Microsoft: Xbox Live is bigger than DirecTV

The current head of Xbox Entertainment Studios has an excellent track record in Hollywood television. Nancy Tellem spent 25 years in the traditional TV business, working at Lorimar and then helping Warner Bros. build up a slate of hit TV shows like "Friends" and "E.R." before serving as President of CBS Network TV Entertainment Group and then as senior adviser to CBS chief executive Leslie Moonves. She left her traditional Hollywood executive position to venture into digital entertainment with Microsoft.

"We launched CBS.com before the company purchased CNET and also started the mobile initiative there," said Tellem. "I was watching how the world was changing and was very interested in how technology was going to impact our business. I remember telling Les Moonves one time that the network distribution system will become obsolete and he threw me out of the office. I had a hankering to get involved in technology and I started Xbox Entertainment Studios at Xbox a year and a half ago. We're effectively a start-up and face all the issues that a start-up does, but we're well financed with the company backing us (in Microsoft)."

"As content programmers, we looked at this amazing audience of gamers and found a huge millennial audience, which is the most sought-after targeted group that everyone from advertisers to programmers seek"

Now Tellem has assembled a team of executives with both a Hollywood and digital new media background to work on original programming. In tandem with these creatives, the traditional interactive divisions within Xbox collaborate on each new project.

"Everything excites me about this venture from being a part of Microsoft to having the opportunity to create a television strategy in this new and changing media landscape," said Tellem. "We are a studio which is focused on creating high quality, premium content with the tech prowess to have integrated features that offer immersive and engaging experiences. I'm also excited about the ability to experiment with new forms of storytelling."

Hollywood has been slow to embrace new technology, and many in positions of power at studios still don't understand the burgeoning video game industry.

"I think many just don't understand the richness of storytelling and production values of video games," said Tellem. "They also don't fully understand the expanse of the industry in terms of the number of gamers and the loyalty and conviction the gamers have. This has been eye-opening to me, and when I highlight all of the Microsoft Studios IP as well as all the other games that have the high fidelity of graphics and the immersive gaming experience, they are surprised and delighted."

One thing that surprises non-gamers is how large the audience is that Xbox, and the larger Microsoft company, reaches.

"Microsoft has 85 million consoles sold globally," said Tellem. "With connected devices like cable and satellite boxes in homes, the challenge is how do you get people to connect. With 48 million subscribers through Xbox Live (silver and gold), Microsoft has a bigger audience than DirecTV. As content programmers, we looked at this amazing audience of gamers and found a huge millennial audience, which is the most sought-after targeted group that everyone from advertisers to programmers seek. We're dealing with an amazing global network and we have the ability through the power of technology to connect with and communicate with people in real time. MSN has 450 million people online every day globally. Microsoft, as a whole, touches about 1 billion people a day. These stats blew me away."

When it comes to original programming for Xbox, the focus is on Xbox Live subscribers and consumers.

"We're very sensitive to make sure whatever we deliver won't be a distraction and is respectful of subscribers," said Tellem. "Either it's only on Xbox or best on Xbox. We're talking to studios and production companies about windowing. To limit access to great content and great creators is a disservice. We hope we can go off our platform to introduce Xbox Originals to people not aware of Xbox. Part of the fun of this job is bringing people in from Hollywood and showing them what Xbox One does. It opens up people's minds in terms of what the technology is capable of."

Tellem also has flexibility she never had at a traditional Hollywood studio, which is allowing her to experiment across multiple genres and concepts for the Xbox audience.

"During a traditional Hollywood pilot season hundreds of millions of dollars will be spent on 100 pilots, most of which will never be seen," said Tellem. "With Xbox, we want feedback from our viewers and we don't have to ask for it. They're going to give it to us anyway. For pilots, we'll see how it goes and be open to feedback from the audience. We're experimenting with interactivity with our first shows. We're creating a social community to exchange in real-time while you're watching. We'll have integrated experiences all on one screen with social media or you can wait until after the show. We're working on time shifting experiences, commenting as you're watching through SoundCloud, where you can source the comments to friends or most liked or most popular. A lot of the things we're working on is experimental like the "awesome" button to react that way instead of tweeting. We're playing with a lot of different things and will refine based on response."

"We're working on content that connects to physical interactions through Kinect. Imagine watching a horror show where the Kinect sees you cover your eyes so the volume goes up or they say, 'Put your hands down'"

The audience Tellem is catering to isn't just the male gaming demographic, thanks in part to the rise of casual gaming and the mainstream acceptance of gaming.

"We have close to 50% females on our platform," said Tellem. "The fun challenge is being able to understand how to drive that audience and be as inclusive as we can. We're throwing out a broad swath of programming and we'll learn and get the responses of what people like or don't like and refine development based on that response."

Part of the experimentation gamers will see with early Xbox Originals programming will include the built-in technology that comes with every Xbox One.

"We're working on content that connects to physical interactions through Kinect," said Tellem. "Imagine watching a horror show where the Kinect sees you cover your eyes so the volume goes up or they say, 'Put your hands down.' We're dealing with a lot of story narratives. There was an experimental feature screening at Tribeca Film Festival that we're working with Interlude technology that gives viewers the chance to choose their story possibilities. It's a simple, relatable story about a relationship in crisis and the way in which the man and woman see it through their own eyes. You can make choices based on what you would think about something."

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