In 2005, Microsoft released the Xbox 360 to the delight of hard-core gamers. But Microsoft had bigger plans. It designed the video-game console as a Trojan horse – a way for the king of personal computers to take over your living room.
Each year, Microsoft has added new reasons to turn on your Xbox, including movie rentals, live sports, all-you-can-eat access to more than 30 million songs, voice commands, TV shows, fitness programs, motion controls, online searches, the ability to use your phone as a remote control – and, of course, video games.
"There are other guys who have multipurpose devices, but no one has done it successfully in the living room, except for Microsoft," says Michael Pachter, a research analyst with Wedbush Securities in Los Angeles.
When it comes to features, Sony and Nintendo have been playing catch-up, says Mr. Pachter. Microsoft had the first console to partner with Netflix, streaming movies and television shows straight to TVs.
Rather than copy the Wii's motion-sensitive wand, Microsoft introduced the Kinect, which doesn't need a controller at all. It identifies body movement and verbal commands. You can start videos with your voice and fast-forward with a hand swipe.
Last year, Microsoft coupled Kinect with its search engine, Bing. This opened up voice search. You can now say out loud, "Xbox, Bing 'Harry Potter,' " for a listing of movies to watch, songs to play, and games to download.
This year brought SmartGlass, software that turns a smart phone or tablet into a remote control for the Xbox.
Pachter thinks these four features – video on demand, hand and voice commands, built-in search, and SmartGlass – have done more than keep the Xbox 360 ahead. They've laid the groundwork for the next Xbox.
He imagines a next-generation machine that could replace standard cable boxes. A television signal would go directly into the Xbox and beam out to any TV in the house.
"If you are a tech-savvy household, you will be able to route any signal you want and watch as many signals as you have TVs with one Xbox," he says. "The cable companies don't make money on hardware. It is not in their best interest to have six cable boxes in your house."
We'll find out soon if Pachter is correct. Many expect Microsoft and Sony to unveil their next video-game consoles this summer.