Xbox Is a Test for the One Microsoft Strategy

For years, Microsoft’s Xbox video game console division was a bit like a sullen teenager in dealings with its parent company: It kept its distance and pretended they weren’t related. The debut of the Xbox One on Nov. 22 marks a new phase in the relationship. The console incorporates software and systems developed throughout the rest of Microsoft and is the first big test of what the company calls its One Microsoft strategy. Pushed by outgoing Chief Executive Officer Steve Ballmer, the idea is to encourage Microsoft’s product groups to work together and tear down once-rigid walls between divisions.

With the console industry’s revenue falling, Microsoft is marketing the Xbox One as a kind of living room set-top box, a device used to watch and control live television as well as streaming video from services such as Netflix and Hulu. Given that Microsoft has sold about 80 million Xbox 360s since 2005, the console may also be its best chance to turn Xbox fans into customers of Microsoft cloud services and devices. “It’s more than a gaming platform,” says Julie Larson-Green, Microsoft’s executive vice president for hardware. “We’re thinking more about our devices as a stage for all of Microsoft.” The risk: If the input from other divisions hurts the Xbox One’s performance, Microsoft will have sabotaged its only product with a dedicated consumer following.