Tech - Microsoft's New Xbox Experience

Matt Vella

On Nov. 19, Microsoft (MSFT) released a totally overhauled operating system for its Xbox 360 video game console. The free update includes a slick makeover of the graphical user interface and new features such as the ability to install games directly to the console's built-in hard drive as well as to stream movies from Netflix (NFLX).

After a little more than a week with the update, dubbed the New Xbox Experience or NXE, I can say Microsoft has effectively rebooted its three-year-old console. The NXE not only bestows the Xbox's software with Apple-like (AAPL) style and simplicity but adds a compelling mix of substantive new features. In fact, the new design moves the Xbox closer to being the all-purpose set-top box or "iTV" that at least a dozen companies have tried to popularize in recent years.

Best Update, Ever
Crowing, Microsoft compares the NXE to the advent of color television in the mid-1950s. Clearly, the company's copywriters need to pump their brakes. Still, the NXE does represent a significant first. Microsoft's chief competitors Nintendo (NTDOY) and Sony (SNE) have incrementally improved their consoles, adding features via free, downloadable updates similar to the NXE. But neither rival has so thoroughly revamped their consoles' operating systems in one step.

The most obvious change is the NXE's new user interface. The previous design, which separated information into tabs, worked well three years ago when there were relatively few options besides playing games on disc. But as Microsoft added the ability to download new games, television shows, and movies from the Web, for example, the interface became clunky and often confusing.

In contrast, the NXE drastically simplifies use. Scrolling through a menu of options in the top right-hand corner reveals a set of panels in the middle of the screen which users can scroll through easily. The interface looks somewhat like the one for iTunes' Cover Flow, which allows users to quickly access long lists of icons. This new design is light years ahead of most digital video recorders, for panache and ease of use, and is more intuitive to use than Apple TV or even TiVo (TIVO).

Streaming Movies from Netflix
The NXE also brings with it substantive new features. The most exciting is the inclusion of streaming movies from Netflix. The process is simple: Netflix subscribers can log into their accounts directly from the NXE and stream one of the 12,000 movies available from the company's Web site. The feature worked flawlessly throughout my testing. (This feature makes obsolete the $99 device introduced by the company earlier this year (BusinessWeek.com, 5/30/08) that can stream movies to a television.)

Of course, Microsoft included sweeteners for gamers. Players can now create three-dimensional avatars, with customized body types, facial features, and clothes. Developers can incorporate these digital alter-egos into a game, adding a dash of personalization. But the novelty feature is eerily similar to Nintendo's so-called Mii avatars, which have appealed to younger gamers. Games also can now be directly installed onto the Xbox's built-in hard drive. This feature seems only marginally useful, speeding up some load times slightly and cutting down on the buzzing of discs spinning in the Xbox's noisy drive.

All in all, Microsoft's NXE adds a useful set of new features wrapped in a sleek new interface. So rich are these options that the free update would have been worth the $50 or so that a new game costs. In fact, the NXE turns the Xbox into one of the most compelling set-top boxes available for gamers and non-gamers alike.

Vella is a writer for BusinessWeek.com in New York.