-- Microsoft on Tuesday strengthened the case for its Xbox 360 video game system to be a star of the digital living room, an all-in-one entertainment set-top box.
The console system was the first to incorporate a Netflix streaming app. Now it's bringing in live TV from Verizon FiOS and the Epix movie channel to complement current offerings of ESPN and Hulu Plus. And all that content can be accessed with your voice using the Kinect motion controller.
The move by Microsoft, along with similar ones by rival , comes as many shoppers this holiday season are looking to take their home entertainment center over the top.
They've grown accustomed to watching video wherever and whenever they want on whatever device they choose. Yet they still cherish the kick-back-and-relax viewing experience provided by the old, reliable home TV.
So, increasingly, viewers are incorporating Netflix and other Internet-based streaming and on-demand content providers, such as Amazon and Hulu, with current broadcast, cable and satellite services to tailor a home TV experience all their own.
"What we see is people adding streaming video and maybe cutting down on the premium service, or finding some way to save some money on the pay-TV side," says Norm Bogen, analyst at market research firm In-Stat.
Just a few years ago, connecting a PC to your TV used to be the chief way to get that over-the-top experience. Now, nearly as many people use a game console as a PC to make their TVs "smart," an In-Stat survey found. "Driving it is the consumer (appetite) for a wide variety of content on demand and the availability of devices that allow them to get that content on their big-screen TV."
This holiday season could be the perfect time to bring these new services to your living room, because there are bargains to be had on Blu-ray players, streaming-media set-top boxes, smart TVs and even video game systems, such as the Xbox 360, that can be a conduit for TV, movies and other Internet content.
"Price points have all come down," says Shawn DuBravac, chief economist and director of research at the Consumer Electronics Association.
Depending on the model, Internet-connected players can be found for up to 50% off the suggested retail price. Models that use ethernet connections such as LG's Network Blu-ray Disc Player, regularly priced at $119.99, is available for $67.99 on Amazon.com. And Best Buy has a Dynex model with built-in Wi-Fi for $59.99. The entry-level $49.99 Roku set-top box costs $10 less than last year. Video game systems and new smart TVs are discounted, too.
Also fueling the over-the-top phenomenon is the growth in homes with high-speed broadband Internet connections and wireless networks. Some 59% of U.S. homes have them, up from 54% in 2010, CEA reports. With a wireless home network in place, you don't "feel the pain" when you connect a new device, DuBravac says.
Electronics makers, video game companies and Internet-based services are competing to find ways to get more programming to consumers.
While smart TVs may be the easy choice for those in the market for a new set, options abound for those looking for less-expensive ways to upgrade their entertainment options.
"When the Internet is connected to my television, it doesn't really matter to me where it comes from," DuBravac says. "The consumer really benefits, because they will be able to find a model that works best for their viewing habits."
How the battle for the home entertainment center is shaping up:
•Set-top boxes. These network-enabled digital media devices have slowly caught on since the first Roku hit stores three years ago. About 6 million were shipped to dealers this year, compared with 4.5 million last year, says CEA.
The advantage of these stand-alone devices is that they require no upgrade of other equipment and no monthly fees (except for any subscriptions to services such as Netflix). The newest Roku 2 XS set-top box ($99; www.roku.com) not only delivers Netflix, Hulu Plus, Amazon Instant Video, HBO Go and movie channels Crackle and Epix, but also has a special version of the game Angry Birds that can be played with the Roku remote. "If all you want is Netflix or Hulu on your TV, the cheapest way to do it is with a Roku" set-top box, says Colin Dixon of market strategy firm The Diffusion Group.
Out for a year now, the Boxee Box by D-Link ($179.99; no additional charge but subscription fees for Netflix or sports) connects you to Internet offerings including Netflix, MLB.TV, NHL Center Ice, Vudu and Pandora Internet radio.
Rumors have Apple working on a smart TV successor to its current Apple TV ($99; www.apple.com/appletv) wireless device that connects you directly to the iTunes Store and lets you watch what's in your computer's iTunes library as well as what's stored in iCloud. It also incorporates Netflix and sports sites that let you watch out-of-market games with a subscription. AirPlay lets you also stream content from other iOS devices.
•Blu-ray players. Three years ago, LG Electronics brought out the first Internet-connected Blu-ray Disc players. Now, others including Panasonic and Samsung have followed suit.
Shoppers should look for Blu-ray Disc players that have built-in Wi-Fi; about 11.1 million network-enabled players were shipped this year, almost half with built-in Wi-Fi, CEA says.
"If you need a new player for your DVDs and want something that works better with your HDTV, Blu-ray players are hard to beat," Dixon says. "Whether you've bought in to Blu-ray Discs or not, they're just a great deal."
Panasonic, Samsung, Sony and Toshiba all have their own players with built-in Wi-Fi, and prices have crept below $80. And most manufacturers also have complete home theater systems with a smart Blu-ray Disc player and surround-sound speakers, such as Sony's 3D Blu-ray Home Theater System ($229.99).
•Smart TVs. LG, Panasonic, Samsung, Sharp, Toshiba and Vizio have begun marketing smart TVs that connect directly to the Internet. Built-in Wi-Fi lets you bypass the Blu-ray player and stream Netflix and other apps directly to the TV screen. About one-third of the 33.4 million digital displays shipped this year are network-enabled. You can find a 42-inch LG Smart TV for $729 on Amazon.com and 50-inch models for less than $1,000.
There are also rumors of new products featuring Google's TV software that uses a special version of Google's Chrome browser for watching and using Netflix and other apps, including Slacker Radio. Sony has dropped prices on its Google TVs, which now start at $499.99 for the 32-inch and $599.99 for the 40-inch set.
•Video game consoles. After building their own on-demand movie and TV catalogs, Microsoft and Sony have brought Netflix, Hulu and other programming — including ESPN (on the Xbox 360) and NFL Sunday Ticket (PlayStation 3) — to their video game systems. Even the Nintendo Wii has Netflix.
If you don't have one of these powerful game consoles, it's time to check out their entertainment offerings. "Game consoles are a great platform for delivering video services today," Dixon says. "If a consumer has one, they have probably already connected it to the Internet for multiplayer gaming. So, it's very easy to start watching video on it, too."
Microsoft's latest Xbox Live software update, which just became available to users Tuesday, lets you use the Kinect motion controller to search and play back movies using voice control. New services include Epix, a movie channel from Lionsgate, MGM, Paramount and Viacom.
Later this month, Xbox will also add Vudu and music video site Vevo, as well as 26 channels of live TV from Verizon FiOS (Verizon service required). Early next year, the service is scheduled to add Xfinity On Demand (Comcast service required).
The PlayStation Network has had on-demand movies and TV episodes for more than three years. In addition to Netflix, PSN has CinemaNow, Hulu and Vudu, as well as live sports services MLB.TV and NHL GameCenter Live.
Description: These stand-alone small Net-connectivity devices have built-in Wi-Fi and special software for bringing Net-based services such as Netflix and Hulu to your TV.
Price: $49.99 for an entry-level Roku to $179.99 for a Boxee Box. You still must pay for downloads and subscriptions to services and download prices.
Features and programming: You can add free Boxee software to your computer and connect that to your TV, but one of the selling points of set-top boxes is that they are small and not full-fledged computers. And once connected, they are always at your service. Apple TV lets you wirelessly watch content that is on your iPad or other iOS devices, as well as shelved in your iCloud.
Video game consoles
Description: All the most popular game systems — the Nintendo Wii, the Microsoft Xbox 360 and Sony PlayStation 3 — can stream Netflix. But the Xbox 360 and PS3 have additional features and deliver high-definition video.
Price: $149.99 for the Nintendo Wii; $249.99 to $450 for PlayStation 3; $199 to $400 for Xbox 360. Must pay for individual transactions; some of those will available to all Xbox Live members, but most, such as Netflix, require a $59.99 annual Xbox Live Gold membership.
Features and programming: Microsoft and Sony continue to add content. (Plans for Nintendo's Wii U, due next year, are unknown.) Those who already subscribe to AT&T U-verse, Verizon FiOS and Comcast will see the services integrated into Xbox Live.
Description: Net-connected Blu-ray Disc players that stream Netflix and other services; many have "smart" TVs with Net connections or built-in Wi-Fi to deliver services and applications.
Price: Smart Blu-ray players start at less than $60; smart TVs can be found for less than $600; 50-inch models, such as LG Smart TV, for less than $1,000.
Features and programming: Most smart TVs and Blu-ray players will stream Netflix and other movie services such as CinemaNow and Hulu. They may offer apps for Facebook, Twitter and Skype. To avoid wires, make sure your choice has built-in Wi-Fi or a Wi-Fi adapter (sold separately).
— By Brett Molina and Mike Snider