The product is similar to a string of other releases from competing companies like AOL (AOL) and Yahoo (YHOO), but we think it's unique. If successful, the coverage could provide Microsoft with an opportunity to gain a foothold in the highly lucrative digital media industry.

With this release, Microsoft is focused on showcasing the Xbox platform and its potential as an interactive TV device. 

Marc Whitten, VP of the Interactive Entertainment Business division, stated:

We want to provide our passionate Xbox LIVE community with a great way to experience the election process with TV that makes them participants -- and not just viewers…This is a great example of how our Xbox capabilities are making the promise of interactive television a reality.

The company's election coverage will allow subscribers to watch and interact with a variety of programs such as presidential debates, party conventions and political news. By partnering with YouGov, the company will also include a unique feature that seeks to engage users by polling them during a live program. Additionally, since the video-gaming community is largely filled by young individuals, the company is targeting this specific segment by generating original content. "Conversations with the Next Generation" will be a series of youth town hall meetings aimed encouraging political participation amongst the younger generation.

A possibly lucrative industry

A longer term trend at play here is the evolution of "interactive television." If the company is able to manage this product and service successfully, it could garner attention from users who want to experience TV in an interactive fashion but do not currently own an Xbox. This could translate into greater Xbox sales and possibly an increase in Xbox Live subscription fees. Additionally, successful programming on the Xbox Live platform could become a substitute for general cable subscriptions if users deem the Xbox's interactive experience to be of a superior quality. The company can also leverage the increase in users to cross-sell its OS, mobile and tablet offerings, as users prefer an integrated experience across all consumer media devices.

Overall, we think that election coverage will provide insights into the appeal of interactive television. The company has already started gathering data from its polling and it can be viewed at the bottom of its press release.

Microsoft currently competes in the console space with Sony's PS3 and Nintendo's Wii. We currently have a $41 price estimate for Microsoft, which is approximately 35% above the current market price.

(Microsoft owns and publishes Top Stocks, an MSN Money site.)