Microsoft Vying for Control of Your Living Room


Microsoft is making a big push to bring movies, music and more into your home. Does it have enough to topple Sony or will Nintendo steal the show?

Jul. 30, 2008 — by .(JavaScript must be enabled to view this email address)

About 20 years ago I did an interview with Bill Gates in which he claimed that he could make watching TV and enjoying pre-recorded or even live video events in the living room as easy as using his Microsoft operating system.

I laughed since the OS he was touting crashed repeatedly….and he winked. Shortly thereafter he made the same pitch to RCA (a top TV brand at the time), Philips and Sony. But these firms claimed that they wouldn’t get into a relationship in the living room because of their own initiatives. That’s what they said, but I believe that those companies turned down Gates’ gambit because of Microsoft’s horrible record for unreliability… a thought that’s reinforced these days whenever Vista or XP crashes.

Just a few years ago, in a meeting with Microsoft multimedia executives and HP, who were launching some less-than-ready-for-prime-time HP Media Center PCs and the less than effective Windows Mobile System, one of Microsoft’s hot shots swore that Microsoft would be a major factor in the living rooms of North America before 2002….and have some of the top TV makers as partners. Microsoft was on the living room run again.

But Microsoft’s continued reputation for inconsistent and unreliable software and hardware and their monopolistic practices (that controlled the operating systems for 95% of the world’s computers) caught up with them. Reportedly, Panasonic, Toshiba, Philips and even Zenith (now LG) turned down efforts by the Redmond computer giant to join forces with a TV-Internet based Microsoft run system. They were probably afraid of being eaten up.

It took six more years to make a marriage, and today some of Microsoft’s partners … such as the dreaded Linksys and D-Link…are not so famous. But they have also partnered with a reinvigorated HP and the ultra hot Samsung, both of which are marketing Microsoft Media Extenders (which put the content of a PC and the Internet right on to your TV). And Microsoft is poised to challenge Sony in another living room product category. Microsoft’s Xbox game-system content delivery service is itself a Microsoft Media extender.

Microsoft has recently added a cadre of business deals with entertainment services designed to shore up its Xbox 360 shortcomings and to make its somewhat disappointing Xbox Live system more popular. And, despite losing the battle between the biggest new content delivery platforms in years (as HD DVD died an early death), it seems that Microsoft is actually moving in the right direction.

Bill Gates is semi-retired and Steve Ballmer is busy running the company. Others in Microsoft have driven the first (possibly) successful foray away from its computer monopoly into a full fledged contender as Microsoft makes its case for moving its technology into the living room. Not just as a me-too move against Nintendo and Sony, but as a legitimate content delivery service that includes video, audio and the use of the Internet in a truly useable living room experience.

At E3, the Electronic Entertainment Expo (which really needs a face lift itself…more later), video game analyst and business expert Len Wanger said that Sony and Nintendo had some nice new software and other uses for their PlayStation 3 and PSP and Nintendo DS and Wii hardware.

“But I think for once people are taking Microsoft seriously,” Wanger says. “They have stumbled badly as a consumer friendly company thanks to their flawed offerings in hardware and software in the home arena. But now the Xbox may just be the all-around vehicle to get Microsoft into the living room with a new generation of consumers,” Wanger claims.

Bobby Orbach, President of Orbach Associates, a leading technology investment and analytical group, reminds us that there may be another company whose foray into the living room, as just a game system, could sneak past Microsoft, Sony and the rest of the entrees.

“Nintendo’s Wii, which beat out Sony’s PlayStation 3 and Xbox as an easy-to-use, easy- to-run game system for all demographics may take ‘Habit Compatibility’ realm (when consumers are so used to a product or service that they will buy anything new from that same company) to the next level by adding features that could soon make it a successful all content device,” Orbach warns. “And then, if history repeats itself, all bets are off on who may win the living room battle.”

For now, Microsoft is making deals and treating partners fairly and this has resulted in Xbox Live landing over 10,000 movies and television shows. This doubles the number of shows and videos that had been available on the console-based online service. While they announced new partnerships with NBC, Universal Studios and the Sci-Fi channel, their biggest partnership is with Netflix. Xbox users can download and watch any movie in the Netflix library at the same fee as their snail mail rental. 

Microsoft claimed it sold 10.3 million Xbox 360s in North America since launching the device in November 2005. Microsoft Executives interviewed at E3 honestly believe that they will eventually sell more consoles than Sony’s PlayStation 3 or Nintendo.

The company also said it collected more than $1 billion in revenue from its 12 million Xbox Live members, who bought games and TV shows and rented movies via the Xbox 360 console. The figure doesn’t include a small but growing stream of advertising and sponsorship revenue, according to Xbox General Manager Dennis Durkin. It does include millions of song packs sold for music games, including Guitar Hero and Rock Band. The company said it sold 80% of all songs downloaded for these two hit franchises. The rest were on PlayStation Network, Sony’s online platform for the PS.

Additionally, with the availability of Xbox Live Party, users now can watch these movies with their friends. Live Party also lets gamers share streaming photos. 

And, unlike its computer division, which takes years to fix or revise a serious consumer flaw, Xbox will also unveil a new interface this fall. Despite silly customized avatars, it has a look and feel of a non-Microsoft product. 

Bobby Orbach says that Microsoft’s dual platform gaming system and PC –Internet extension system gives them an all-around edge. “They have finally reached a comfortability platform that both manufacturers (TV makers, PC makers) and consumers can use,” Orbach says. “And, while Vista is an underachieving system for PCs, it actually has some great advantages for other entertainment and content platforms.”

Microsoft is also acting like a competitive CE company, cutting the price of its 20GB Xbox to $299, before the new 60GB model that will retail for $350 comes out next month. Microsoft is successfully competing in price, technology and features with Sony and Nintendo, and has finally learned that the CE business and the retail business can’t be monopolized.

Industry experts point to the renewed interest in the Windows media extenders, so now the big TV makers also add content to the wide screen home systems by using limited access Internet channels through Ethernet or Wi-Fi. Panasonic, Sharp, and Sony offer a few Internet channels in this fashion, while LG, Toshiba have a few Internet streams, but nothing to write home about.

Hakan Olsson, senior marketing manager for Microsoft’s Connected TV division, thinks that his Vista OS based Extender System has more to offer than what some of the TV makers’ bare bones Internet Access features. The Samsung Media Extender that he showed off recently is a $239 box that connects to any TV, but is designed for living room/ large screen appeal. “I believe that we have the best all around solution for a total entertainment sharing, high definition content watching and feature packed system,” on the market now,” Olsson claims.

TiVo, Apple, VuDu and other content management or delivery systems also have limited video, audio and specialized channels serving the whole house, but these systems lack the complete ability to mix and access the Internet and cable or satellite TV.

In about two weeks, I will be participating in a sort of bake off of the leading whole home (concentrating on the living room) systems and will deliver a full report then. But in recent previews of the Microsoft Windows Media Extender and non Windows systems like those from service providers such as AT@T, Cablevision, Verizon and Time Warner, and TV makers such as Sony’s Bravia Internet TV and Panasonic’s Internet enabled TV, it seems the popularity of sharing prerecorded videos, music, photos and regular TV functions, are inevitable. 

Since soon much of this technology, both Microsoft based, proprietary and Linux-based is starting to be built-into some 2008 TVs and set-top boxes and many 2009 systems, the consumer may not have a chance to shut off these features.

And soon or later, there might be so much Microsoft in the living room or den; you may not be able to turn off Microsoft.

So maybe basic TV will be a hit again!

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