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Microsoft: Cable TV 'cannot be duplicated' by a la carte apps

Microsoft's portfolio of non-game apps on Xbox 360 includes services that make it easier for users to "cut the cord": cancel a monthly subscription to cable, and replace it with platforms like Netflix, Amazon Instant Video and Hulu Plus. But in a phone interview last week, executives for Microsoft and Time Warner Cable told Polygon they disagree with the idea that those individual apps support cord cutting.

As they see it, cable subscriptions offer something that a la carte services can't replace.

"If you don't have a subscription from [a cable TV provider], what you instantly don't have access to [...] cannot be duplicated through these two or three a la carte offerings that are out there — which is really what it is, two or three. So I don't think it is in any way facilitating that," said Blair Westlake, corporate vice president of Microsoft's Media and Entertainment Group.

Westlake pointed to cable subscribership numbers in the U.S., which remain extraordinarily high: According to the latest industry data, approximately 103 million of the nation's 114 million TV-owning households — more than 90 percent — subscribe to some form of paid TV service.

more than 90 percent of TV-owning U.S. households pay for TV

The Xbox 360's new Time Warner Cable app, released last week, represents the strongest collaboration yet between Microsoft and a cable provider to allow Xbox 360 users to watch live cable channels through the console. It's the third app of its kind; Verizon offers 75 live channels through its FiOS app, and Comcast's app delivers Xfinity On Demand content. (AT&T U-verse customers were able to use the Xbox 360 as a set-top box until last spring, when AT&T suspended that service indefinitely, and Microsoft sold its IPTV platform, Mediaroom, to Ericsson earlier this year.)

Time Warner and Microsoft will soon expand the TWC TV app with video-on-demand content, which will make it the telecom company's first app to offer both live TV and on-demand programming.

"We expect to have the video-on-demand component of [the app] in the next six months or so," said Mike Angus, senior vice president and general manager of video for Time Warner.

From Westlake's perspective, having a cable subscription is "an entirely different category" from subscribing to cheaper a la carte services.

"Even Netflix is, so to speak, a single channel, like a single one of the 12 or so multiplexes of HBO," said Westlake. "It's one channel; think of it as one of those 300 that [are] available on the Time Warner Cable app."

streaming services offer a vast breadth of content

That view discounts the breadth of content available from providers such as Netflix, whose Instant Watch streaming service currently offers nearly 3,900 different seasons of TV shows and more than 7,500 films. Amazon Prime members can stream more than 3,000 seasons of TV series and over 15,000 movies. Hulu Plus offers more than 2,200 TV shows and more than 3,800 films.

Apps such as TWC TV and FiOS come directly from cable providers themselves. Certain apps for individual types of content, like the ESPN app and the NFL on Xbox One app, also won't function without an underlying cable subscription. And indeed, live sports remains a primary selling point for cable TV, since that content is rarely available without a subscription. Westlake argued that the cable-required apps prove the unique value that a cable subscription offers.

"I think it actually does the opposite," said Westlake, speaking of the Xbox 360's app portfolio and whether it facilitates cord cutting. "It says to somebody, 'This is really a lot of value for the money' — many times more than just trying to patchwork it together by going a la carte if they didn't have a subscription to [a cable provider]."

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