Huge staff cutbacks at Microsoft, including the shutdown of Xbox Entertainment Studios, carry a warning for tech companies eyeing a move into original programming, according to The Hollywood Reporter. The moves also cloud the future of the high-profile project "Halo," which still may be headed for Showtime.
"The closure, part of a Microsoft-wide cost-cutting effort that could result in 18,000 layoffs, comes from new CEO Satya Nadella as he looks to transform the Redmond, Wash., company into a 'more agile' operation. That means refocusing the Xbox One as a gaming console and not an all-encompassing entertainment hub as was once intended," THR reports.
The "Halo" situation — along with the overall move into original programming — was complicated by the departure in February of longtime Microsoft CEO Steve Ballmer. The report notes that Ballmer hired former CBS exec Nancy Tellem in 2012 to oversee efforts to develop original content at Xbox.
"Now Tellem and a small team, including Executive VP Jordan Levin, will remain for a time to shepherd the studio's final projects, such as Amblin Entertainment's long-gestating 'Halo' series, which is expected to land at Showtime. Network President David Nevins told reporters July 18 that he remains interested in the project despite Xbox Studios' problems and what would be a hefty financial commitment," the THR report says.
The piece notes that Microsoft's original programming initiative was part of a trend among digital platforms such as Amazon, Hulu, AOL and Yahoo, with all of them following digital leader Netflix into the original content space.
"Xbox Studios was considered to have a distinct advantage because it boasted an established platform, which counts 48 million Xbox Live users. But despite its potential, the studio struggled to develop a programming slate in a timely fashion," THR reports. "After 22 months, it launched just two originals — live broadcasts from the Bonnaroo music festival and a soccer reality series timed to the World Cup."
The report adds: "Insiders say Microsoft's disconnect from Hollywood was apparent from the beginning. The studio lacked focus, say several sources, and didn't have a clear programming strategy, leading to dealmaking delays."
Ballmer's exit from Microsoft appears to have had an impact on "premium advertising opportunities on the Xbox console," THR notes.
"It's one of the areas where they had a really credible opportunity," said Pivotal Research analyst Brian Wieser. "But they've decided against it. It raises questions about whether they want to be working with large brands."
While a number of projects appear to be on the chopping block, including the unscripted pilot "Fearless," others may still have a future.
"Some projects, such as 'Jash Presents Rubberhead,' a variety show based on the YouTube channel from a group of comedians that includes Michael Cera and Sarah Silverman, are expected to land at new homes shortly," THR reports.