Microsoft hires CBS’ Nancy Tellem to form new Xbox studio

In a significant bet that a technology company can compete with Hollywood to produce original video content, Microsoft Corp. has hired Nancy Tellem, the longtime entertainment president of the CBS network, to run a new production studio in Los Angeles.

As entertainment and digital media president, Tellem will put together a team to develop series that will be available exclusively through Microsoft’s Xbox platform.

Microsoft has this year made Xbox its entertainment brand not only for the Xbox 360 video-game console but also for other connected digital devices like computers, tablets and smartphones.

“What’s so exciting about this opportunity is we’re looking at the next iteration of television,” Tellem said in an interview. “We’re starting from scratch and we’ll be looking at linear and interactive content, both longer-form, like television, and shorter form.”

Tellem, who had worked at CBS since 1997 and ran its entertainment division from 1998 to 2009, is the highest-profile entertainment executive to join a tech company since former Warner Bros. chairman Terry Semel became chief executive of Yahoo in 2001 and then named former ABC entertainment president Lloyd Braun to head a new Santa Monica office.

Braun spent two years at Yahoo, leaving in 2006 after failing to make the Web portal a power in original programming. Semel spent six years running the company but departed in 2007 as its fortunes were fading against competitors like Google.

Many observers have said that Semel and Braun’s media-focused strategy at Yahoo may have simply been too early. In the past few years, consumers have become more comfortable consuming entertainment on digital devices. Earlier this year, Microsoft disclosed that Xbox 360 owners spend more than half their time online watching video and listening to music, not playing video games.

Most studios and networks like CBS now make their content broadly available online, including on the Xbox, through their own websites and apps as well as platforms like Hulu, Netflix, iTunes and Vudu.

Tellem’s appointment came from talks that started early this year when the executive met with Microsoft in her post-presidency role as an advisor to CBS chief executive Leslie Moonves. During her time at the network she was known for pushing into digital media and oversaw the CBS.com website, and was known as a strategist and deal-maker more than as a programmer.

“Our early discussions with Nancy around what television could mean on the Xbox platform went well and it became clear her expertise from the television industry could accelerate the strategy we were pursuing,” said Phil Spencer, vice president of Microsoft Studios, which has in the past focused on video-game production. “We have always known the goal for Xbox is to be a platform for all forms of content.”

Although most avid video-game players are young men, Tellem said she sees her primary audience as families who use a broad range of digital devices.

“We’re going to reach out to a very broad range of consumers,” she said. “When I first got to CBS we looked at what the core audience was and built from there, and that’s just what I’m going to do again.”

The executive has yet to put together her staff, and she says she doesn’t yet know what content she might produce first or when it will launch, though it seems unlikely that anything could debut before late 2013.

But she said she hopes to make “premium content” that can compete with current shows airing on broadcast and cable networks.

“We have large visions as to where this could all go,” Tellem said. “Building up a studio in Los Angeles with a significant financial commitment is very important.”

Spencer said Microsoft hasn’t determined whether the shows Tellem produces will be supported by advertisements, available only to paying subscribers to the XBox Live online service, or be sold on a pay-per-view basis.

The formation of the studio makes Microsoft a competitor, in a sense, to television networks vying for viewers’ limited attention. The more time people spend watching original shows on Xbox, the less time they can watch CBS or USA, and the less motivated they may be to continue paying for a cable subscription, which provides much of the revenue to traditional networks.

But Tellem said she will work with Hollywood studios and producers in creating programming for Xbox. Spencer added that Microsoft still plans to encourage partners to distribute their own programming through the Xbox. Some, like the HBO Go application, require a cable subscription.

In 2004, Microsoft hired former Universal television chairman Blair Westlake to spearhead media partnerships. He continues to oversee licensing of television shows and movies for the company.

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