At the E3 trade show this week, Microsoft announced that it is finally ready to begin combating the surprisingly popular Nintendo Wii in a meaningful way. Whether this initiative comes too late in the game is a matter of some debate--my take is that the Xbox 360 will be defeated by this generation of consoles in the same way its predecessor was when it competed against the Sony PS2 and Nintendo GameCube. But Microsoft has made one thing clear: While its Xbox 360 will always cater towards hard core gamers, they're very much interested in the larger and more lucrative casual gaming market as well.

There are many aspects to Microsoft's new strategy for the Xbox 360, but the most visible and interesting is the new user interface that will debut in fall 2008. Currently and awkwardly dubbed the New Xbox Experience, this new UI will replace the current blade-based UI that's been available on Microsoft's premier video game console since late 2005. It is designed to accommodate the growing repertoire of experiences that one might enjoy on the Xbox 360. Sure, video games will always be a big part of it, but with the New Xbox Experience, users are also expected to partake in a growing selection of streaming and downloadable video content--including a new free service for Netflix subscribers--as well as various social networking-type experiences, where you will interact with those in your friends list in new and exciting ways, no matter where they are physically.

That the Xbox 360 has the horsepower to handle this new world of experiences is unquestionable. A bigger issue, however, is whether the Xbox 360 is the appropriate device to form the digital hub of your home. As a consumer electronics device, the Xbox 360 is a miserable failure, with a jet engine like drone that will overcome virtually any onscreen entertainment unless you crank up the volume past acceptable levels. Will a future version of the 360 solve this problem? No doubt, but then Microsoft very conspicuously did not announce such a thing this week, so one might reasonably expect that it will be 2009 before we see a reasonable hardware upgrade.

In any event, Microsoft is plowing ahead. Here's what the company says you will be able to do with the New Xbox Experience.

Interactive with Netflix. Netflix subscribers will be able to order DVD movies to rent via the Xbox 360 and view over 10,000 streaming TV show episodes and features films, for no additional cost. Netflix offers a similar service through a $99 Roku device that, incidentally, is completely silent (and, yes, supports HD output).

Xbox LIVE Primetime. Microsoft has announced a new "channel" on Xbox LIVE called Xbox LIVE Primetime, which lets you play TV-style games vs. others online. The first such game, "1 vs. 100," will debut this fall and is made by the company behind the show "Deal or No Deal."

LIVE Party. This feature lets you create a virtual party with up to 8 friends. You can voice chat while watching a movie or TV show, share photos, or play an online game.

Avatars. In a clear attempt at copying the success of the Nintendo Wii's on-screen "Mii" personas, Microsoft is adding a similar system to the Xbox 360, whereby users can create cartoonish avatars to represent them online. Avatars are fully customizable and look really, really lame.

Xbox LIVE Marketplace. Microsoft's existing online storefront is being expanded to handle the growing list of content and content types that will soon become available.

To give you an idea of how important this upgrade is, Microsoft claims that this is the first time a mass-market consumer electronics device has been re-launched through free software. The idea here is that the Xbox 360 is powerful enough to handle what would have otherwise been two generations of console designs. That's a bit of marketing hype, of course, but as a devout (if realistic) Xbox 360 fan, I'm curious to see how this unfolds. In the meantime, enjoy--or maybe cringe at--the UI to come.

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