronics and media company that owns its own studios, a serious ace up the PS3’s digital-distribution sleeve.
Sony has already beaten Microsoft in the high-definition format war, with its proprietary Blu-ray Disc stomping Microsoft’s HD-DVD alliance off the market. Now Sony appears to be targeting digital distribution as well, treading heavily on territory that Microsoft currently rules in the console space. Sony’s online gaming network still lags far behind Microsoft’s Xbox Live, but where the money really lies — in digital distribution — Sony is essentially already on par with its competitor.
Microsoft’s existing partnerships have filled its Xbox Live library with downloadable movies and shows. But Sony is its own partnership, and the minute it decides to make movie and TV content available via the PlayStation Store, that critical mass will bring Sony immediately up to speed with Microsoft’s years-in-the-making coalition.
Online movie distribution still isn’t a cash cow; U.S. consumers spent $95 million buying and renting movies online in 2007, compared with $23.4 billion doing the same with DVDs. However, both Microsoft and Sony are taking a long-term approach, the same view taken by Paramount, Paramount Vantage, MGM, United Artists and Lionsgate in their just-announced venture to create an on-demand movie and TV service that will compete with HBO and Showtime.
Sony has also taken the first steps toward content portability, with its latest firmware updates for the PS3 and PSP (PlayStation Portable) supporting remote play of games and movies, including Blu-ray films. Initially seen as game-driven decisions, these innocuous updates can now be seen as another pragmatic step toward Sony’s dream. But where Microsoft appears focused on owning consumers’ homes and living rooms (remember the “Home Station” rumors?), Sony has aspirations of touching our entire entertainment experience.
Before the Xbox, Microsoft had never played all that successfully in the living room scene, so its console was a conspicuous entry in the electronics arena. But Sony had a long track record with the PlayStation family, making its PS3 a logical addition. The fact that the PS3 plays Blu-ray movies and connects with the PSP was initially a novelty. Now those features have become shrewd business decisions that could pay huge digital-distribution dividends.
Microsoft is often the first to toot its own horn regarding Xbox Live Marketplace, and rightfully so. But for all the attention Microsoft receives for its online marketplace, Sony and its PlayStation 3 are doing much the same thing on a subtler scale. Some would argue that Sony is “slow to respond,” “reactionary” or “unsure of itself.” The flip side — and perhaps the more realistic argument — is that Sony has intentionally taken baby steps, gradually warming people to the idea of portable content and their proprietary formats before springing the complete digital-distribution model on them.
Microsoft debuted Xbox Live before it was really ready for prime time, but the online service has since become the undisputed leader of the pack. Yet for all the movies and TV shows Xbox Live provides, it’s still geared toward gamers. In the grand scheme of digital distribution and “e-lifestyles,” Sony’s approach may actually win the war. The PS2 helped DVDs go mainstream, and we all initially thought the PS3 was trying to do the same with Blu-ray. But in light of Sony’s recent connectivity updates and its impending online video service, the PS3 looks now like it will be Sony’s Trojan horse for digital distribution on the whole, not just for a single format or in a single location. Now, how’s that story go about the tortoise and the hare?
— Jonas Allen