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Despite Promises to Advertisers, Microsoft Disbands Xbox TV Studio

But Halo project is still in the works

Microsoft's digital TV strategy is toast, with its Los Angeles studio closing during this massive round of layoffs. Microsoft confirmed today that Xbox Entertainment Studios is shutting down, potentially undermining promises Microsoft made at its NewFronts this year to deliver a deep lineup of new shows streaming to living rooms.

The studio had faced repeated delays, and its most anticipated program—based on the hit Xbox game Halo and produced by Steven Spielberg—is still in the works. But questions surround the remaining lineup that Microsoft pitched in New York just three months ago.

At the NewFronts, Microsoft's vp of agency accounts Stephen Kim told buyers "our commitment to advertising is clear." At the time, the Xbox-maker discussed the Halo show, new reality series, comedy shows and documentaries.

Today, Microsoft announced 18,000 layoffs under its new CEO Satya Nadella. Most of the cuts—12,500—came from Nokia, which Microsoft bought earlier this year.

After reports earlier today that the L.A.-based studio was in trouble, Microsoft confirmed its was shutting it down as part of the organizational changes. The company said Nancy Tellem and Jordan Levin would remain to oversee the development of some shows in the pipeline.

“Xbox will continue to support and deliver interactive sports content like ‘NFL on Xbox,’ and we will continue to enhance our entertainment offering on console by innovating the TV experience through the monthly console updates,” head of Microsoft Studios Phil Spencer said in a press statement today. “Additionally, our app partnerships with world-class content providers bringing entertainment, sports and TV content to Xbox customers around the world are not impacted by this organizational change.”

Nadella did not mention the studio in a strategy memo sent to employees this week, in which he outlined his focus for the company.

The Xbox gaming team still seems to be a priority, for now, and the console is Microsoft's strongest consumer brand, according to tech analyst Colin Gillis with BGC Partners.

Still, closing the entertainment studio puts an end to an expensive and confusing effort, with marketers constantly questioning Microsoft's commitment to developing its own shows.

"The Halo franchise budget is like a Hollywood movie," Gillis said. "That's a big budget."

While Microsoft gets out of producing its own streaming video, companies like Yahoo and AOL are pushing full force into original programming, Forrester analyst James McQuivey noted.

"Other than Halo-related concepts, this was a unit that never got off the ground, largely because it didn't know what its mission was," McQuivey said. "It's interesting that this is happening at the same time that everyone else, including Yahoo!, is now committing to original content production wholeheartedly."

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