The company unveiled the Xbox One, an entertainment console that wants to be the one system households will need for games, television, movies, sports and other entertainment. It will go on sale later this year, for an undisclosed price.
For the past two years, Microsoft's Xbox 360 has outsold its rivals. But it's been eight years since that machine came out, and Microsoft is the last of the three major console makers to unveil a new system. In those eight years, Apple launched the iPhone and the iPad, "FarmVille" rose and fell and tablets began to threaten desktop computers, changing how people interact with games and beyond.
Now, the stakes are high as Microsoft, Sony and Nintendo are all using their latest machines not only to draw gamers but also to command the living room. The goal is to extend their reach beyond loyal legions of hardcore gamers and to become as important to our lives at home as smartphones have become to our lives on the go.
Don Mattrick, Microsoft's president of interactive entertainment business, said the company has spent the past four years working on an "all-in-one home entertainment system."
At an hour-long unveiling at the company's Redmond, Wash., headquarters on Tuesday, Microsoft executives used voice controls to switch back and forth seamlessly between watching live TV, listening to music, playing a movie and browsing the Internet - all while running apps for stuff like fantasy football and Skype chats on the side of the screen.
People will be able to connect their cable or satellite set-top box and watch TV through the Xbox One. It will have its own channel guide and allow viewers to change channels by voice command.
Senior Vice President Yusuf Mehdi demonstrated how the console switched quickly between channels after saying show names such as "Mary and Martha" or commands like "watch MTV." His voice command of "What's on HBO?" brought up the channel guide for HBO.
"No more memorizing channels or hunting for the remote control," Mehdi said.
The interface for the TV goes well beyond the functionality in the Wii U, which still requires users to press buttons to change the input source on the TV. Xbox One seamlessly flipped between games, movies and TV shows with voice commands.
"There's the ability for you to manage the privacy settings so you can turn it off," Marc Whitten, Microsoft's chief product officer of interactive entertainment business, said in an interview in his office after Tuesday's presentation. "Just like the 360, the biggest thing for us is that you are in control of your privacy."
The company also introduced a more ergonomic Xbox controller, with a slightly different layout from the Xbox 360 controller and trigger buttons that vibrate. The new console will also add the ability to play Blu-ray discs, matching what Sony has in its older PlayStation 3.
The Xbox One won't require a constant connection to the Internet, but having it will be useful for many of the gaming and entertainment features. The Xbox has been popular largely because of its Xbox Live service, which lets users play games online with other players with annual plans that cost as much as $60 a year.
Despite talk that Microsoft might restrict the use of games previously owned by others, the company confirmed that the Xbox One will indeed play used games, but it didn't provide details on how that would work. It said games for the Xbox 360 won't work on the new system because the underlying technology is different, though the company said it will continue to make games for the older machine. Whitten said the Xbox 360 "is going to be incredibly vibrant for some time to come."
A multiyear agreement between Microsoft and the National Football League is in the works to develop new interactive viewing experiences for pro football games through such products as the Xbox One and Microsoft's Surface tablet computer. Fans will be able to watch games, chat with other fans, view statistics, access highlights in real time and gather fantasy information about players and teams - all on a single screen. For those who prefer multiple screens, fans can get an even deeper experience on mobile devices such as tablets.
Nintendo kicked off the next generation of gaming in November with the launch of the Wii U, the successor to the popular Wii system. The Wii U features an innovative tablet-like controller, though its graphics is on par with the previous-generation Xbox 360 and Sony's PlayStation 3. Nintendo said the console sold just 3.45 million units by the end of March, well below expectations.
Sony was next, teasing plans for its upcoming PlayStation 4 - without showing the actual box - at a February event in New York. The reaction to that console, which featured richer graphics and more social features, was mixed. The PS4 is expected by the holidays.
Microsoft didn't waste any time showing off the Xbox One console, new Kinect sensor and Xbox controller at the beginning of Tuesday's presentation.