FORTUNE — Microsoft (MSFT) isn’t just competing with Sony (SNE) and Nintendo in the videogame space these days. Like any entertainment company (and videogaming is one of the leading forms of entertainment today), it’s fighting for the limited amount of free time consumers have to spend in today’s digital world — alongside television networks, Hollywood movie studios, and digital distribution services such as Netflix (NFLX), Amazon (AMZN), and Hulu. In addition to developing exclusive videogame franchises (Halo, Gears of War and Fable), Microsoft is also financing an entire slate of original video content for its Xbox 360 and Xbox One videogame consoles, some of which are based on these exclusive game franchises.
Last June at the E3 videogame trade show, Steven Spielberg announced that he is executive producing a new live action Halo video series with Microsoft and developer 343 Entertainment. Now Xbox Entertainment Studios president Nancy Tellem and vice president Jordan Levin are in New York City giving media buyers a first taste of original programming for this year and next.
News has already broken around one of Microsoft’s original series, the six-part documentary Signal to Noise (working title) from Academy Award winning producer Simon Chinn (Searching for Sugar Man) and Emmy winning producer Jonathan Chinn (30 Days). The first film, Atari: Game Over, from director Zak Penn (screenwriter of The Avengers), will unearth the Alamogordo, N.M., landfill where Atari buried millions of unsold E.T. videogame cartridges from the Atari 2600. Penn, who filmed the successful excavation this weekend, will also dig into the impact the Atari console crash had on the world of entertainment. Tellem said the series, which will also include films exploring the impact of MP3s and Silk Road, will debut later this year.
Just as music has gone completely digital, millennials and younger generations are now growing up without dedicated allegiance to traditional networks. Tellem and Levin believe the Xbox platform, which has over 85 million consoles installed around the globe, has an advantage in reaching this elusive, time-shifting, and advertising-coveted audience.
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“The challenge remains the same: to produce high quality content that resonates with our audience,” said Tellem. “Our audience is smart and sophisticated, and the bar is quite high. They seek to be entertained through an array of video content and games, and that makes our tasks particularly challenging. However, we are in a unique position with 48 million subscribers on our platform (Xbox Live gold and silver members) who already understand how to interact with content. Both producing premium content and offering interactivity are our differentiators.”
One of the early differentiators for Xbox Originals will be interactivity, given that gamers are used to multitasking and interacting with the images on screen. Levin said that with each new show idea, the interactive team is brought on board to brainstorm on interactive opportunities ranging from “choose your own camera angle” to utilizing the Xbox Kinect camera.
“At CBS, we’d think about cool interactive ideas, but it was always after the fact, not an integrated experience,” said Tellem. “With our Xbox technology, we can create an integrated seamless experience that is meaningful and not forced. When you look at our platform, there are so many choices with apps like Amazon, Hulu, Netflix, as well as eSports, and videogame video apps like Twitch and YouTube, and gaming.”
As companies like Amazon, Netflix, and Hulu spend billions on new original programming, Microsoft is in a position to reap those rewards through apps on the Xbox. Tellem said her division has been afforded the necessary budget to create original programming aimed at the Xbox audience.
“At Xbox we have an amazing audience, and now we want to keep them there and engaged,” said Tellem. “Every Xbox One system has a Kinect camera attached to it. There are of privacy issues and parental control things that can be built in, but if you own the console there’s an opt-in opportunity to take advantage of. The technology is there and available for consumers that want to take advantage of it.”
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Levin said that while there are more transmedia experiences out there in entertainment today, including acclaimed second-screen interactions like HBO’s Game of Thrones and AMC’s The Walking Dead, most of these require users to go to another screen.
“With Xbox the functionality is integrated into the experience,” said Levin. “Xbox started as a game console and then started adding video. Now people are starting to think of it more as an entertainment console. While we want to take advantage of its interactivity, we’re cognizant of the fact that there are a lot of bells and whistles that get created that are often a distraction. We don’t want to take our eyes off what makes a good story.”
Interactivity will be on full display at the 13th annual Bonnaroo music and arts festival on June 13-15 on Xbox Live. Tellem said this festival, which will allow fans to choose to watch different entertainment stages, connect with other music fans, and even Skype with bands backstage, offers a taste of the interactive potential for live events moving forward.
Two of the new series on Xbox will be reality programming with an international appeal. Every Street United is an unscripted street soccer series of eight, 30-minute episodes and a one-hour finale, featuring legendary soccer players Thierry Henry and Edgar Davids. Emmy-winning director Jonathan Hock (Streetball) filmed in the U.S., England, Argentina, Spain, Brazil, the Netherlands, Ghana, and South Korea. The series culminates this July in a 4v4 street game finale in the shadow of the World Cup in Rio de Janeiro. Tellem said this series, which debuts in June, is an example of the global audience Xbox is trying to connect with through its programming on Xbox Video for Xbox One, Xbox 360, Windows 8 (PC and Surface), and Windows Phone 8.
Fearless (working title), an unscripted series currently in pilot production, features Paul de Gelder, an Australian Navy bomb clearance diver and shark attack survivor who takes on an adrenaline-fueled quest to aid individuals who risk their lives to make the world a better place. Levin said the series will take viewers into the lives of tornado chasers, U.S. Coast Guard rescuers, and bush rangers who fight against heavily armed poachers. De Gelder, who lost his arm and leg in a shark attack, will even swim with great white sharks without the protection of a cage.
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“Every mission will have a purpose and cause behind it,” said Levin. “The interactive team has focused on two areas, allowing adventure and adrenaline junkies to get a more vicarious experience by controlling the series from different angles and seeing things not in the final cut; while also allowing viewers to further explore the causes in each episode by connecting with their communities.”
Levin and Tellem both admit that these shows are all experimental in the sense that the interactivity and what Xbox audiences want isn’t set in stone.
“Until they’re out there, we won’t know if it works or not,” said Levin. “We do want to put certain things out there just to get feedback from our viewers.”
Microsoft is also partnering with global television studios on dramas. Humans is an English-language adaptation of the Swedish series, Real Humans, which will debut in 2015 on the Xbox platform and Channel 4 in the United Kingdom. The series explores what happens when a family brings home a robotic servant called a “synth.”
Xbox Entertainment Studios is also acquiring the rights to books and graphic novels. The studio is turning Gun Machine, the hardboiled detective thriller based on the New York Times bestselling novel by Warren Ellis, into a series. Ellis will executive produce with Brett Conrad (Sons of Anarchy),” who has signed on to write the pilot script about a detective tracking a serial killer who is tied to a mysterious collection of guns used in infamous New York murders. Microsoft and IDW Entertainment are co-developing a limited event live-action series based on Chuck Dixon and artist Jorge Zaffino’s graphic novel series Winterworld. With the world encased in ice from pole to pole, the surviving humans have formed tribes that war, enslave, and trade with one another in an effort to survive the infinite winter. Ted Adams and David Ozer from IDW Entertainment, and Rick Jacobs and Dave Alpert from Circle of Confusion (Walking Dead) will executive produce.
While Xbox Entertainment Studios is actively talking to the game developers behind State of Decay, Age of Empires, Fable, Gears of War and Forza, Halo is the only confirmed videogame adaptation. But Microsoft is turning the pen-and-paper, role-playing game Deadlands, created by Shane Lacy Hensley, into a series. The genre-bending alternative history of the Weird West is filled with undead gunfighters, card-slinging sorcerers, mad scientists, secret societies, and fearsome abominations.
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“We are working closely with Microsoft Studios and have discovered that their creative process is not much different from our own,” said Tellem. “We are also enlightened by the complexity of game building and the focus of the game play; this is incredibly insightful as we look to produce more immersive storytelling experiences over time. To have access to the talent of Microsoft is an unparalleled opportunity as we continue to build Xbox Entertainment Studios.”
Comedy is also in the mix for Xbox. Extraordinary Believers is a new series from Robot Chicken creators Stoopid Buddy Stoodios (Seth Green, Matt Senreich, Eric Towner, and John Harvatine IV) that blends reality TV, improv comedy, and CGI characters into an original story. A trio of medieval characters is transported to Los Angeles and needs to find magic mushrooms to return to their home. Levin said the technology behind this series is not only cool, it also affords Microsoft the ability to create a casual game or a console game about characters from another world trying to escape our world.
There’s also an untitled JASH Comedy/Variety half-hour show in development with Sarah Silverman, Michael Cera, Tim and Eric, and Reggie Watts. Each week, a different comedian will host/curate a show featuring new and unsung talent, using various video formats. Silverman will host the pilot episode, and Daniel Kellison (Crank Yankers) will executive produce. The series has a pilot commitment and will begin shooting in June.
In a way, the Xbox platform is affording Microsoft the ability to have its own interactive pilot season any time of the year. The traditional model, where Hollywood studios waste hundreds of millions of dollars on shows that never reach air, is outdated for today’s mobile, always-on-demand generation of gamers. Microsoft can test a show, get immediate reaction, and then tweak it for a series, or completely scrap it.
“This is the tip of the iceberg of a pretty robust pipeline across live events, unscripted, drama, comedy, and original programming,” said Levin.
