This is the first article by Mack D. Male, in a two part series, exploring Microsoft’s Internet TV strategy. Mack is the author of Windows Media Blog and mastermaq.
Television over the Internet, better known as IPTV, is a small but growing segment of the very large market for television products and services. Gartner predicts the number of IPTV subscribers will grow from 3 million in 2005 to 50 million in 2010, creating huge opportunities for technology vendors. However, there’s more to the story than simply moving the signal from traditional broadcast and cable networks to Internet networks.
The two biggest factors contributing to the growth of IPTV are interactivity and convergence. Interactivity is all about putting the user in control, and moving beyond simply watching TV. Think: looking up statistics while watching a sports game, or changing the camera angle. Convergence is about making things work together. Displaying photos from your computer on your TV, for example, or on-screen caller ID. For all of these things to work, you need more than just hardware. IPTV makes software an extremely important piece of the television services puzzle.
Enter Microsoft
There may not be another company as well-positioned to take advantage of the growth in IPTV as Microsoft. Despite being primarily a software company, Microsoft has long had a passion for television. The company launched the 24-hour cable news channel MSNBC in July of 1996 in a joint venture with NBC. Just less than a year later, Microsoft purchased WebTV, one of the first products to marry television and the Internet. In 2000 they acquired Israel-based Peach Networks, a provider of technology for digital television. The late nineties also saw a number of television-related investments by Microsoft, in companies such as AT&T, @Home, Comcast, and Rogers.
While the 1990s were a period of heavy investment in television companies (including a number of acquisitions), the 2000s have so far been much more about Microsoft developing television-related technology. It is on the resulting products and services that we now focus our attention.
Target: Consumers
History: Founded by Steve Perlman in 1995, acquired by Microsoft two years later.
Released: September 1996
Technology: Set-top box with online service.
Pricing: $325 for the set-top box, $20/mo for service
WebTV was the first major product and service offering to combine television and Internet access. It got off to a very good start, and sold well in the early years. Microsoft noticed, and made a bid for the company that was challenged by Sun Microsystems, among others. Eventually the deal was approved, and WebTV became a wholly owned subsidiary of Microsoft. The product was later rebranded as MSN TV. As more and more people ditched dialup for broadband, MSN TV lost many subscribers.
Target: Consumers
History: Second Microsoft product to integrate television and Internet access.
Released: January 2001
Technology: Set-top box with integrated DirecTV receiver and DVR.
Pricing: $9.95/mo or $14.95/mo (for ISP access)
UltimateTV was a joint venture with DirecTV, and essentially aimed to combine television with Internet access. It accomplished this by borrowing heavily from WebTV’s software. At the time, UltimateTV was the only satellite receiver to support picture-in-picture. The product failed to catch on with consumers, however, and was taken off the market in 2003. It is still supported by DirecTV.
Target: Consumers
History: First released as a special Windows XP SKU, included in some Windows Vista SKUs.
Released: September 2002
Technology: Application supporting TV tuner cards built on top of Windows.
Pricing: Windows Vista Home Premium MSRP $239
Windows Media Center is an application that runs atop Windows XP or Windows Vista designed to act as a central access point for home entertainment. Local and networked photos, music, and video are all indexed and made available, and if the computer has a TV tuner then live television is also available. Windows Media Center also acts a sort of network hub, and allows streaming of media to Windows Media Center Extenders such as the Xbox 360.
Microsoft TV Foundation Edition
Target: Cable network operators
History: Microsoft’s first major attempt at a software platform for television.
Released: June 2003
Technology: Software platform integrating video-on-demand, DVR, HDTV, live TV, and an interactive program guide.
Pricing: N/A
Foundation Edition is quite similar to Mediaroom (or IPTV Edition) except for the fact that it is focused on the cable market, rather than the Internet one. DVR and HDTV technologies are the main focus of the product. Comcast was the first and only major cable operator in the US to deploy Foundation Edition, back in 2004, though they recently announced they were dropping support for the product. Microsoft definitely seems more focused on IPTV and Mediaroom – Foundation Edition receives only a cursory mention on the Microsoft TV site.
Target: Consumers
History: MSN TV is an evolution of the WebTV product Microsoft acquired.
Released: October 2004 (MSN TV2)
Technology: Set-top box supported by an online service.
Pricing: $99 USD/year (not including hardware)
MSN TV2 was introduced largely to capture customers moving to broadband Internet access. The box runs Windows CE and supports many popular applications such as Windows Media Player. It also supports file sharing with Windows computers.
Target: Consumers
History: Evolution of the Xbox Live service.
Released: November 2006
Technology: Internet service accessed via Xbox 360 consoles.
Pricing: 240 Microsoft Points per HDTV episode, 160 Microsoft Points per SDTV episode
The Video Marketplace on Xbox Live allows users to purchase TV shows and movies using their Xbox 360 gaming console.
On the first day of the 2007 Electronic Entertainment Expo (E3), Jeff Bell, Microsoft’s VP of Marketing for the Xbox, announced that Xbox Live has more than 7 million members, and that $125 million of content has been sold via the Video Marketplace. He also announced that the US-only service will finally be launched in Canada and Europe by the end of the year.
The Video Marketplace (and Xbox Live in general) has a lot of momentum right now, and looks to be an important part of Microsoft’s strategy moving forward.
Target: Broadband service providers
History: Formerly known as Microsoft TV IPTV Edition.
Released: June 2007 (Mediaroom re-branding)
Technology: Software platform integrating video-on-demand, DVR, HDTV, live TV, and interactive programming guide. Intended for use with IPTV networks.
Pricing: N/A
Mediaroom is the newest offering from Microsoft, and arguably the most exciting. More than just a simple re-branding, Mediaroom has the potential to be the television platform Microsoft has always wanted. It also brings about two major shifts in the company’s strategy.
The first is related to branding — previous products, such as IPTV Edition or Foundation Edition, were very rarely known about by the end consumer. Microsoft intends to change this with Mediaroom, hoping the brand will come to be recognized and in fact requested by consumers.
The second shift is related to third-party development — quite simply, Microsoft is finally planning to make it possible. Unlike with previous products, developers will be able to create applications that work with the Mediaroom platform. And that’s what Mediaroom is really about – creating a platform. It’s what Microsoft does best, after all.
Next Up: Integration
Perhaps the strongest reason to deploy Microsoft solutions, media-related or otherwise, is the integration story. If you have two components and they are both from Microsoft, chances are they will work very well together. That wasn’t the case for Microsoft’s early television software efforts, but integration is increasingly the focus. And integration is what could give Microsoft the edge over competitors.
In part two we’ll look at how Mediaroom, Windows Media Center, the Xbox 360, and some other Microsoft products work together to make the experience of sharing media in the home much simpler and more enjoyable than it is today.
Part two: Microsoft’s Internet TV strategy: today and in the future
