See how Microsoft is going Hollywood with Xbox Entertainment Studios

Microsoft announced a bunch television shows today that will debut over time on its Xbox Live online entertainment service. These Xbox Originals will be broadcast on game consoles, PCs, and mobile devices.

Seasoned TV executives Nancy Tellem and Jordan Levin are running Xbox Entertainment Studios in Hollywood. Their strategy is to create original TV shows that will give people more reason to subscribe to Xbox Live while extending the service’s reach beyond console gamers.

But their first shows will focus on what appeals to the base of mostly young male gamers. When the first programs go live this summer, Xbox Live will become one of the largest TV networks since it already has a base of 48 million members.

We caught up with Tellem and Levin at a press briefing in San Francisco last week. Here’s an edited transcript of the conversation.

GamesBeat: One of the new shows among the Xbox Originals is Humans.

Jordan Levin: We’re starting production late summer. You adapt these things, so they work more naturally for your territory. But it’s interesting. When we’re dealing with a global platform — we’re in 41 territories — as you start to make rights deals, you have to think through which rights are important, which rights are secondary, and how you can continue to create upside for your partners.

Nancy Tellem: You first go through the lens of what you think works with the audience. What we like about Humans is not only the action, but also the character stuff. Looking for prototypes, it’s like Game of Thrones or Walking Dead or Breaking Bad. Not only does it appeal to the millennial man, but it also appeals to women as well. As we’re looking at all these scripted series, we look through that lens. You don’t want to limit yourself as far as where you look. You want to partner with as many people as you can, have access to as many ideas as you can. Thankfully, with us being well grounded in traditional media, we get what our partners need.

GamesBeat: Are you doing anything different across Xbox 360 and Xbox One? Is there some unique content that you could interact with on Xbox One?

Tellem: The intent is, whatever we produce will be on both platforms. We’ll be able to do some things only on Xbox One, just because the architecture of 360 has its limitations. But we hope to achieve a similarity of experience.

Levin: Now you’re starting to get into what makes this even more challenging than just trying to find the right programming. The whole process of putting together this layer of interactivity, against a platform in which there’s different functionality for the different hardware … there are different screens, as screens start to get married together. That’s why there’s this team of 125 people up in Vancouver to build out things like the NFL interactive experience. The timing of all that’s different. The legal needs are different.

We start to talk about bringing together technology. In that world, the entertainment world, the devil is in the details. You have to approach it from a place of mutual respect, trying to hear what each other [is] saying and find out how to translate between the two. The nice thing for us, at least within Microsoft, has been … neither side is approaching it from a standpoint of, “This is the way you do things.” It’s, “Look, this is our context for how things are done, but let’s figure out a new process that works for both.”

Humans is a good example of the technology we’re trying to build. When dramas work, people love the social immediacy of watching something in real time. That works better for sports and live events than it does for something you’re time shifting, though, and consuming on your own watch. One of the products we’re trying to develop is something called time shifted comments. It tags comments to individual frames, similar to Soundcloud. It allows you to sort those comments however you want to see them. If you want to see your friends’ comments, if you want to put together targeted individuals you like, if you want to see the most read or liked comments, you can snap that on a separate sidebar. When we talk about interactivity, part of what we’re trying to develop are things of that nature, that solve problems.

Tellem: The challenges are different when you’re dealing with [video on demand] versus a live broadcast. It’s exciting to figure out how to present to the audience something that they’re choosing to watch when they watch it.

Levin: One area we look at with dramas is underlying rights. Those come in a lot of different forms. A lot of properties have been on the market that have influenced a new generation of creators. Those come from a lot of different sources. Graphic novels are a rich area. One that we’ve acquired is Winterworld, created by Chuck Dixon, which we’re looking at as a limited series. We’ve acquired a number of books. A good example is Gun Machine, which was a New York Times bestseller, written by Warren Ellis, who’s an executive producer. Deadlands is a very popular role-playing game for nearly two decades that’s spawned books and graphic novels. They’re all in script stage, but again, that gives you a sense of our thinking.

There’s another pool of intellectual property that we’d be fools to overlook, and that’s the treasure that is the various game properties that Microsoft owns. This is by no means to suggest that we are going to develop every single one of these franchises into more than games. But again, just to give you some insight, these are properties where we’ve started to meet with the game studios, started to meet with the creative heads and the brand managers at those studios. We’ve spent time at those studios to get a better sense of those worlds and consume the materials that have been developed around them and understand what their goals and ambitions are and see if we can be of help to realize them. We’re trying to see if a live series, whether scripted or unscripted, is something that helps them extend their brand and creates a unique experience for the Xbox platform that does feel deserved and doesn’t feel like a marketing gimmick.

Tellem: To reiterate, this is an amazing opportunity, to have such a library of content. … We had a discussion about [the canceled Xbox 360 game] 1 vs. 100. It was an experience that was done some time ago, and it was well-received but never pursued. We’re looking at all of that to figure out if it’s worth looking more closely and exploiting.

When you’re dealing with these seminal game titles, we defer to the game studios themselves as to what they want to do. It’s not like we’re coming in and saying, “We want you to do a live series.” It’s more about them saying, “We want to expand our franchise. What can we do?” Before with most of these, a lot of people from the outside, from my business, came in and said, “Oh, let me do Gears of War.” They developed to features that never went anywhere. It’s more that we’re the trusted studio to support what they want to do and how they want to grow that franchise.

Halo embarked on a digital feature a couple of years ago. It was a risk at the time because we weren’t sure how the fans would react. As it happened, it was really well-received. It showed their appetite, wanting to learn more about the characters and flesh out the mythology that’s revealed in the games. I think about 50 million unique viewers watched that, which in my world would be fantastic. But it also highlighted the love of the game, how a rich storytelling opportunity with Halo was something they were very sensitive to, making sure they were respectful of the fans. We are developing another digital feature. We’re working very closely with 343. They’re guiding us through this. We’re bringing our own expertise and supporting what they ultimately want to accomplish.

We brought in Scott Free Productions, which is Ridley Scott’s company, to produce. We start shooting next week on a digital feature that augments the storytelling that already exists. We hope we’ll have that done and be able to release some time at the end of the year. In active development is the series with Steven Spielberg, which we’re working on as well. Again, for us, it’s an amazing opportunity to work so closely with a game studio and help them execute their vision.

GamesBeat: So these are two entirely different entities? The Scott Free production is another Web series, like Forward Unto Dawn (a Halo live-action show from 2012)?

Levin: Similar, but higher budget. We’re biting off something a little bigger. We’ll be shooting in Ireland and Iceland. It’s not following Master Chief.

A lot of it’s about making the right marriages. A lot of different entities come together to make something. You don’t want to force marriages. You want everyone to feel comfortable with one another. We’re in that marriage-making process with some good possibilities.

This is a content company. It may be a different content company than people in Hollywood are used to, but there’s a greater level of common understanding than there is a disconnect. A lot of it, for us, is about bringing together a process where both sides understand the common language and put in place processes that make sense for everyone.

GamesBeat: Do you have multiple release strategies for these productions?

Tellem: What’s great about this is there aren’t any models. We’re going to be experimenting with a lot of different ways in which we can distribute. Obviously, we can start with our platform. You look at the Xbox platform, at tablets. The service we’re trying to build can live on the console and off the console as well.

As you look at the portfolio and the types of shows we’re looking at, each will be dictated by a different model or a different distribution plan and strategy. Unlike our old business, where you had to fill slots, it’s a pretty open-ended platform. We’re not restricted by formats. We’re not restricted by length of content. We’re seriously looking at certain things that will be in front of a paywall or behind it. The focus is to enhance the value proposition for the Xbox Live subscribers. Original content, for us, will be the differentiator. We can always say that either it will be only on Xbox or best on Xbox. That leaves a little bit of room.

GamesBeat: Is there an advertising component as well?

Tellem: The way we’re looking at it right now, certain programs will be supported by advertising. To tell you the truth, we’re kind of reframing our presence there, as far as our existence and what our content focus is.

GamesBeat: Can you talk about the support within Microsoft given the CEO changeover?

Tellem: This has been an amazing year and a half. For me, the transition from CBS to Microsoft is like an entirely different world. The way that processes are … they’re similar, but it’s more complex. It took me a good year to figure it all out, and I’m still learning. But it’s easier now. We went through the [reorganization]. The whole concept of one Microsoft made total sense to me. I think people are embracing that concept.

With Satya Nadella, even in the short tenure that he’s been CEO, he’s resetting everyone’s perspective. He’s very focused on the consumer. He’s focused on making sure that there’s a lot of usage in all of our software content. He’s very supportive of what we’re trying to build. … Not that we’re incumbents by any means. We’re challengers. Certainly, I feel that way in what we’re trying to build here.

GamesBeat: What do you feel about the prospect of your competition being able to get more and potentially better shows?

Tellem: We have Netflix, Hulu, and Amazon on our platform. It really isn’t a question of competing with them. We aren’t. What it is is trying to figure out our audience. We’re offering up an amazing service that involves 100 apps right now. We have incredible games. They’re offering linear content. They don’t have that kind of interactive opportunity that we’re going to capitalize on. I don’t see us in a competitive situation at all.

If I hear, “Oh, Netflix bought this show,” that’s great. It gives another opportunity for people to use our service to access Netflix content. That’s a good thing.

GamesBeat: Would you offer other streaming services opportunities to use your interactive elements?

Tellem: Sure. Last year we did a deal with the NFL where we’re doing just that. We’re offering realtime personalized highlights and updates to your fantasy league. You can snap to Madden during halftime. … Like I said, it’s either best on or only on. That’s our focus.

GamesBeat: Is interactivity your big differentiator when you’re talking to production companies about coming to the platform?

Tellem: I think the big differentiator is us. There is some seriousness to that. We’ve been in the business a long time. We know these guys really well. We know the community really well. They understand the bar that we’re trying to set. That’s not to say that we’ll hit it with every show. We also know that in this business, there’s a lot of failures and a few successes. But if we can keep the content at a certain level, at a very high level, and also add that interactive capability that helps us support a creator’s vision, that’s a big differentiator.

To your point about competition, everyone has a different agenda as far as what they’re trying to accomplish with original series. For Netflix, I think original series was a differentiator, and in the future, it may protect against other content providers who’ll be more resistant. Amazon has another model. For us, our focus is on using our console and people who are subscribing to our service. Between these game announcements and releases, we offer content that will keep them engaged and on our service.

Levin: One of the things that helps us competitively, when you’re doing pitches or trying to explain what you’re looking for, is that there’s a focused target here against millennials with a male lean. We’ll expand and grow out. But I think when you start to get into nonlinear services, subscription video-on-demand services, one of the biggest challenges is there’s no forcing function to decide how much you can do, how much you can support, how much you can buy. Companies can get sucked into potentially losing their focus and not being able to articulate what their needs are because they have open and unlimited shelf space.

For us, we’re fortunate to start with a base. We’re trying to find out as best as possible what’s going to appeal to that base. Those other services are growing in a manner that’s a bit similar to basic cable services. They started off purely licensing content. They built their backs on licensed content. Then, slowly, they’re starting to introduce original content as a point of differentiation, and, as a result, charging more for that content, either on a subscription model or an ad-supported model or some combination.

As the media landscape fractures and as these models evolve in a very fluid manner, you’re definitely getting to a point where everyone tries to figure out what makes the most sense for their business. We’ve seen a lot of people come in. They view this opportunity as something exciting to them because it’s new. That’s the type of executive we’ve attracted. Certain creators really like that. They want to try and figure that out with us. A lot of it is based on relationships, where you’ve worked with a person before. As we try to make these marriages, if we’re going to put our reputation on the line with various partners, being able to say, “I’ve worked with this person before; I know their personality; I know you’ll sync up and see eye to eye with them,” it gives them some comfort. There’s going to be some security around it. Those relationships do matter.

It’s hard to sit out there. You don’t want to sound immodest, but we’ve all seen these grand declarations — “We’re going to do this and that and spend tons of money against programming.” That doesn’t always cut it. There’s a base of knowing where we came from, where we are right now, and where we’re trying to go as an industry that does benefit from experience, as long as there’s an openness to say, “Let’s embrace new instead of holding on to the old.”

GamesBeat: What about producing some programming that’s completely passive and not interactive? Would the consumer have the option to consume content that way?

Tellem: Absolutely. It’s a total option. It’s going to take time for people to understand that they have that option. That’s where we start with the content and make sure that it stands on its own and is something that’s really engaging. That’s a challenge. It’s not easy to attain. And then, being able to offer this interactivity, so that if people want to go deeper, they have that opportunity.

GamesBeat: Is there a mandate, though, on your side, to make sure there’s some interactivity?

Levin: It’s important to us. We try. There’s an effort made on everything. We haven’t yet rolled anything out. But I also don’t think we want to force things just because there’s some mandate. … People like to hear mandates. They like to hear those bold pronouncements — “This is our model. This is how we do what we do.” … We have to come to this with a lot of humility, a lot of appreciation for the fact that this is going to be very fluid. Things are going to change. We have to be able to adapt. Let’s not box ourselves in, no pun intended. That doesn’t make sense.

We’re going to prototype interactivity for everything. We may look at it and say, “This just doesn’t work.”

Tellem: We’re focused on the social community that naturally exists among Xbox Live users. To be able to share something on a [video on demand] basis with a friend in New York or Dublin or wherever … that alone is a unique experience. We’re looking very broadly or very specifically as it pertains to customizing features that will apply to a show.

You don’t want to have interactivity for interactivity’s sake. It has to make sense. It has to be organic to the piece. It can’t be a forcing function.

Levin: It can’t be cart leading the horse, where we feel like we’re doing this grand experimental thing, but we forgot to make the shows good. Not everything is going to work. That’s just the law of averages. But there’s an interactive budget for every single series. That budget is substantial. An interactive team is part of every single piece of series development. The commitment and the resources are there. As far as whether we choose to activate that or not, we’ll have to see.

GamesBeat: Is the live-action gaming stuff going to be concurrent with all these mass-market TV shows? It sounds like the programs are going ahead of the gaming stuff.

Tellem: Let’s go back on what you said. Our core audience appear to be gamers, but we also have non-gamers on our platform. When you look at the household, the significant others or whatever, other people are using the platform as well. We’re looking at the overall millennial audience. Obviously, it’s heavily weighted toward gamers, but gamers are no different from what we call millennial men. I think there’s a lot of similarity. There isn’t any uniqueness to a gamer as far as what they like in entertainment.

Levin: We’ve done a lot of research to bear that out because there have been a lot of conversations about that psychographic and what they watch as opposed to others. When you’re talking about gamers, you’re talking about younger men for the most part.