With the newest Xbox, Microsoft considered some prototypes to integrate an Xbox into a television, two people familiar with the company's plans said. One recent prototype included a plug for a high-definition video signal to be piped into the device, one of the people said.
The goal, another person said, was to make the device connect games more tightly to normal television watching. So if a customer's friend began playing Activision Blizzard's "Call of Duty," for instance, he could challenge the friend to a match, sending an invitation to the TV screen.
Microsoft also designed technology that would allow customers to plug their cable or satellite signal into the Xbox directly, one person familiar with the matter said, allowing people to watch live programming and surf channels while also being able to easily switch over to a videogame or on-demand video with the press of a button.
Microsoft also developed a companion digital-video recording technology, this person added, but has been wary of including it for fear of upsetting existing partnerships.
The prototypes also included a game-streaming service, people familiar with the matter said. That technology, which is offered by companies like OnLive Inc., allows customers to play visually intense games without the need for specialized circuitry. Instead, the game is played in a data center far away, with images and button presses streamed over the Internet.
While Sony bet on streaming technology last year when it agreed to pay $380 million to buy game-streaming company Gaikai Inc., Microsoft has been more measured in its efforts, people familiar with the matter said. Internally, employees debated whether the technology was possible given the cost of building data centers and the technical feasibility of streaming game images reliably to customers with slower Internet connections.
Still, Microsoft has continued developing the technology, other people familiar with the matter said. The company is aiming to potentially use streaming to allow gamers to play older titles made for the Xbox 360 on the newer device.
Microsoft has refined other aspects of the Xbox, other people familiar with the matter have said. Those include specialized glasses, two people familiar with the matter said. One of them noted the glasses are designed to compete with other 3-D gaming glasses, and may have functions that blend images of the real world with that of a game, known as "augmented reality.
