After a longer-than-expected wait, some shipping glitches, and a good deal of anticipation, my open-source, crowd-funded, cloud-gaming, Android-powered Ouya game console arrived in Friday's mail. I unpacked the box, plugged it in, and fired it up. After 24 hours, I've come to some conclusions about the device – though I can't say they're all positive.

(See also Can Startup Ouya's Crowd-Sourced Gaming Console Challenge Sony, Microsoft and Nintendo?)

Ouya: Out Of The Box

The Console: The first thing I noticed about the console itself was its size. The thing is small – about the size of a Rubik's Cube. With no optical drive or expansion slots, there's no reason for the device to be any bigger, but it was still a little jarring. It's also pretty idiot-proof. Plug in the included power adapter and HDMI cable, press the only button on the device, and you're ready to get started. 

The Controller: The controller was reputed to be the system's crown jewel, and overall, it's a success. The pop-off panels for accessing the dual battery compartments seem a little insecure at first, and I would have preferred a more traditional hinged compartment on the back, but the Ouya design seems rigid enough once everything is snapped together, and it's probably cheaper to fix, down the line.

Other than that, the pad, sticks and buttons worked as planned, the controller fit my average-sized hand nicely, and I was able to forget about controls and focus on the games immediately. And that's really the point. I found it worlds more comfortable than any Sony controller, and somewhat more natural than the Xbox 360's. If this controller shipped with a next-gen system, I wouldn't be upset.

Ouya Setup

The hardware was great, and pairing the controllers was straightforward. When I logged into my account, though, the Ouya's Kickstarter roots started to show. Setup went smoothly enough, but even a little documentation might have been nice. The box included only an FCC-mandated warning: no manual or diagrams. The log in process was simple, but to retrieve the username I'd registered months ago, I had to swap to my laptop and Google "Ouya username retrieval." An inline "Retrieve Username" next to the "Lost Password" link in the setup screen wouldn't have been terribly hard to add.

With any luck, that retail units will ship with more documentation and a smoothed-out interface. As an early backer, a reviewer and someone who'd like to see this type of project succeed, I didn't really care, but the Best Buy set is accustomed to a higher level of hand-holding.  

The Ouya UI

Once you're logged in, the Ouya interface is pretty clean, but there aren't too many more positives worth noting. It's tough to make four menu items a jumble, but Ouya somehow succeeded. The designers may have been trying a bit too hard to make things cool.

The menu items:

PLAY: Play the games you’ve downloaded. Simple enough.

DISCOVER:  This is the Ouya app store. DISCOVER is a horribly awkward list of downloadable games, with confusingly named sub-menus (What’s the difference between CHECK IT, STAFFPICKS, and FAVS, anyway?). The GENRES section is more useful, but it reveals an unfortunate lack of content designed for the device. As of the weekend, there were only six games in the DUAL STICK category and only three applications in APPS.

MAKE: Information for software developers that really doesn’t belong in a main menu.

MANAGE: System configuration.

I get what Ouya was going for, but everything abut the interface screams BETA, and it wouldn't have been that hard to do it right. Drop me straight into PLAY, provide a prominent link to the store, and link to games that are related to the one I'm currently playing. Hide the rest somewhere boring. Done.

Some of the gaps should get filled when more titles become available, but that list is likely to to see a lot of static. The bar is pretty low for Android games, so not every entry will be up to par for console games.

That's where some content curation could help. Branded channels (e.g., something by IndieCade or one of the gaming mags) could really help users find games worth playing. So could a healthy peer rating system and some filtering based on past ratings. The good news is that all of this can be fixed in software. The bad news is that the retail release date is coming up fast.

(See also Android Gaming Console Ouya Set To Ship At End Of June.)

Ouya Games

Final Fantasy III: What about Final Fantasy III? If you've played the Android version on other devices, you know what you're getting. If you played the original version 20 years ago, it's a refreshing trip down memory lane. FFIII offers Game Boy mechanics with 3D graphics: think Pokemon Stadium on the N64 compared to Pokemon Yellow and Red. Younger gamers without an appreciation of history will probably get bored very fast. It's great to see a major studio throw some weight behind the Ouya, but this game is not a kingmaker. 

The Ouya Verdict

I think the gaming industry needs a kick in the pants, and I'm glad to have helped support the Ouya's attempt to provide it. I have hopes that in time, the Ouya can provide exposure to indie game developers, add playability to Android games that could really use a solid controller and function as a valid over-the-top box for Netflix and other TV apps.

As a geek and freedom fighter, I think my money was well-spent. If I were a parent on a shopping mission or hardcore gamer looking for a fix, though, the Ouya just doesn't deliver. If you're looking for anything resembling a AAA-title gaming experience, your $99 would be better spent on a used Xbox 360 or a new video card for your gaming computer.

I think Ouya has the potential to fix the bugs and round out its stable of apps and games to make a really viable complement to traditional consoles, but the company needs to move fast, before gamers decide to move on.

After months of promises, Microsoft finally integrated Skype with Outlook.com, its cloud email and calendaring service. But for its next act, Microsoft may well put Skype on its Xbox console — a move with far more intriguing, and even disturbing, ramifications.

As of today, a select group of Outlook.com users in the UK can begin placing video or voice calls, or sending instant messages, to their existing Skype contacts. Within Outlook, users will have a choice: traditional email will work as before, although the new "Messaging" options will trigger the Skype capabilities. Users can either type in a friend's name within People, or — in a nice touch — simply click on their picture to launch a message.

Microsoft paid $8.5 billion for Skype two years ago in order to "adapt to a changing market, primarily characterised by permanent and ubiquitous connectivity," as the IT analyst outfit Duquesne Group put it at the time. So far, Microsoft has steadily moved Skype forward as its ubiquitous communications interface across PCs, Windows tablets, and smartphones. That leaves the Xbox.

Video Kinect To Xbox Skype?

It's virtually a given that Skype will come to the living room. In February, Giovanni Mezgec, a Skype enterprise product marketing manager, told me that Skype users at home might use a "set-top box" — like, say, the Xbox! — to access the service.

"You are the same time a consumer, the same time a mother, the same time an employee, the same time a person that travels on the bus, you get the idea," he said in an interview at the time. "What we wanted to do was to offer a set of tools from the living room to the boardroom, a communication platform that is rationalized, but different."

Officially, though, Microsoft is keeping mum. "We are always thinking about what is next for our platform, but we have nothing further to share at this time," a spokeswoman said in an email. Rumors of the Skype-Xbox integration popped up earlier this year, following a Microsoft job posting.

And Microsoft's Xbox already has a videoconferencing solution: Video Kinect, which allows Xbox players to set up video chats with their Xbox Live friends of they own the Kinect depth camera peripheral. 

Separate But Equal

In many ways, Skype is playing catchup to features already offered by Video Kinect and the Xbox Live service itself. There's the video chats, of course, but Xbox Live also supports presence (who's playing or watching what, provided that users allows their friends to see this); group chats or play experiences, known as "parties"; text and video messages; and private chat. 

So far, Microsoft has kept its Xbox Live community separate and distinct from its other online services. That means that each Xbox user can have several collections of friends: Outlook contacts, Messenger contacts, Skype contacts, and an Xbox Live group. If you include Facebook, Twitter, and LinkedIn, which Microsoft also integrates with, that's seven separate groups. Granted, many of these contacts overlap — but many don't. (Note that Microsoft asks you for a Microsoft Outlook.com or Hotmail account when you sign up as a new user on the Xbox, for support purposes.)

Microsoft may not be able to do much with how Facebook, Twitter, and LinkedIn manage their own contact databases, but if and when it integrates Skype with the Xbox, will it merge a user's Xbox contacts with his or her Skype contact list — or even Outlook contacts?

Turns Out Ubiquity Has A Downside

The question is really a cultural one. Does it make sense for a company like Microsoft to obliterate the distinction between work and play this way?

If you own a Surface tablet, and set up Skype for the first time, Microsoft will ask you to merge your Hotmail contacts with your Skype contacts. That's not really that big of a deal. But do you really want your boss calling you when you're playing Lego Batman with your son? I don't.

What might be interesting, however — from either Skype or Video Kinect — would be the option to replace video avatars with actually small video screens of my friends. I might not like losing screen real estate in Gears of War, but it might add more of a communal sense while playing Hearts or Xbox poker.

Anything else, though, runs the risk of alienating users who just want to be left alone in the evenings. Slowly, we're all being forced to integrate our jobs into other aspects of our lives. Microsoft may want to eventually push Skype into the Xbox, but it needs to do so delicately.

Serial entrepreneur and homeschool advocate Penelope Trunk claims that videogames, not traditional schooling, better prepares children for a future world of highly collaborative, analytical knowledge work. With that in mind, Trunk essentially allows her children to decide how often and how long they want to play.

A kid who is completely absorbed in a video game and can't hear a word his mom says is actually exhibiting the behavior psychologists like Mihaly Csikszentmihalyi call flow — which is the highest form of learning because it's such engaged attention toward mastery of a skill that you don't notice anything around you.

While it's easy to dismiss Trunk's embrace of video games as silly and extreme, the current school model is hardly a wellspring of success, either. Consider that only 78% of students graduate high school - even fewer for many ethnic groups. That's not college graduation - that's high school.

A Common Sense Approach To Video Games

So should you allow your child to choose video games over school?

Probably not.

While there is ample evidence that video games can improve learning, collaboration skills, analytical skills and motor skills, Trunk's hardline position of choosing video games over traditional schooling simply does not stand up to the totality of data. 

But that doesn't mean there isn't a role for games in the growth and development of kids. 

(See also A Eulogy For City Of Heroes - How A Video Game Saved My Life.)

For more insight, I spoke with Douglas Rushkoff, who has written several books on related topics, including Playing the Future, which embraced the notion that constant immersion in a world of digital tools, sims, role-playing games and ever-present screens could prove beneficial for children - and ultimately the planet's future. But even Rushkoff wasn't willing to replace school with games. 

ReadWrite: Can videogames offer benefits to children?

Douglas Rushkoff: I absolutely see the benefits of gaming - both as a new form of narrative and as an entree to critical thinking about digital environments, and even as a first step toward programming. But most games, and gamers, are not particularly biased toward that advancement. 

ReadWrite: Given that there appears to be so much evidence that at least some video games can be beneficial for children, why do  most parents see them so negatively? 

Douglas Rushkoff: There's a lot of evidence that video games cause harm, as well. It's a bit hard to balance one's knowledge that gaming might enhance a kid's programmatic sensibilities with the experience of one's kid being hyper and hard to control after extended video game sessions. I mean, try talking about the benefits of video games with a parent who is contending with a kid who refuses to do homework or throws tantrums when he can't get time on Wipeout. 

ReadWrite: Is there a clear path for schools to positively incorporate gaming into their curriculum?

Douglas Rushkoff: There may not be a clear path, but there are many possibilities. There's Katie Salen's model at Quest to Learn, which uses gaming as a metaphor for all sorts of subjects. I think the object of the game here, so to speak, is to use gaming as a way to transcend winner-takes-all models and understandings.

We don't' play to win, anymore, but to keep the game going. There are sustainable models implied by gaming that are not necessarily implied by books and traditional stories. 

The other clear path is to make sure kids understand how any digital environment they're encountering is put together. They must come to understand these are not neutral spaces, but designed environments with embedded agendas. It's the same as television or anything else: who made this, how do they want me to feel, how are they making their money? 

ReadWrite: Should parents let children set their own limits on how long to play or what to play?

Douglas Rushkoff: It depends on the child. I think children depend on their parents to set limits on how much candy they eat. Kids haven't internalized discipline, particularly when they are two or three or four years old. They really depend on parents to make sure they eat right, wear the right clothes, do their homework. Gaming falls into the same category.  

(See also Why Video Games Are Good For Your Kids.)

Not All Games Are Created Equal

Lisa Nielsen - a former New York City public schools teacher and author of Teaching Generation Text writes that "at their most basic level video games are similar to books." Like books, vdieo games can be anything: "trashy novels, historical fiction, non-fiction, classic literature" - each type offering varying contributions for learning. 

According to Nielsen, parents should focus on what "learning" a particular video game offers their child. 

If given the choice to learn about Roman history by reading, watching, discussing, or being a citizen of the Roman Empire, which would you choose? With simulation games you are no longer a passive recipient of information. You are an active member of a meaning-making experience where you have been transported to an alternate time, place, or reality.  

As a parent, I like Rushkoff's balanced approach. Video games may indeed enhance a child's socialization skills, mental focus, ability to collaborate - and even improve their intellect. But as Rushkoff and many others warn, they can have more negative effects as well. The problem is that the science is simply not yet conclusive enough to convince parents that they should abandon long-held beliefs and start encouraging their children to play Grand Theft Auto instead of doing their homework.

(See also Do Violent Video Games Really Cause Violent Behavior?)

Even with definitive, easy-to-understand proof of the benefits - which is far from certain we'll ever have - that kind of paradigm shift could take decades. 

(See also World Of Warcraft Gamer Collen Lachowizc Wins Seat In Main State Senate.)

Lead image courtesy of Wikimedia. Image of Douglas Rushkoff from his site. Image of Rome: Total War courtesy of Flickr.

M$: Short for Microsoft, used to imply Microsoft cares more for money than it does for security, stability, and anything else that could make a good Operating System." - Urban Dictionary, 2004.

"Microsoft sucks." Too many times, the conversation stops there.

Yes, Microsoft gets plenty of criticism, much of it justified, on everything from its nasty attacks on Linux to the failings of its latest operating system. Along the way, Microsoft has helped write its own narrative as a money-grubbing monopolist - old, litigious, out of touch. For Pete's sake, it took years for Bill Gates to recognize the potential of the Internet.

But that's only part of the story. We too often overlook the many things that Microsoft does right: its philosophy of open research; its willingness to adopt and contribute to open source; even its willingness to admit when it's wrong. The case here is not necessarily what Microsoft does best, but what it does well, what it deserves to be recognized for, and what we generally overlook.

1. More Open Than You'd Think

Microsoft, open?! Really?

Of course not, if you're looking strictly at Microsoft's commercial products. There's no way that you'll ever see Windows released as open-source code, nor will true open-source advocates ever put Microsoft in the same camp as say, Red Hat.

But in 2006, Microsoft began changing its tune toward open-source software - forced by IBM and Red Hat, admittedly. The tide turned when Microsoft and Novell signed a cooperative agreement shielding themselves and non-commercial free software developers from being sued; by 2012, Microsoft had entered the list of the top 20 contributors to the Linux kernel. Linux never really cracked the desktop PC, but Microsoft seems content enabling Linux to run on virtual machines, and possibly even developing Office for Linux, too.

Basically, Microsoft has achieved detente with open-source software; acknowledging its role, using it to Microsoft's own advantage, competing with it on its merits and contributing back to the community, where warranted. Argue all you want how Microsoft arrived here - kicking and screaming, perhaps - but Microsoft's attitudes toward open-source software have significantly improved.

2. Open Research, Too

One of the few companies that opens the doors to its labs is Microsoft, with events like TechFest held each year in either its Redmond headquarters or in its Silicon Valley facilities.

Many companies host developer conferences to engage with partners and announce new products. The difference is that Microsoft seems to emphasize research and showing off the fruits of that research to the world at large. There seems to be a sense of pride there that only a few companies (Intel, for one) seem to share.

Finally, there's the discovery aspect. Google Scholar does a fine job of assisting searches for academic papers, but compare Google Scholar and Microsoft's Academic Search. Not only is Microsoft's tool arguably more interesting than what Google offers, it also allows you to search by organization. Compare Microsoft versus Google versus IBM in terms of citations and papers, and decide whether or not you believe Microsoft's numbers, which show Microsoft publishing much more research than Google.

3. Winning The Game (Console)

In little more than a decade, Microsoft has forced Nintendo, one of the pioneers of the modern video game console, into near irrelevancy. It hasn't managed to do the same with Sony, yet, but its Xbox has outsold Sony's PS3 for well over a year (at least in the United States). Meanwhile, Microsoft continues to innovate with its use of the Kinect peripheral, both as a camera and a form of gesture input. 

Both Sony and Microsoft have struggled to bundle their consoles with music, movie and app stores, in much the same way Apple has. But Microsoft has also kept its eyes open. If the reports of the "Stingray" Xbox are true, Microsoft may be smartly attacking on two fronts: developing a low-cost Xbox derivative to take on Roku and Boxee in the video streaming market, while maintaining its dominance in game consoles. 

4. A Sense of Vision... And Touch

In the last decade, Microsoft has either bought or developed products for productivity (Windows, Office), collaboration and connection (Skype, Lync, Windows Phone) and entertainment (Xbox) and embarked on an ambitious bid to tie them all together.

Microsoft chief executive Steve Ballmer now describes the company as a services-driven organization, but Microsoft is increasingly committed to pushing the boundaries of hardware, whether that be its gigantic Perceptive Pixel displays, its Kinect depth camera, the Xbox or Windows Phones, and its Surface tablet. Microsoft has built outwards from a formidable presence in Office and Windows, adding powerful communication tools in Lync and Skype, and tying together tablets, phones and console together via the cloud. There's no other company in the industry - no, not Google, not Apple - whose software and hardware ecosystem traverses as broad a spectrum as Microsoft.

Microsoft may have fallen short with Windows 8's touch interface, but Kinect is impressive in its own right, even if it was licensed from a startup, Primesense. (I don't know why Microsoft hasn't made a corresponding investment in speech recognition, which would fit so naturally alongside a touch-based interface.)

Microsoft is now the chief steward of the PC, responsible for pushing its boundaries. Tablets, phones and Chromebooks attract the ink these days, but preserving the future of 350 million PCs is no small task.

5. Microsoft Peripherals: So Good, We Forget About Them

Every day, we sit down at our laptop, PC, or other computing device, put our hands to our keyboard and type away. And, in general, many of the best of those keyboards and mice have said "Microsoft" somewhere on them. 

Set aside arty attempts like the Microsoft Arc Mouse. When you get right down to it, Microsoft's basic Comfort Desktop keyboards and basic mice have been under our fingers for years and years. Microsoft's keyboards are one of the reasons many people can't imagine typing on a tablet's sheet of glass for any length of time. 

  6. Investing In The Future

Few companies have the resources to invest in startups, whether that be a company or a teenager. Microsoft does both: efforts like BizSpark give out Microsoft software and assistance to startups, while efforts like the Kodu Cup help kids learn how to code. The Imagine Cup crosses borders to incentivize student innovators develop their own products and the business models to run them. And while Microsoft helps launch solar-powered broadband in Africa, it must know that it's not going to earn a front-page story.

Much of what Microsoft is simply doing here is a high-profile effort to seed Windows and its other products around the world, employing many of the same practices that other technology companies employ. But is "good" being done here? Certainly.

7. Windows Phone: Committed To Being Different

During the holiday season, comScore reported, Microsoft's Windows Phone actually lost market share. Ugh. It's hard to write positively about Windows Phone when consumers obviously aren't falling in love with it. But Windows Phone provides an attractive, easy-to-use alternative to the iOS/Android duopoly, forgoing dozens of static app icons for dynamic "Live" tiles that transform the phone's home screen into a dynamic mosaic of information. It's, well, iconic.

We all know Windows Phone's weakness: apps. What Microsoft hasn't done is convince application developers to embrace the platform, and that's a big reason consumers have shied away. But the Windows Phone OS itself has a lot to recommend it, and the hardware from Nokia and HTC isn't bad, either.

8. Still Owning The Enterprise

For all of its emphasis on consumer-facing technologies, Microsoft's empire was built on productivity and the enterprise. Microsoft's Server and Tools and the Business Division typically report both the highest profits and revenue of any divisions within the company. Microsoft has forged relationships with thousands of businesses, generating stable, consistent revenue streams especially with the creation of subscription models like Office 365.

While Google Apps continues to cut into the Word/Excel/PowerPoint triumvirate, Microsoft has made an end run around Google's services by making collaborative services like Lync the centerpiece of Office.

Does Microsoft need to own the enterprise via hardware like Surface? In the end, no. If Surface doesn't end up as the Bring Your Own Device (BYOD) option for enterprise workers, the rumored Office for Android and iPad will likely serve instead. That's the end goal: capturing attention and generating revenue from enterprises, no matter the medium. As long as that keeps happening, Microsoft can afford to bet on riskier ventures like the Surface and Windows Phone.

9. Microsoft's Mea Culpas

I was honestly impressed by Microsoft's apology that it had fallen short of its commitment to provide "browser choice" to European customers in 2012, as part of a settlement agreement. Microsoft owned up to its mistake, described what had happened and what steps it would take, and again took responsibility for the error when the European Union slapped the company with a $731 million fine.

Google, by contrast, faces fines and a concerted EU investigation after allegedly ignoring requests to rework its privacy policy. Many expected Microsoft to have looked for excuses and appealed the EU's decision. It didn't.

Wouldn't it be nice if Microsoft didn't screw up in the first place? Sure. Microsoft obviously regrets its bawdy song-and-dance routine at a Norway developer conference showed last year, or its "big boobs" gaffe a month later.  But even the world's largest companies make mistakes. A company's character is determined by how it deals with them.

If It Bleeds, It Leads

Failure interests us. Microsoft climbed to the top of the market, creating arguably the world's richest man in the process. Tech journalists remain eager to write the story of Microsoft's fall, me included. Some of Microsoft's tactics are still downright embarrassing: the Scroogled campaign, for example. Windows 8 might well end up as the second coming of Vista. There are still questions whether or not Microsoft can tie its software, services and hardware together into a cohesive whole.

But refusing to acknowledge the other side of Microsoft's story isn't right, either. There's some good work coming out of Microsoft, and ignoring that creates an incomplete, inaccurate picture.

All images courtesy of Microsoft, except Microsoft's Open Source Lab Room by Todd Ogasawara, Microsoft mouse image by Fredric Paul, and roses image courtesy of Shutterstock.

Microsoft's follow-up to the Xbox 360, currently code named 'Durango,' will likely be unveiled on May 21 at a "small venue" with a focus on initial details and a 2013 company roadmap, sources tell The Verge.  Because this May event is only one month from this year's Electronic Entertainment Expo (E3) in June, its likely Microsoft won't actually show the physical console and will instead focus on hardware specs, social and online gaming features and a timeline for release. Perhaps most important, there's no word on whether Microsoft will require always-on Internet connectivity to use the the new platform.

Putting aside the decision to keep the event small, this move appears to parrot the steps taken by Sony in February when it unveiled the PlayStation 4 at an extravagant showing in New York City. Company executives spent a lot of time talking PlayStation philosophy but never displayed a physical console. With E3 right around the corner, Microsoft has no reason to jump the gun either. 

In another move seemingly cribbed from Sony, Microsoft is reportedly outfitting the new Xbox with an AMD x86 chip, giving it a PC architecture that will not play old games. Other notable specs rumored for the new console include a 1.6GHz 8-core CPU, 8GB of memory, and a 500GB hard drive. 

Always-Online Rumors Take Center Stage

More pressing than any hardware spec, confirmed launch title or release date is the rumor that Microsoft will bake in so called "always-online functionality" to its new Xbox. Always-online functionality would require players to maintain an active Internet connection at all times just to use the new console.

The benefits of this are unclear - at least for players - while the negatives have been argued time and again and even displayed in real-time with debacles like Electronic Arts' SimCity launch disaster, which has contributed to the game publisher reaching the finals of The Consumerist's Worst Company In America Poll for the second year in a row. 

It's hard to imagine Microsoft thinks it can get away with enforcing such a monumental shift on Xbox players. By restricting console use to the quality and reliability of the players' Internet connections, Microsoft would make players  beholden to company servers and whatever digital content management restrictions publishers decide to impose. 

Such a move would be a disaster waiting to happen, though it illustrates the contentious future of an industry stuck in a constant in a tug-of-war between big gaming companies and committed, tech-savvy gamers. If Microsoft is smart, it will keep quiet in May on the always-online rumors, but even that won't soothe the angry mob. 

Image of current Xbox suite courtesy of Microsoft. 

Table stakes in the online content industry these days is owning the rights to "exclusive" content, and Microsoft took a small step in that direction, agreeing to distribute Pulp, a "comedy about comics," which premieres Monday on its own Xbox platform.

"Microsoft might not seem like the obvious partner for an indie comedy, but the film industry has changed," Adam Hamdy, Pulp's co-director, told The Telegraph. "Xbox 360 can instantly distribute Pulp to millions of UK customers, and publicize the release in ways that simply aren’t possible traditionally."

The Competition For Content

That's the same argument, but writ small, that online content houses like Amazon, Hulu and Netflix have chosen to try and win audiences. Netflix, of course, is shaping the future of TV by signing up shows like House of Cards, Lillyhammer, and a new season of Arrested Development - though some have speculated that Netflix should be on a deathwatch, instead. Hulu has done the same thing to a lesser extent. Amazon has also ponied up, buying the rights to the critically acclaimed television series, Justified.

And HBO, one of the first paid services to orient itself around original content, has said that more customers are tuning in to watch its original series - at least via its HBO Go application - then to watch movies. That may be because movies on HBO come and go, depending on licensing deals, while its original series - including The Sopranos, The Wire and Game of Thrones, among others, live on forever on HBO Go.

Last March, Microsoft began positioning its Xbox game console as more of a video set-top box on on the order of a Roku, with more minutes spent watching recorded movies and television content than playing games. Last year, Nielsen found that consumers spend an average of about an extra hour per week on a game console watching recorded video.

Microsoft's recent moves are in line with that trend. In September, Microsoft hired former CBS exec Nancy Tellem to run a new Xbox content studio, although the first efforts were essentially interactive "Sesame Street" programs. Adding exclusive distribution of Pulp is a more traditional content play, something that one might expect Tellem would orchestrate with Hollywood.

Microsoft representatives did not respond to requests for comment by press time.

Content Is King, But Breadth Is Queen

The difference between Microsoft and a service like Netflix, however, is that Redmond inextricably tied to the Xbox platform; although Microsoft outsells all other game console in the world (in 2012, the company claimed more than 63 million Xbox 360s had been sold, lifetime) Netflix has vastly more distribution across Apple's iOS and Mac platforms, plus Android phones, tablets and various set-tops like the Apple TV, Roku and WD TV boxes, among others.

For Microsoft, however, an exclusive content deal means two things: profits and cachet. Microsoft's interactive division is forever flirting with losses (last quarter, Microsoft's Entertainment and Devices Division recorded a $19 million profit). Although Microsoft may in fact have paid money to license the premiere of Pulp, it's equally likely that studios could pay Microsoft to promote their films, a strategy that the industry is beginning to see with Roku (via banner ads promoting recent films) Comcast and Cox (ditto) as well as Hulu Plus (via a carousel of promoted shows).

Microsoft may not have the clout of a Netflix, but analyst Richard Doherty of The Envisioneering Group has characterized the Xbox as the most socially connected TV platform, and Microsoft's "second screen" Smartglass technology gives the service a technological leg up on the competition. Now, Microsoft set on expanding its Xbox from a game console to a content distribution hub. The company may be far behind its competition in that regard, but the race is far from over.

It's official. Long after the XBox 360 is relegated to scrap heaps and Gamestop bargain bins, the Microsoft Kinect – the XBox peripheral that lets you control the action with body movements alone – will be going strong.

A Mediocre Game Controller

To tell the truth, the Kinect is a pretty ho-hum video game controller. It works with a fairly weak selection of game, given how long  it's been on the market, largely because blockbuster games generally require the kind of pinpoint control you can get only from a joystick or control pad. Microsoft may be working on games that take better advantage of the Kinect hardware, but that's not the point. 

The point is that the Kinect is a cheap, open, powerful piece of hardware with a life beyond video games. It's been hacked in a number of ways since its inception, and with October's launch of Kinect for Windows, Microsoft is fulfilling the promise of its SDK and throwing the company's weight behind the effort in a big way.

Microsoft Moving Beyond The Xbox

Microsoft's emphasis on the Kinect makes sense. The XbBox has been wildly successful within the high-end game market, but that covers only a fraction of total households. To earn the company's SmartGlass system a spot in non-gamer living rooms, Microsoft needs a central piece of hardware, and an open Kinect gives it an in that Apple and Google can't currently match. On the back-end, Microsoft is positioning the Kinect as a boon to revenue-hungry content providers, but on the demand side, it's hoping the market will take care of things on its own.

So far, the market has responded. Projects like OpenKinect have spawned dozens of interesting uses of the original Kinect sensor, including virtual touchscreens and three-dimensional image tracking that works in the dark. It probably won't be long before the Ouya has its own Kinect hack. With the addition of official support and upgraded hardware, Kinect for Windows should encourage those developers to productize their work, and attract a lot more interest from commercial developers. The $200 device provides a standard platform with a high-quality camera, skeletal tracking, face and voice recognition, and a wealth of development tools and support. Its camera alone is probably worth the cost. 

Kinect-ing With Physical Therapy

Late in 2012, the Department of Defense expressed some interest in using the Kinect for therapy. The DoD found the Kinect particularly interesting for the ongoing treatment of remote patients, or those who wanted to maintain anonymity while undergoing care. The economics of the system make sense (the costs of just a few patient transports could easily pay for a Kinect and PC), and Microsoft is pursuing the deal aggressively.

Medicine is a big market for the Kinect. Tokyo Women's Medical University is currently using Kinects as part of its Opect project (see video here), which lets surgeons access information in a hands-free, Minority Report style that doesn't contaminate their hands.

While medical uses make better PR than an automatic Nerf gun turret, they still doesn't get the Kinect into the average living room.

For that, we'll need an entirely new killer app. If Microsoft gets really lucky, that app might come from crowdsourcing. But the more likely source is a certain television manufacturer with a dislike for Apple and Sony. 

See more Kinect coverage on ReadWrite.

Start figuring your gaming budget for 2013, because the clock is ticking down to the Xbox 720's debut at the Electronic Entertainment Expo next June. Microsoft's official Xbox blogger Major Nelson has all but officially confirmed this by posting an E3 countdown to his site with a terse three words: "And it's on…"

Tech spec rumors have already started swimming about the Xbox 720's potential 8 GB of memory and a price peg at a possible $299 for next year's holiday season. And it goes beyond the Xbox: speculation about Sony's next move concerning the PlayStation 4 are also skyrocketing now.

For the Xbox, you can also expect some serious upgrades to the processor and graphic capabilities, most likely thanks to Intel and Nvidia, though probably not a strong emphasis on motion controls, considering the stagnant adoption by the hardcore gaming market Sony and Microsoft have been catering to for years.

The bad news in all of this: Microsoft seems more concerned with repeating history and being first yet again instead of ensuring that its product is structurally sound and will deliver a truly 'next-gen' experience at launch time. That's what it happened mind eight years ago with the 360, and it seems we're heading down that road again.

The Xbox 360 Debacle

In 2005, Microsoft took a huge risk that being first to market was more important than being the best, when they released the Xbox 360 an entire year before Sony's updated PlayStation. Players were given the first experience of console gaming in high definition, accessory-free wireless controllers and a surprisingly elegant online interface.

But the Xbox 360 also yielded some massive missteps, the most obvious being the "Red Ring of Death" hardware malfunction that forced a recall costing Microsoft more than a billion dollars.

On top of that, the launch games for the 360 were terribly lackluster, with the only bright light being the second iteration of Call of Duty. It wasn't until late 2007 and early the following year that the console saw its best content, in the form of high-definition sequels to already-acclaimed series: the second Gears of War, the third Halo and the fourth Grand Theft Auto, to name a few.

By being first to the floor, Microsoft did give the Xbox the footing to begin seriously competing against the industry veterans with literally decades more experience. This was a smart move back when the company was having trouble branding Halo's Master Chief against Mario, Zelda and Solid Snake. With the early jump, they were able to successfully market the Xbox 360 as a true gaming enthusiasts' and, later, a true all-around media-consuming device.

When Sony finally hit the market in 2006, they got snagged by an expensive $600 price tag and hardware components that cost enough to mean a loss with each unit sold.

Now, seven years later, as rumors run high again, the last thing consumers need for a second wave of HD consoles is another industry free-for-all. Sony and Microsoft have already demonstrated they cannot deliver complex and delicate entertainment bundles under the huge pressure just to hit the shelves first.

Next-Gen Graphics Requires Next-Gen Hardware

Not only will those launch factors weigh heaviliy in 2013's looming console war, but voices in the game development and graphics engine markets have already been warning for months that upcoming consoles might be underwhelming as the next step in photo-realistic gaming and physics.

Tim Sweeney, founder of Epic Games and the graphics engine running everything from Gears of War on the Xbox to Infinity Blade on the iPad, is reticent to think Microsoft and Sony can deliver a console that meets Epic's standards. In February 2012, he announced that the Xbox 360 would need to be ten times as powerful to run the most taxing demo on the Unreal Engine 3. Epic is already onto the fourth version of its engine, and much remains to be seen on whether the next console generation will even be capable enough to run that engine at full capacity.

When talking with Wired magazine, Sweeney had more to say about it will take to deliver a truly earth-shattering gaming experience, like the jump from standard to high definition consumers were given back in 2005. To begin the quest towards human-vision style realism, which Sweeney thinks may be two or three console generations away (and potentially decades in time if console lifespans continue to expand), the developer is calling for hardware 2,000 times more powerful than the Xbox 360. But this kind of innovation "hinges on manufacturers moving toward the power levels Sweeney is looking for today."

"Epic has seen the specs of proposed new consoles and is actively lobbying for them to be more powerful. It could be a bad sign for the industry if new, relatively underpowered consoles make an appearance at this year's E3 consumer show," Wired concluded. This prediction seems even more likely with the recent race-to-be-first announcements and the tech-spec leaks that have been floating around.

Unless Microsoft and Sony are hiding a few tech cards up on their sleeves, players may be getting some disappointments this year. The posting of a countdown and the open provocation of a deadline only six months away don't exactly match up with the calculated and grand vision of the stunning next-gen gaming experience for which Sweeney is hoping.

As it stands, Sony has more reason to hold off from diving into the next-gen deep end than Microsoft does. They have two large AAA titles in the works — The Last of Us and Beyond Two Souls — as well as a number of other quiet latecomers to the PS3 that will keep Sony's console fresh for slightly longer than the rusting Xbox 360.

For now, Microsoft has put the Xbox 720 out first to start the inevitable race. It's your move Sony, but only if you want to play that game.

2013 will be a make-or-break year for Microsoft. Not so much from a financial standpoint, but for how the company is perceived.

Traditionally, Microsoft has built itself around the PC, anchoring itself by its core operating systems: Windows XP, Windows Vista, Windows 7 and now Windows 8. But in the last few years, Microsoft’s Server and Tools division has generated the highest revenue and profits in the company, followed by the traditional pillars of the company, Windows and Business Tools, or Office.

How will Microsoft fare in 2013? Financially and overall, just fine. But be on the lookout for softness in the company's traditional businesses as Microsoft evolves into a services company.

Windows 8: A Mild Flop

Any Microsoft predictions need to start with Windows 8. So let’s get this out of the way: Windows 8 will flop in 2013.

Not hard - the new operating system probably shouldn’t be compared to the catastrophe that was Windows Vista. But Windows 8 will likely be seen as overly ambitious, a risk that many potential customers won't be willing to take. In all, though, Windows 8 will sell slightly fewer copies than Windows 7 during 2013.

That’s not because Windows 8 is bad. It isn’t. To its credit, the new OS hasn’t been plagued with the sort of slowdowns and crashes and user interface mistakes that afflicted Vista. 

But the break from previous version is sharp. Windows 8 doesn’t launch to the desktop, the most familiar interface (and - perhaps to speed the transition to the new user interface - Microsoft is refusing to let users configure it to go direct to the old-style desktop). Years of interacting with smartphones and tablets have taught users how to navigate the Metro interface, and swiping left and right along the main Start screen is easily understood. But most consumers don’t quite seem to get what they need to do when they want to “work,” i.e. use the desktop. The back-and-forth between the desktop and the Start menu, the navigation between apps, the lack of a traditional Start button and other interface changes will frustrate users. Unlike Michael Dell, I see a significant chunk of enterprises still choosing to standardize on Windows 7. 

Typically, Microsoft halts sales of the previous operating system two years after the new version goes on sale, which would mean that Windows 7 would fade away in Oct. 2014. (Windows 7 mainstream support will expire in January 2015.) I think we might see a “toned-down,” more transitional edition/service pack of either Windows 8 (or 9?) that will help consumers shift over to the new OS. 

Basically, what consumers will accept is a Windows 8 tablet interface on top of a Windows 7 desktop environment. They don't have it. Yet.

Surface: A Nice Idea, But...

If Microsoft could deliver a full-fledged Windows 8 experience at the $500 price point of the Surface RT, the company would sell a ton of its new tablets. So far, it's not even trying - the Surface Pro starts at $900.

Windows tablets - from Microsoft or others - will be lumped together with Windows Phone: lovely experience, but without the variety of apps that users are used to on the leading platforms. Sorry, but developers are going to support Android and iOS first, and then maybe Windows and BlackBerry. That leaves Web apps as the saving grace.

In that environment, Surface will survive, but not thrive. Windows tablets from other manufacturers will barely survive. Expect some hardware makers to try a consumption-oriented “Surface Mini” form factor, though, with modest success.

Traditional clamshell laptop form factors will still be the most popular for business, with convertible/detachable hybrid tablet/laptops making headway among consumers. That means it's hard to see a sweet spot for the Surface Pro to catch on.

Finally, Touchscreens will become a standard necessity very quickly. Logitech and other peripheral manufacturers are in trouble. 

Server Tools and Office: Under Pressure, But Still Dominant

At this point, most people use Office because they use Office. It’s a habit. Most consumers don’t really need Office for basic Word processing, but there’s always just a bit of formatting that the free alternatives can’t manage. Businesses, meanwhile, have made Word, Excel and PowerPoint into staples of everyday business life.

There’s no reason any of that will change in 2013. Office for Windows RT and Surface remains one of the compelling selling points for the platform. And, revenue concerns or not, it makes perfect sense for Microsoft to ship Office for the iPad and the Mac. So it no doubt will do just that. It’s in Microsoft’s best interest to keep its .DOC, .PPT, and .XLS formats (and their XML equivalents) front of mind for most of the Web’s population.

It’s also difficult to see Microsoft’s Server and Tools business disintegrating. This has been one of the company’s most stable businesses, and should continue to be so for years to come.

Xbox: The Top Dog’s Getting Long In The Tooth

Will there be an “Xbox 720” by Christmas 2013? Hard to say. But with each passing year (the Xbox turns seven in 2013) the possibility becomes more and more likely. 

Either way, the Xbox is becoming even more important to Microsoft. The Xbox’s function (as a games console) has evolved into an entertainment console. I think we’ll probably see that recognized as a rebranded “Arcade” version, reimagined as a sort of beefed-up Roku. Cloud services remove much of the need for local storage, but the Kinect provides a compelling user interface as well a gaming controller. Microsoft could strip out cost from Kinect, possibly making it audio-only. I think a stripped-down Kinect Arcade bundle is likely.

Kinect for Windows, though a fascinating idea, probably doesn’t as make as much sense, given Windows 8's a touchscreen interface. In general, however, Microsoft will have to stumble badly to allow Sony, Nintendo or others back into the console game. 

Windows Phone: We’re Number Three!

Great product, nice interface, solid hardware. Count me in the camp of people who admire what Microsoft’s done in the smartphone arena. But there’s no way Microsoft unseats either Android or iOS. Instead, Microsoft should hope to become the third option - outpacing RIM's upcoming BlackBerry 10.

Will it? Probably, over time. In the United States, BlackBerry and Symbian are dead ducks.

Microsoft Online: Bing, IE Gain Respectability

It’s probably fairer to say that Microsoft’s online services have already gained respectability, and will continue driving forward in 2013. Bing’s home page is still one of the most attractive sites on the Web, and if people were forced to visit it for every search it would do even better. They're not forced to do that, of course, and Bing continues to trail Google by a large margin.

If that's going to change in 2013, the boost will come from Windows 8. In the new operating system, Mozilla’s Firefox and Google’s Chrome are unwelcome guests, rather than a fundamental part of the OS. And integrating Bing - which has diverged into its own ecosystem, rather than follow Google - will help Microsoft gain share in search. Whether or not Internet Explorer is truly the most popular browser varies by which analyst firm you ask, but IE10 will definitely help grow Microsoft’s presence online.

The tougher question is whether Microsoft’s online division turn a profit in 2013? The answer is No. It will come closer, but that milestone will have to wait.

All the changes should work together to benefit Microsoft’s online ecosystem. The company has brought together a suite of products, from Skype to Microsoft’s Office Web Apps, that can all be tied together. How well Microsoft can monetize them, however, is anyone’s guess.

Put it all together, and 2013 is the year Microsoft doubles down on its pivot away from being a software supplier to being a services provider.

Expect some softness in Windows sales, but continued strength in back-end tools and services. How this all plays out will determine whether 2013 ends with a very different Microsoft perceived as a newly revitalized dominant player or a reeling giant struggling to regain relevance. 

How do you make a truly great game? Peter Molyneux has been asked that question countless times. For the 53-year-old British gaming luminary known for both his veteran status in the industry and his polarizing ambition to surpass expectations, the words “mobile” and “social” are his next steps toward an answer.

“The way we develop games is changing very fast and it’s changing forever,” he says.

Molyneux, known best for launching titles from the ground floor of the PC era in the late ‘80s and going on to create the Fable game series, is probably the last person one would expect to staunchly reject the Xbox-and-Playstation-dominated console generation. In the age of slingshotting birds, farming crops and more Facebook word puzzles than you can spell, mobile and social games are thought of less for their greatness and more for the mindless actions they lure players to perform for unfulfilling rewards.

But Molyneux is turning that notion on its head. With a new studio, 22Cans, he is putting all his professional weight behind turning these simple games into full-blown social experiments, with the dream that he can get an unprecedented number of smartphone owners playing - and thinking - in his world all at the same time.

From Floppy Disks To Fable

Following a career selling floppy disks with Atari and Commodore 64 games on them, Molyneux almost left the industry after a rocky start developing his own titles, including a text-based business simulator that sold just two copies.

Bouncing back with a lucrative stint creating database networking software, Molyneux co-founded Bullfrog Productions in 1987. His first hit, Populous, a PC "God-game" that let players play the role of a deity, came two years later. Populous went on to sell 5 million copies and establish Molyneux’s career.

In 1997 Molyneux co-founded Lionhead Studios, which was acquired by Microsoft in 2006. Lionhead’s big hit was Fable, a game that continued to explore the good and evil tendencies that drive player motivations. As one of the first big studio titles to focus heavily on player morality, Fable was notable for weaving player choice and story, altering everything from your character’s appearance to the way the world reacted to you, all within a good-versus-evil framework.

A number of sequels eventually led to the stagnancy of the series, and Molyneux announced his departure from Microsoft last March. He now has co-founded 22Cans, an independent game studio based in Guilford, United Kingdom, with former Lionhead Studios CTO Tim Rance.

What’s Inside The Cube?

His first title since leaving Microsoft is called Curiosity - What’s Inside the Cube. It is also Molyneux’s first foray into mobile gaming, and it’s so veiled in secrecy that it conjures up memories of debating what Jack Shephard and John Locke will find inside the infamous hatch on Lost.

Marketed as half social experiment and half competition, Curiosity is a free iOS and Android game released last month that has many users and critics skeptical, and not because it’s even more mind numbingly simple than clicking a cow. Rather, it’s because the game allegedly has the power to change lives. Well, for one of us at least.

In Curiosity, you do but one thing: tap the screen and see a cubelet shatter away to the satisfying flutter of disintegrating glass. That block is one of 68 billion pieces of an enigmatic floating cube. But only one person - the one who taps away the final cubelet - will get to see what’s inside.

The secret contents of the cube have been described as “life changing” in the game’s brief intro and by Molyneux himself. Aiding the mystique is alternating cube art for every other new layer, ranging from real-life photos and still-life art to cryptic literature references.

This monumental tease has prompted a fresh round of accusations that Molyneux is once again overhyping the gravity of his creation, resulting in disappointment when the finished product doesn’t live up to expectations. It’s a tendency of his that peaked with the Fable series and has dogged him throughout his career, even generating a satirical Twitter account dedicated to his grandiose ideas.

But Molyneux has been steadfast on his promises, leaving players with an insatiable interest in 22Cans’ creations, of which there will be 21 more following Curiosity.

Molyneux has announced that Curiosity 2.0 is on the way, to be submitted to Apple this week and released soon after approval. He hopes to release it for Android a little earlier to get it in the hands of players as soon as possible.

As for the updates, “It’s a mixture of things we learned, new ways of interacting and making the cube smaller, there’s a real sense of new timeness,” Molyneux says.

So while the visibility of real-time changes and new destruction tools (including the most expensive downloadable content ever) will be nice, the more important addition with the release of Curiosity 2.0 will be the insight 22Cans has gained from the past three weeks.

“There’s some really fascinating things about player motivation we’ve learned. We’re going to go into a lot of detail… about how Curiosity has altered our perception of what a game is,” Molyneux says.

Currently, the app has been downloaded “a few million times,” Molyneux says, and players have blasted away more than 5 billion of the cube’s 68 billion cubelets, giving 22Cans a trove of data to sift through and analyze.

A number cruncher and Wikipedia editor has figured out a potential time scale for the cube, using some complex summation formulas. Because the first layer had 100 million cubelets and each layer is slightly smaller than the last, 68 billion in total equates to a little more than 2,000 layers. That puts the end date somewhere in the ballpark of late next summer at the current rate.

But Molyneux doesn’t want numbers like that to convince anybody that the game will drag on for a year and kill its namesake quality, especially considering the fact that we’re only on layer 70. “There’s a limit, but we can always bring that forward,” he says, meaning that at any point 22Cans could make the next layer the center of the cube and accelerate the entire experiment.

Meanwhile 22Cans has extracted a number of important lessons from Curiosity. For one, the studio learned the hard way what happens when an independent game company’s creation yields hundreds of thousands of downloads in the first few days, and had to formally apologize for the app’s early bugs.

Crowdfunding And Project Godus

Molyneux and his studio have been transparent from the beginning about their games acting as both social experiments and educational tools to be absorbed for future titles. While Curiosity still attracts new users every day, Molyneux is already gearing up for his next big thing — “Project Godus.”

Announced on Kickstarter on November 21, Godus is Molyneux’s vehicle for reviving the God-game genre he popularized decades ago. Slated as a reboot of Populous, Godus will aim to take that experience further on iOS and Android alongside a more graphically rich PC version.

The crux will be this ability to shift platforms, from desktops and laptops to smartphones. Molyneux hopes this will capitalize on how game playing is changing from long-duration console experiences to multiple-screen, on-the-go gaming. He says his studio can offer a truly balanced experience. “Most people are not overly attached to a particular platform anymore. The platform is just a window.” In three to ten years, “releasing something on a single device will be unthinkable,” Molyneux says.

“This is some of the tech that we tested on Curiosity,” he adds. “Can you link people together on many different platforms, over 200 with Android for instance? Can they all be fair? And if you looked at Curiosity, there were completely different engines powering that.”

Of the nearly £500,000 needed, the Kickstarter campaign has already amassed upwards of £192,000 with some unique prizes for generous backers, like a chisel-engraved titanium necklace with the game’s logo on it or the opportunity to co-design a character named after you.

While 22Cans isn’t the first group of indie developers to utilize Kickstarter to rekindle a popular franchise, the studio certainly jump-started the crowdfunding with the enormous interest generated through Curiosity. And while backers of the project may get some wearable swag, it’s a two-way street. The studio can develop Godus with unprecedented feedback.

Building An Audience Through Beta Testing

In Molyneux’s eyes, the common thread between great games is the amount of time spent playing, learning from and refining the game. “If that theory is sound, then how do you find a group of people that really care about it? That’s where Kickstarter comes in,” he says. “We can find a group of people that not only actually care to play the game, but they also want to pay to test it.”

With Godus, even lower-tier rewards for donations offer beta and even alpha testing of the game as it is being developed. That's better than than waiting and testing the finished product select focus groups, Molyneux says, which was a tendency that kept big studios like Microsoft from doing anything but minor tweaking to projects like Fable II.

Molyneux won’t offer any fresh hints about the secret inside Curiosity. “It’s not cash, a car or Half-Life 3,” is all he’ll say, though it does seem to pain him to fall back on his PR-approved one-liner.

Though the life-changing aspects of 22Cans’ creations may be Molyneux’s biggest overpromise to date, with the success of Curiosity, there's been no shortage of people willing to listen and cross their fingers right alongside him. It seems that many people would rather waste their time in pursuit of something grand, even if the chances of winning are infinitesimal, than follow companies like Zynga into a profit-hungry maze with no exit?

Good news for Holiday shoppers -- Microsoft's Xbox game console will continue to appear on store shelves.

Judge James Robart, a federal judge based in Seattle, ruled (PDF) late last week that Microsoft owes Motorola some sort of royalty for the patents it owns covering 802.11 Wi-Fi technology and H.264 video codecs, but that those patent royalties would be fair and reasonable, and up to the court to decide. In no way, the court ruled, does Motorola have the right to ban the Xbox from being sold.

Taken by itself, the Microsoft-Motorola suit is tangled enough, stretching back to October 2010, when Motorola sent Microsoft a letter offering to license the patents it owned, which were part of the 802.11 Wi-Fi technology. The court had found that the terms Motorola offered, however, were excessive: 2.25% of the price of the end product, plus all of the 802.11 patents that Microsoft itself owned. Put another way, Microsoft's only real product that incorporates an 802.11 Wi-Fi controller is an Xbox 360. One of the cheapest models is the Xbox 360 with an included 4GB of storage, which retails for $199.99; at that royalty rate, Motorola would be owed about $4.50 for each of those Xbox models Microsoft sold.

The Motorola-Microsoft litigation has also sucked in a separate dispute, involving the H.264 video patents that Microsoft incorporated into Windows 7. (You might know H.264 as MPEG-4, one of the more popular video codecs, used today by Blu-ray, Adobe Flash, YouTube, and Microsoft's own Silverlight, among others.)

That royalty rate may not sound like a lot, even taking into account the razor-and-razor blades model console makers employ, where consoles are sold near or even below cost, and profits are made up via software sales, services like Xbox Live and media sales.

What is FRAND?

But the patents in question fall under the so-called FRAND category, which used to be known as RAND, or reasonable and non-discriminatory. (The term "fair" was tacked on at some point.) The logic is this: For a broadly accepted technology like Wi-Fi, contributions are made from a variety of companies. FRAND assumes that those individual technologies are themselves patented, but contributed to a "patent pool" that is legally shared among the participants.

Companies may have to take a license to access FRAND technology, but the idea is to facilitate wide adoption by keeping royalties low. A company with a proprietary technology can charge higher royalties, but also risks alienating customers. A good example of this is Apple's Lightning connector, which replaced the ubiquitous 30-pin connector used by its previous products. So far, Apple has struggled to find third-party products, such as hard drives, to adopt the new connector.

FRAND issues have come up in other cases -- involving Motorola, not surprisingly. In November, a judge dismissed a case between Apple and Motorola Mobility that also covered Wi-Fi and video-streaming patents. Motorola had also attempted to set royalty rates at 2.25%, and, like Judge Robard, Judge Barbara B. Crabb in a Wisconsin federal court also ruled that those FRAND terms weren't fair at all. The problem, unfortunately, was that Apple itself apparently overstepped its bounds, sniffing that it wouldn't be bound by the court's ruling if Apple itself decided that the royalty rate wasn't high enough. 

"... Apple states that it will not commit to be bound by any FRAND rate determined by the court and will not agree to accept any license from Motorola unless the court sets a rate of $1 or less for each Apple phone ... ," Judge Crabb wrote, as reported by Groklaw. "In other words, if Apple is unsatisfied with the rate chosen by the court, it 'reserves the right to refuse and proceed to further infringement litigation.' "

Which, as every parent knows, is the legal equivalent of hearing "You're not the boss of me!" The court's response -- like that of many parents, was to take away the child's privileges.

Putting "Fair Back Into FRAND

In the Microsoft case, Judge Robard's ruling states that when Motorola offered to provide its 802.11 patents to Microsoft under RAND terms, Motorola was legally obligated to follow through -- and at fairer terms than originally offered. Over the past few months, Motorola has attempted to wriggle free; it argued, for example, that Microsoft's rejection of its offer also freed Motorola of its obligations to provide Microsoft a license at all. The crux of the matter is that Motorola owes Microsoft a patent license, at FRAND terms that haven't yet been decided. The court is working on this, and will reportedly issue its ruling for the royalty rate early next year.

The other major complication to cases like these are foreign rulings, especially from Germany, which has become a power player of sorts in establishing international injunctions. Judge Robard had previously blocked Motorola from enforcing any injunction the German court granted; now, given that he had already ordered Motorola to sign a FRAND license with Microsoft, he lifted the ban -- essentially, the order made it a moot point.

Patent litigation now seems to be an essential aspect of modern technology -- an arms race where the company with the biggest arsenal of patents wins. What Judge Robard and Judge Crabb are doing, thank goodness, is forcefully negotiating some sort of detente.

The ReadWrite DeathWatch is known for serving up plenty of doom, gloom and grumpiness. But for the Holiday Season, we're going to take a slightly different tack, and highlight companies and technologies that Cheated Death - that might have died, but didn't.

First up for the Cheating DeathWatch is Microsoft, which somehow managed to stay relevant even as the market and the media have pivoted away from the desktop computer arena that made the company rich and famous.

Where Microsoft Was

After buying DOS to enter the operating system market in 1981, Microsoft knocked out IBM and held off Apple to become the undisputed champion of the computer operating system. Along the way, Microsoft imitated and intimidated as much as it innovated, gaining a reputation as a bully - bulldozing its way to success with marketing, money, and industry leverage.

Whatever its tactics, Microsoft was successful. Windows killed IBM's OS/2, Office killed WordPerfect and Lotus 1-2-3, and Internet Explorer demolished Netscape. Microsoft was king of the tech world, closing out the millennium at its highest valuation ever.

And then everything fell apart.

As first RIM, then Apple and Google brought computer functionality to mobile devices (from smartphones to tablets), they shifted the center of the tech world to mobile devices and away from Microsoft's desktop stronghold - and Microsoft couldn't answer. In the lucrative search market, Microsoft's bid to buy Yahoo failed, and its Bing search engine shows no signs of dethroning Google. In the enterprise, Linux was becoming a viable alternative to Microsoft's products. Only Microsoft's XBox was able to become a leader in a new market. Pundits were increasingly ready to write off Bill Gates' creation as a dinosaur, not able to keep up with swifter, smarter competitors. The DeathWatch was on.

Where Microsoft Is Now

But Microsoft didn't give up. Love it or hate it, Windows 8 is everywhere, from PCs to phones to tablets, and people are actually taking it seriously. It's early, and Microsoft has a lot of catching up to do, but even tech insiders can now bring home a Windows-powered Surface tablet or Lumia 920 phone and hold their heads high.

Even the gaming market is looking up. Halo 4 sales hit $220 million on opening day, with killer reviews. Microsoft's E3 preview of SmartGlass displayed a well-planned move toward cross-platform gaming, and the rumored Xbox Surface could back up its mobile gaming ambitions.

Microsoft is refreshing its whole lineup. Office is finally moving to the cloud, IE 10 is completely rebuilt, and bing has a new consumer focus, thanks to deeper relationships with Facebook, Amazon and Yahoo. There's even the first new logo since 1987.

Can Microsoft pull off this reinvention without a hitch? Not a chance. There's evidence that the tide may already be slowing. Still Microsoft has gone from an aging granddad to a revitalized contender in just about a year. Depending on who you ask, it might even be kind of cool.

How Microsoft Got Here

From one angle, Microsoft came back by doing what it always does - rolling in late and large. It finally understood that mobile, touchscreens and data portability were big, the same way it realized the Web would be huge back in 1997 - years after everyone else. It the media blitz for Windows 95 or Internet Explorer 4 all over again - only with at least slightly better ads:

But Microsoft actually did something kind of bold. In its own words, it "shunned the incremental" for once. Windows 8 is a major departure from other operating systems - including Windows 7. The Surface may not be quite sure whether it's a tablet or a laptop, but it's a novel flagship for a hybrid OS that looks great in ads and challenges third-party manufacturers to do better.

Microsoft has also finally learned to adapt. It has dropped Windows prices to compete with Apple, addressed the Google Docs threat by moving Office to the cloud, and given non-PC devices a nod by expanding Windows to ARM processors.

Can Microsoft Stay On Top?

One of the biggest drivers of Microsoft's mind-shift was Steven Sinofsky, the President of Windows and Windows Live who left the company in November. While Microsoft's stock took a dip after the announcement, there is a of potential upside. Sinofsky made enemies at Microsoft, and some analysts think his absence might smooth collaboration in the future.

Sinofsky's replacement, Julie Larson-Green has been with the company since 1993, and arguably had as much influence on Office and Windows 7 and 8 as Sinofsky did. She's smart, knows the lay of the land, and has a lot of friends. The question, really, is whether she can use that political capital to push the company forward. Sinofsky could be brutish, but he got things done.

Larson-Green's first task is to pull more support and innovation from its hardware partners. Microsoft has always prospered by getting its partners to do much of the heavy lifting, but many of its biggest and most important relationships have well-earned spots on the ReadWrite DeathWatch. We're looking at you HP and Nokia.

Those challenges are very real, and Microsoft is not out of the woods yet. But make no mistake, Microsoft is still a player.

To see more ReadWrite DeathWatches, check out the ReadWrite DeathWatch Series, which collects them all, the most recent first.

A Microsoft patent application published this week suggests that the software giant could use its Xbox 360 Kinect hardware as a “Big Brother” sensor to prevent too many people from watching rented movies.

The patent application, applied for on November 1, is titled “Content distribution regulation by viewing user.” The patent, assigned to Kathryn Stone Perez, Alex Aben-Athar Kipman and Andrew John Fuller, describes a “content presentation system and method allowing content providers to regulate the presentation of content on a per-user-view basis”.

Although the patent goes on at some length, the concept is fairly simple: the patent assumes a future in which a content provider (Microsoft or a third-party studio) licenses content like a movie or game to be played. The difference that the patent suggests is that the content would be licensed on a per-user-view basis, so that, for example, a maximum of four people could watch a movie.

The patent goes on to suggest that the computing device itself enforce limits on the number of people that could view the movie or game. If the number of viewers exceeds the limit, the viewers could be asked to re-license the movie - paying more for the privilege, one can assume - or risk it being blocked or shut down.

Or as the patent application suggests:

“Once the presentation begins at 326, the users in the field of view may change over the course of the presentation. Users may enter or leave the display area of a display device, for example. At 328, the display area for the display device is re-scanned. At 330, a determination is made as to whether the consuming user count has changed. Again, the content provider based on information provided to the content provider by the display device may perform step 330. In such embodiments, the content provider performs step 330. At 332, a comparison of the user count and any view or performance limitation against that allowed by the license is again made. If the license is exceeded, the process moves to step 338 to offer an opportunity to change the license terms. If the count has not changed, a determination is made at 334 whether performance of the content has been completed. “

The numbers refer to specific components of the patent itself.

Kinect Is Watching You

Although the computing device in question could be any number of things, including a camera-equipped mobile phone, one of the drawings attached to the patent includes a television screen with a pair of cameras mounted upon it. Although neither the patent nor the drawings name it specifically, the suggestion is that the Xbox Kinect sensor could be used to identify users and determine if their presence, including moving in an out of the room, would be enough to warrant a license warning.

“Individuals may be specifically identified and the amount of their consumption of the content tracked relative to their specific use,” the patent application reads.

Microsoft clearly recognizes that its Kinect peripheral offers it the chance to take living-room computing in new, revolutionary directions, from peripheral displays that can project “holodeck”-like scenery on the walls to mounting it on your computer monitor to enable Minority Report-style gestures. The patent also specifically mentions eyeglasses - most probably the Fortaleza augmented reality glasses that previously leaked documents detailed - that could be used to view real and virtual objects. Microsoft representatives did not return requests for comment.

Pay-Per-View Impact

Still, the use of Microsoft hardware to enforce copyrights could have more of a real-world impact on things like sporting events, all of which carry taglines similar to those used by Major league Baseball: “Any reproduction, retransmission or rebroadcast without the expressed, written consent of Major League Baseball is strictly prohibited.” 

For a baseball game, the rights to watch it are essentially free, paid for by a user’s cable or satellite license. (Baseball, like other sports, charges more for the rights to see out-of-town games or to watch games online.) But bars, restaurants and other businesses have to buy a special business TV subscription that allows them to broadcast sports to larger groups of people, such as this one from Cox. The price might not be that high - a Cox salesman told ReadWrite that an expanded HD package would run $80 per month - but the special events are where a business will pay more.

The price for watching a pay-per-view bout at home might be $50, while businesses typically pay $1,500 to $3,000 or more depending on the size of the venue, according to J&J Sports President Joseph Gagliardi, as quoted by Bloomberg. Some bar owners attempt to tap into the residential signal to broadcast the pay-per-view mixed-martial-arts matches, and should pay more to broadcast football games. 

But while Kinect-equipped bars might be relatively rare, on any given Sunday living rooms across the nation might be packed with family and friends. And if the NFL, MLB or NBA decided that too many people were watching the game, the video feed could suddenly be cut off. And that would truly be game over. 

Image source: Microsoft.

Microsoft is reportedly building its own “Xbox Surface” gaming tablet, which could give the company a true mobile gaming strategy.

Microsoft officials declined to comment, but the rumored 7-inch tablet could incorporate a custom ARM processor as well as “high-bandwidth RAM suitable for gaming tasks,” The Verge reported on Tuesday. In June, the site published what it believed to be the specs of the device, which included 288MB of RLDRAM 2 and a screen resolution of 1280 x 720.

Microsoft is also reportedly considering a Surface phone, according to the rival BGR site. 

If the reports are true, an “Xbox Surface” tablet would give Microsoft something of a head-to-head competitor to the Sony PlayStation Vita and the Nintendo 3DS. Technically, Microsoft already has a mobile gaming platfrom: Windows Phone, which is moving into Windows Phone 8. Games like Dragon’s Blade and Dungeon Stalker take advantage of Windows Phone 7 (and 8), providing the platform with entertainment for Windows Phone users to enjoy on the subway or an airplane. But the quality of the games pales to what Microsoft’s game console, the Xbox 360, offers; gaming sites like PocketGamer usually give short shrift to Microsoft’s phone games. 

Mobile Gaming On The Rise

Statistically, the rise of mobile gaming clearly justifies a Microsoft foray into the market. In September, analyst group NPD (which provides reports ranking the various game consoles and games by unit sales) said that the number of “mobile gamers” climbed 9% from a year ago, to a total of 23%  of the 211.5 million U.S. gamers, or a total of 46.53 million mobile gamers. Since the number of total gamers actually decreased 5%, that means that mobile gamers are growing both in absolute numbers as well as a percentage of the whole.

What NPD doesn’t do - publicly, at least - is break out the numbers for each console. However, a recent report from the Associated Press does a nice snapshot of how console makers are faring. Microsoft, for example, says it shipped 1.7 million Xbox 360 consoles during the latest quarter, down 26% from 2.3 million a year earlier. Sony shipped a total of 3.5 million PlayStation 2 and PlayStation 3 units for the quarter, down from 4.9 million a year ago. And Nintendo said it sold 1.32 million Wiis for the six-month period ending in September, down from 3.35 million a year ago.

The mobile market is a bit more vague. Nintendo didn’t break out its portable shipments, and Sony said it sold 1.6 million portable PlayStation units (possibly including the Vita) versus 1.7 million units a year ago. That probably means that there’s a market opportunity for Microsoft, if it chooses to head down that path.

What Games Would An Xbox Surface Run?

But there's a simple question that hasn’t yet been answered: Would an Xbox Surface tablet actually run Xbox games?Currently, the Xbox 360 is powered by the so-called Xenon chip, a triple-core IBM PowerPC chip. That’s an entirely different architecture than the ARM processor found within the Apple iPhone5 or all Android phones. And that, in turn, means that games written for a custom ARM processor in an Xbox Surface tablet would require a custom port to the tablet by the developer itself. It also means, however, that Windows Phone games should work without too much trouble. Designing a tablet around a custom Intel chip seems to make more sense, as it would likely provide the X86 compatibility needed to run true Windows apps, which have already begun straddling the Xbox console and PC anyway.

An ARM-powered Xbox Surface tablet might resemble the Surface RT: a low-cost, specialized platform that would require custom apps. That doesn’t mean those apps wouldn’t be written, but it would require additional development effort (and most likely financial incentives from Microsoft) to start building an app ecosystem for the Xbox Surface. And would PC-quality games run well on a tablet? Doubtful.

Other Possibilities

There are a couple of other possibilities: Sony recently bought Gaikai, a cloud-gaming company that is being assimilated into the PlayStation space. Microsoft has already announced that its latest Halo 4 offering is being powered by its Azure cloud software; it’s not too far-fetched to think that Microsoft could be planning some form of streamed offering, either using the Xbox 360 console for local processing or going all the way back to its own in-house servers. Either way, that would help Microsoft circumvent the limits of an Xbox Surgace tablet.

This could also simply be a blown-up marketing effort. Both Sony and Microsoft have released “custom” Xbox hardware tied to a specific game; it’s possible that this could simply be an “Xbox” branded Surface tablet with the SmartGlass “second screen” app front and center.

A Microsoft bet on mobile gaming is certainly risky. But as tablets usurp PCs, an Xbox Surface could also be seen as ahead of the curve.

Microsoft’s new Smartglass technology, due Friday, combined with a new update to the Xbox, puts the company clearly in the driver’s seat to control the evolution of the living room.

Microsoft said Tuesday that its Smartglass technology, which makes tablets and phones a “second screen” to complement the Xbox game console, will be available on Friday, the same day the company plans to release Windows 8. At the same time, a scheduled Xbox update adds Windows Explorer to the TV screen - along with a key addition: recommended content.

“We are bringing the Web to the TV like never before with Internet Explorer, launching a brand new music service, and making it even easier to find the entertainment you love using Kinect and Bing voice search,” said Yusuf Mehdi, chief marketing officer for Microsoft's Interactive Entertainment Division, in a blog post. “This release is the next step in our journey to transform Xbox 360 from a games console to an all-in-one entertainment system.”

According to Nielsen’s first-quarter “Cross-Platform Report,” (PDF), Americans spend 1 hour 38

minutes per week on gaming devices. But consoles with the power to stream video (now, virtually all of them), the average time spent is 2 hours and 48 minutes a week. The conclusion? Game consoles aren’t just a console, they’re a set-top box, a front-end gateway to entertainment content that the traditional cable or satellite box just doesn’t provide.

The same report also notes that DVR viewing continues to increase. With the exception of live sports, viewers are caring less about watching live TV as it happens, instead time-shifting it to when it’s most convenient. That, in turn, blurs the line between the recorded shows available on Netflix, Hulu and other sources of content and the linear streams of content presented on network and cable TV that we can “dip into” with our DVRs.

Recommending What To Watch

One of the most important additions to the Xbox update, then, is the release of recommendations. “Recommendations will allow you to discover new movies, TV shows and games, generated based on a number of variables including the content you previously viewed, what your friends are consuming and what is most relevant and popular with our Xbox community,” said Larry Hyrb, Microsoft’s Xbox community spokesman, in a related blog post. “You can now rate content yourself and also see Rotten Tomatoes ratings.”

According to ABI Research, the number of videos and TV shows available to watch numbers somewhere north of 100,000, although the total varies widely according to how they’re defined. (Amazon and Google, for example, are suspected to equate a single episode of a TV show as equivalent to a movie, putting South Park on the scale of Captain America.) However you count, though, there’s an overwhelming amount of content out there, and recommendations help narrow it down based on your preferences and what your friends like.

There are essentially three methods of rating content:

1. Active or manual ratings, such as what Netflix and Google TV use, allow users to rate The Blues Brothers, for example. The algorithm then determines that, based on your preference for popular, critically acclaimed movies starring Dan Ackroyd, that you might like Ghostbusters(http://www.imdb.com/title/tt0087332/).
2. Social recommendations use “likes” and references to promote content.
3. Passive recommendations aren’t based on what you say you want to watch, but what you actually do watch.

The latter two are Microsoft’s preferred methods.

“Solving the [recommendation] problem for users means solving how users relate to content,” Sam Rosen, an analyst for ABI Research, said in an interview. “How they decide what they want to watch, when they want to watch, and giving them the flexibility to subscribe to certain feeds, to browse based on certain interests, and personalize their recommendations based on who they’re sitting with.”

“I think that passive and social [recommendations] are going to catch on more than manual,” Rosen added. “I think that rating for the purpose of rating has worked well for Netflix, based on their timing of when they entered the Web, and their ability to build a certain loyal base. I think as people move away from their PC on their desk, where they’re making the decision about what to put in their queue, as they move to more on-demand rating, I would guess - and I haven’t looked at the question - I would guess that the number of people rating Netflix content is going down over time.”

Watching The Web On TV

Bringing the best of the Web to the set-top box, of course, was the mission statement of Google TV, which launched two years ago. But content providers, leery of losing ad revenue, blocked the nascent platform. Today, Google TV isn’t much more than a front end to services like Netflix and YouTube, with some third-party apps.

However, Google TV also offers one capability that other platforms have lacked: the Web. Unfortunately, that meant typing in a search query. With the updated Xbox and Kinect, Xbox users can now verbally ask a query, rather than have to use an awkward on-screen keyboard. Voice also works with the recommendation engine as well.

The Xbox update also includes new features like “pinning” favorites to the Start menu, the newly released Xbox Video, and recently watched content. Improvements to Bing will let users say, “Xbox, Bing, action” and receive results for action movies from across Xbox.

SmartGlass: Last, And Least Interesting

In some ways, SmartGlass might be the least interesting update to the Xbox. Yes, it will give the Xbox a “second screen,” another way for a user to interact with content on the main display (program notes and minutiae from HBO’s Game of Thrones, for example) and additional control options like pinch and zoom. SmartGlass will be used by games, including Dance Central 3, Forza Horizon, Halo Waypoint and Home Run Stars, among others; entertainment apps such as HBO GO, MSN, and NBC News; plus sports apps like ESPN and the UFC.

However, it requires users to own a tablet or phone. Not surprisingly, SmartGlass will be first available with Surface and with Windows Phone 8; additional platforms are coming soon, according to Engadget. That approach hasn't placated existing Windows Phone 7.5 users, who will be left out in the cold at launch.

Microsoft has set itself up to traverse the continuum of tablet, phone and PC. But it hasn’t forgotten about the biggest screen in the house, which in some ways is still the most important of all.