What Can a Media Exec Learn From Xbox 360?

(MoneyWatch)  Despite the recession, and the anemic year-end sales logged by most retailers, the top gaming consoles and communities seem to be thriving in a way that may contain some useful insights for other media companies.

Consider Microsoft's Xbox 360, which enjoyed strong holiday sales and has sold 28 million units since its launch in 2005. The company reported that between Christmas and New Year's Day, its Xbox Live community had its busiest week ever, with 1.4 million players concurrently online.

Xbox Live grew by more than 20 percent over the holiday period and now numbers 17 million active members. When we first reported last July about the deal between Xbox and Netflix to make streaming video available to gamers, it was about a potential upside, but Microsoft now says the movie-streaming service is indeed now one of the most popular new Xbox features.

But there is much more to this business success story than that.

Just take a look at one game to see what I mean: NBA 2K9. This is simulated basketball game that represents a vast improvment over its predecessors, in many ways. Based on how you choose to play each game, an "adaptive AI" adjusts to your game strategy, initiating posts, picks, zones and other options that more closely track with those on a real world basketball court. Players can even switch their shots in mid-air!
NBA 2K9 also presents far more realistic graphics -- the NBA players actually look like themselves now, with improved skin and facial textures, eye movements and realistic uniforms as opposed to the older generation of NBA games where they appeared more like caricatures. The crowd noise is also more realistic and the "broadcast team" covers the game with a more believable granularity than in previous, "canned" versions. The extremely popular -- and useful -- replay function has been upgraded, as well, presenting views from multiple angles, much as occurs over at ESPN.

Finally, through Xbox Live, each NBA team's roster is automatically updated on a weekly basis to reflect trades, injuries, and how well each virtual player's alterego is actually performing on the real-world court. Thus, if LeBron is hot in Cleveland, he's hot in 2K9 as well.

Fine, you may say, this is all very interesting, but what does a high-tech game have to do with, say, a newspaper? Bear with me here. Ignore some of the obvious differences, and consider the idea that both are in the information business, as well as the business of serving a community (aka a market).

What Xbox illustrates is that:

• a commitment to invest in technology to innovate and then continuously improve your products will pay big dividends;
• a deep understanding of how users use your products uncovers needed improvements and enhancements that users will gladly pay for;
• the community itself becomes an attractive asset for partners (i.e., Netflix), which, in turn, deepens community loyalty and activity;
• access to real-time news and information (injuries, trades, statistics) is what users need to enhance the immersive experience of using these products;
• the user interface is so critical to the success of your product that to allow it to remain stagnant is to consign it to a death watch;
• users want to have greater control over all their IT products via a robust toolset of features that allow ever-richer experiences; and,
• users want to connect with others while using your product, to share information, compete, and forge new friendships in the process.

I could go on, because the list of potential lessons here for media companies is virtually unlimited, but only if those companies can grasp the parallels and therefore accept the analogy. If they can't -- and many will not -- that's just possibly why their companies are in danger of going out of business.