Is Microsoft getting out of the Xbox Music and Video business? Nadella suggests they might (Updated)

Readers of this site know that Microsoft's Xbox Music and Video are good services at their core, but many speed bumps keep them from reaching their potential. Whether it is stiff competition from Amazon and Apple or an awkward software experience, the Microsoft teams behind both services have their work cutout for them. Toss in the rebuilding attempts at the Xbox Music app for Windows Phone 8.1, and many consumers are left frustrated.

In yesterday's earnings call, Microsoft CEO Satya Nadella dropped a strong, but subtle, hint that Xbox Music and Video may be on the chopping block.

Quoting from the transcript, Nadella notes in passing:

"With our decision to specifically focus on gaming, we expect to close Xbox entertainment studios and streamline our investments in music and video. We will invest in our core console gaming in Xbox live with a view towards the broader PC and mobile opportunity."

The news of the Xbox entertainment studios shutting down came out last week as it was part of the general 18,000 layoffs from the company. The potential of Xbox entertainment studios was never realized, cut short before it had a chance to rise or fail. One could argue that Microsoft producing their own shows is veering dramatically off course for what is essentially a software company, making this the right – but tough – decision for Nadella.

However, the part where Nadella pronounces that they are streamlining their "investments in music and video" is troubling. As Microsoft watcher Paul Thurrott commented on Twitter on what "streamline" means he observes it "…doesn't mean maintain or expand, for starters."

Nadella seems to be pushing Microsoft back into its primary mission, and for Xbox One that is pure gaming. Microsoft shuttering Xbox entertainment studios is sensible, even if the prospect of a hit show is enticing (see Amazon and Netflix's success with producing their own series). Nevertheless, Xbox Music and Xbox Video, both of which grew out of Zune, seems like a natural extension of media in the living room and even more so for mobile. Nadella appears to be second guessing their investment in those services, calling into question their future. At the very least, Nadella is curtailing that group within the company.

Microsoft is undoubtedly in a tough position here. Companies like Amazon and Apple have already had a lock on streaming and music purchases. Toss in streaming juggernauts Spotify, or Pandora, and the argument for Xbox Music is a tough one to make. Is Microsoft stretching itself too thin just to reinvent the wheel? Better yet, what is the argument for Xbox Music and Video in terms of actual advantages to end-users (versus competing products)? Up until now Microsft has not differentiated themselves enough from their opponents, giving consumers little incentive to move forward.

I know many people have half-heartedly joked that Microsoft should just give up on Xbox Music, especially after the app situation on Windows Phone 8.1. Well, you may just get your wish.

Update 2:30 PM ET - Microsoft's Joe Belfiore has taken to Twitter to assure that his team is still working on the software for Xbox Music and Video:

"Don't worry, no plan to drop Xbox Music/Video-- my team builds these key scenarios for tablets, phones, PCs! And Xbox team does on console...In fact, we have one of our bigger/stronger Xbox Music updates just a couple weeks away…you're gonna like it. Perf, fixes and some features!"

In other words, the software that powers Xbox Music and Video will go on, though questions about Microsoft's commitment to the services still remain for some.

Daniel Rubino

Daniel Rubino is the Editor-in-chief of Windows Central. He is also the head reviewer, podcast co-host, and analyst. He has been covering Microsoft since 2007, when this site was called WMExperts (and later Windows Phone Central). His interests include Windows, laptops, next-gen computing, and watches. He has been reviewing laptops since 2015 and is particularly fond of 2-in-1 convertibles, ARM processors, new form factors, and thin-and-light PCs. Before all this tech stuff, he worked on a Ph.D. in linguistics, watched people sleep (for medical purposes!), and ran the projectors at movie theaters because it was fun.