Microsoft’s TV Opportunity

Microsoft is clearly on the back foot in the hardware/software
experience in the mobile world and in Web services, and while
Windows 8 (W8) has some claim to be revolutionary, those
claims are yet to be tested. Where it could steal a march on
Apple and Google, and Microsoft chief Steve Ballmer could
proclaim himself an innovator for the first time, is
addressing the TV element of the multi-screen system, where
the other two have clear weaknesses.

Xbox is the key here, and Microsoft has sensibly been
extending the gaming system’s user interface and brand to
video and integrating its user interface with those of Windows
Phone, W8 and Live. In turn, the updated Xbox UI is built
around the Metro design of Windows Phone 8 (WP8) and W8, and
harnesses Microsoft’s Bing search. And Microsoft is boldly
pushing Xbox to the core of the TV entertainment experience —
partnering with 40 content providers from around the globe to
increase the amount of live and on-demand content for the
platform —assets that will be shared with W8 in future.

It is learning lessons from geniuses of the early multi-screen
video world like Amazon, in terms of consistency and habit,
and also how to drive loyalty via subscriptions. Many of the
programs and apps from partners are only available to
customers who purchase Xbox Live Gold memberships. All this
takes Microsoft a small step closer to its long term goal of
replacing set-top boxes with Xbox to make it a critical center
of the living room, and then pushing the whole user content
and apps experience toward Windows — on PCs, tablets, TVs and
media players.

The other important platform to integrate into the overall
“devices and services” strategy will be Mediaroom — far less
successful than Xbox, but sitting in the about-to-explode,
connected TV space, and with more inbuilt advantages over
Apple and Google than Microsoft has had in other non-PC
segments. Success in connected TV will depend on partnerships
and integration with other platforms, far more than on boxes
or packages on their own, no matter how sexy, and this could
benefit Microsoft over Apple. The latter’s closed and tightly
controlled ecosystem could well find its stumbling block at
last in TV and in going head-to-head with pay-TV providers,
and Apple will actually have internal conflicts of interest,
since one of the key drivers for the iPad is to encourage
consumption of existing subscription content around the home.

So far, Microsoft has played a far stronger hand than many
rivals and is well perched to give Apple, Google, Samsung and
others a very good run for their money. One key difference is
the strategy, in that Microsoft is aligned with, rather than
against, the pay-TV industry, actually helping operators
withstand the onslaught from emerging players — a role it also
claims for Windows Phone. Microsoft sees connected TV as a
positive disruptive force that pay-TV operators should embrace
by deploying TV Anywhere to extend their reach and defend
against cord cutting, while actually attracting new
subscribers for OTT-only subscription packages. And now Xbox
has been, in effect, united with Mediaroom, acting as a
catalyst to ignite relevant development and acquisitions.

Microsoft now has a far more convincing TV ecosystem than its
competitors, including Apple, and this is being reflected in
partnerships with key operators. This advantage is already
feeding into Xbox and will be called into service to
differentiate W8, too. It has significant challenges — Google
has greater content assets, including YouTube, and the
alignment with Samsung to boost Android TV. However, this is
an area where the Windows giant has a real edge. Rather than
blindly imitating Apple’s integrated model, Ballmer needs to
dig deep for his creative side, and change the rules — basing
them around Xbox and TV — at a time when Apple‘s own
innovative impulse is running slowly.

About the Author

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