Microsoft and Comcast recently announced that Xbox Live users will now be able to stream on-demand Comcast Xfinity content through their gaming consoles. It’s been insinuated by some that Microsoft is making some form of payment to Comcast for the deal.

This doesn’t seem outlandish. The 20 million paying Xbox Live users (out of 66 million Xbox 360 units sold) now spend slightly more time streaming content than they do playing video games. Microsoft will keep stoking this trend, pushing its hardware further into the profitable mainstream of entertainment content consumption.

But, will the Xbox grow up to become a more dominant mode of delivery?

Getting into the living room has been a priority for Microsoft since it’s acquisition of WebTV in 1997. That product, which attempted to establish an entirely new category, never took off. Gaming consoles, however, were popular, and Microsoft has been able to piggyback into the living room using that form factor. To ensure that the Xbox would break into the market, the hardware in 2002 was superior to Sony and Nintendo’s products, and was sold at a loss.

Microsoft has a significant head start on Apple, and any of the other big tech competitors like Google who want to move into the living room. Even though it’s selling more briskly than it was several years ago, AppleTV is still referred to by the company as a “hobby.”  As for Google, large hardware partners of Google TV have abandoned the technology as a failure while Google readies a new tablet.

Microsoft’s ownership of Skype, and history of successful partnerships with Facebook, indicate that the company has a potential to powerfully and deeply integrate the (currently) most popular social nexuses with its hardware. If Windows 8 and the partnership with Nokia takes off (i.e. they can create a must-have device and content network that is more attractive than Apple’s), it could trigger a big shakeup in tech. An integrated digital environment that spans multiple form factors (laptop, phone, tablet) is coming. But at present it still seems unlikely that Microsoft will be the one to create it.

Are we ready for connected TVs?

The living room may not be changing along the trajectory that Microsoft and its content partner Comcast are anticipating. First of all, the Xbox is a gaming console, and is purchased as such. While Microsoft is no doubt deeply pleased that entertainment streaming through its box is taking off, the fact remains that only ~30% of the console’s owners bother to connect it to the Internet.

While not abysmal, Microsoft’s numbers are a little boring. If this product is the future, why are people so unexcited about it? They have the hardware – why won’t they connect? Jeremy Toeman recently tried to parse this same question in the Guardian with regards to Connected TVs, which have a low connection rate of 15-20%:

Other than Netflix, there isn’t a strong consumer-facing value proposition for any of the smart TVs today. … It remains highly unclear as to why things like Facebook and Twitter even belong on or anywhere near a TV. As a second screen (mobile, tablet, laptop) experience, sure, but on my television screen? I’ve yet to meet someone outside of Silicon Valley who thinks seeing a Facebook feed scroll down the side of their living room TV set sounds like entertainment. 

The reason that the Xbox Live usage won’t take off in a bigger way is similar to the reason that Connected TV’s aren’t being connected: people still buy TV’s to watch TV, and they buy gaming consoles to play games. Presumably, most everyone who’s buying a Connectable TV or an Xbox 360 also has the other digital gadgets that provide far better Internet experiences.

Multiscreen viewing is on the up

It’s the “other gadgets” that are successfully encroaching upon the TV/Console model, not the reverse. TV viewing is down for the 12-34 year old age bracket. Internet consumption is up, and time spent on the Internet occurs concurrently with TV viewing. 43% of iPad users claim to watch TV and surf the Internet simultaneously “all” or “most” of the time. It’s estimated that by 2014 there will be 61 million iPad owners in the US – 19% of the population.

Multiscreen viewing is popular right now amongst first adopters because the experience of watching television, while interesting, isn’t as captivating as the Internet. Television networks have tried to spin multi-screen viewing as positive –viewers can interact with ads and buy things on the spot! But the truth is probably that most of the time viewers are looking at a smaller screen because they’re bored with what’s on the big one – and they’re not accustomed to being bored.

Can TV ever replicate the hypermedia experience?

The Internet works because of hypertext – links that endlessly connect pages together. Because of hypertext, web viewers can explore knowledge nonlinearly. Hypermedia is the seamless combination of text, images, audio, and video. The Internet as we experience it today is hypermedia: an endless sea of on-demand content that maintains a state of continuous engagement. This experience is superior to any other atomised content consumption modes, and it’s what we’ve come to expect. 

Apple’s iPhone and iPad are hypermedia devices. They dissolve the walls between nearly every known medium this side of holograms. The experience of using them is unlike what has come before – and that’s why they’re so successful. The very idea of TV + Internet is flawed. TV on the Internet isn’t really TV. It’s just a large video file, in an immense ocean of other video files. The Xbox, frankly, is a legacy device, still trying to bring the old dream of WebTV alive. That could change, but right now there’s little indication it will.