Microsoft thinks it has the one. The company unveiled the Xbox One, an entertainment console that wants to be the one system households will need for games, television, movies and other entertainment. It will go on sale later this year, for an undisclosed price.
For the past two years, Microsoft has led the gaming industry in console sales with the Xbox 360. But it's been eight years since that machine came out, and Microsoft is the last of the three major console makers to unveil a new system. In those eight years, Apple launched the iPhone and the iPad, "FarmVille" rose and fell and tablets began to threaten desktop computers, changing how people interact with games and beyond.
Now, the stakes are high as Microsoft, Sony and Nintendo are all using their latest machines to not only draw gamers but also command the living room. The goal is to extend their reach beyond loyal legions of hardcore gamers and to become as important to our lives at home as smartphones have become to our lives on the go.
Don Mattrick, Microsoft's president of interactive entertainment business, said the company has spent the past four years working on the "all-in-one home entertainment system."
At an hour-long presentation at the company's Redmond, Washington, headquarters on Tuesday, Microsoft executives used voice controls to seamlessly switch back and forth between watching live TV, listening to music, playing a movie and browsing the Internet—all while running apps for fantasy football and Skype chats. It showed how users could watch live sports on TV while getting updates on their fantasy leagues on a split screen.
"It really extends the home entertainment experience," Gartner analyst Brian Blau said.
He said the console seems to appeal to "more than just a core gamer in the family" and should be of interest to all types of audiences, from sports players to TV viewers to those who are "social and want to share things."
Xbox One is the third entry in the latest round of the "console wars." It follows Nintendo Co.'s launch of the Wii U in November and Sony Corp.'s tease in February for the upcoming PlayStation 4. Each of the next-generation consoles have shifted away from simply serving as gaming machines, as they incorporate streaming media apps and social networking features.
With the Xbox One, people will be able to connect their cable or satellite set-top box and watch TV through the game machine. The Xbox One has its own guide and lets people change channels by voice command.
Senior Vice President Yusuf Mehdi demonstrated how the console switched quickly between channels after saying show names such as "Mary and Martha" or commands like "watch MTV." His voice command of "What's on HBO?" brought up the channel guide for HBO.
"No more memorizing channels or hunting for the remote control," Mehdi said.
The interface for the TV goes well beyond the functionality in the Wii U, which still requires users to press buttons to change the input source on the TV. Xbox One seamlessly switched between games, movies and TV shows with a single voice command.
"You can switch to your game like it's a TV channel flip," said Marc Whitten, Microsoft's chief product officer of interactive entertainment business. He called it a "lag-free instant experience."
Microsoft also unveiled a new version of its camera-based Kinect system with better motion and voice detection, including the ability to read faces and tell whether you're smiling or not. The Kinect will be required for Xbox One to work. The company also introduced a more ergonomic Xbox controller, with new buttons and a slightly different layout from the Xbox 360 controller. The new console will also add the ability to play Blu-ray discs, matching what Sony has in its older PlayStation 3.
Among the games previewed for Xbox One were the military shooter "Call of Duty: Ghosts" from Activision Blizzard Inc., the soccer extravaganza "FIFA 14" from Electronic Arts Inc. and the racing simulator "Forza Motorsport 5" and time bender "Quantum Break," both from Microsoft Game Studios. Microsoft said more games will be shown at next month's E3 video game conference in Los Angeles.
The company said there will be more than 15 games available exclusively on the Xbox One in the first year after it launches, eight of them new franchises. In recent years, the Xbox has been the exclusive home to such popular gaming franchises as "Halo," ''Forza" and alien shoot-'em-up "Gears of War."
Wedbush analyst Michael Pachter noted that Tuesday's presentation was more general than what Microsoft will likely give at E3, where games will be central as thousands of game industry insiders, bloggers and journalists gather for the annual industry conference.
"They didn't focus on games," he said. "They focused on everything else."
That everything else includes a multiyear agreement between Microsoft and the National Football League to develop new interactive viewing experiences for pro football games through such products as the Xbox One and Microsoft's Surface tablet computer. Fans will get the ability to watch games, chat with other fans, view statistics, access highlights in real time and gather fantasy information about players and teams—all on a single screen. For those who prefer multiple screens, fans can get an even deeper experience on mobile devices such as tablets.
Microsoft is also branching into creating original content beyond games, following the trend of other technology companies such as Amazon.com Inc. and Netflix Inc. Director Steven Spielberg will produce a TV series involving Microsoft's popular "Halo" franchise.
Microsoft said games for the Xbox 360 won't work on the new system, though the company said it will continue to make games for the older machine. The Xbox One won't require a constant connection to the Internet, but having it will be useful for many of the gaming and entertainment features. The Xbox has been popular largely because of its Xbox Live service, which lets users play games online with other players for as much as $60 a year.
The original Xbox debuted in 2001, and its high-definition successor premiered in 2005. Part of the Microsoft entertainment and devices division that also includes Skype and the Windows Phone, the Xbox represents a small fraction of Microsoft's overall revenue. In the latest quarter, revenue in that division amounted to about 12 percent, or $2.5 billion of the $20.5 billion total.
Nintendo kicked off the next generation of gaming in November with the launch of the Wii U, the successor to the popular Wii system. The Wii U features an innovative tablet-like controller, though its graphics is on par with the previous-generation Xbox 360 and Sony's PlayStation 3. Nintendo said the console sold just 3.45 million units by the end of March, well below expectations.
Sony was next, teasing plans for its upcoming PlayStation 4—without showing the actual box—at a February event in New York. The reaction to that console, which featured richer graphics and more social features, was mixed. The PS4 is expected by the holidays.
Microsoft didn't waste any time showing off the Xbox One console, new Kinect sensor and Xbox controller at the beginning of Tuesday's presentation.
Microsoft's stock fell 23 cents, or less than 1 percent, to close Tuesday at $34.85.
Explore further: Microsoft expected to reveal next-generation Xbox (Update)