Is Microsoft going to miss the Internet TV/Streaming Video revolution?

My friends on Facebook know that one of my focuses since retiring from Microsoft has been reworking my home entertainment setup.  In researching all my options one thing stands out, Microsoft products are going to play a very small role in the revamp.  This isn’t due to a lack of desire of my part; I’m a Microsoft fan.  The problem is that Microsoft’s approach to Internet TV is confusing, fragmented, and incomplete.  And, as has been the case in other consumer offerings such as Mobile Phones, the reliance on Partners has worked to exacerbate Microsoft’s weaknesses.

You can’t accuse Microsoft of being late to the party when it comes to the Digital TV revolution.  When I joined the company in 1994 the Tiger Video on Demand server was already public and its successor, Mediaroom, is a major player for TV providers today.  For example, if you have AT&T U-verse you are seeing Mediaroom in action.  Microsoft also shipped a DVR about the same time as Tivo (1998-99), then folded that capability into a fairly comprehensive home media offering called Windows Media Center (WMC) in 2002.  Windows Media Center has offered both Netflix and Internet TV capability since 2009.  And the Xbox 360 gaming console has offered Netflix since 2008.  Both WMC and the XBox 360 can now also serve content from Microsoft’s Zune store.  Microsoft also was an early player in getting TV vendors and others to build these capabilities into their products with Windows Media Center Extenders.  And Windows Home Server is also a player in this space with its ability to act as a central store and DLNA-compatible server for providing content to various devices around your home.

So what’s the problem?  You have a nice 50″ LCD TV and you want to watch NetFlix, Hulu Plus, and other services on it.  What  do you get?  You can spend $59-99 on a device from Roku that will let you access a wide range of Internet-based video services including NetFlix and Hulu Plus.  You can spend $99 on Apple TV for similar, though more Apple/iTunes-centric, capabilities.  Your new 50″ LCD may have Internet access capabilities built-in.   Or you might get it built-in to your new Blu-Ray player.  And then there is this weird $299 Google TV offering  from Logitech that I don’t get, but that is a different topic.  But what is Microsoft’s solution?

From a consumer standpoint the problem is that Microsoft has lots of Internet TV capabilities, but not an Internet TV product offering.  You can put a great solution together, but it will take a lot of time and money, and the solution will be complex and relatively hard to use.  Microsoft was in early with Media Center Extenders, but failed to follow through and there are no longer any on the market (other than the Xbox 360).  Windows Media Center itself has largely been repositioned from something to drive your TV to a way to watch TV (and other content) on your PC.  Few OEMs are offering PCs specifically configured to sit with and drive your TV, and when they do have an appropriate offering expect a properly configured box to run $400-500 or more.  Interestingly Dell, as the only major PC manufacturer in the US offering a box configured for this purpose (the Inspiron Zinio HD) doesn’t list it in the HDTV/Home Theater section of their website!  Then there is the Xbox 360.

The Xbox 360 is clearly what Microsoft associates with TV when it talks about “3 Screens” (PC, TV, Phone), and I recall seeing a recent article claiming that Xbox 360 is now being used a greater percentage of the time watching Netflix than playing games.  But the Xbox 360 is clearly optimized as a gaming console.  It is large, loud, hot, and expensive for something you would use only for streaming video.  It also currently offers far more limited set of content providers than the Roku or Apple TV.  I might put one in my family room so I can play games as well as watch Netflix content, but I’d never put one in my bedroom.  And I’d never put one in any room of my mother’s or in-law’s homes.  The Xbox 360 also still lives with a legacy that turns what could have been an advantage against Apple TV et al into a cost problem.  The Xbox 360 contains an HD-DVD drive rather than Blu-Ray.  HD-DVD is fine for distributing games, but all HD movies now come on Blu-Ray. 

Then there is Windows Home Server.  I won’t say a lot about it, except that various decisions that Microsoft and its partners have made don’t leave much room for it as a media server.  In fact, all its key functionality can be had in NAS servers from Buffalo and a few other players at a fraction of the cost.

On the marketing front Microsoft is missing much of the 2010 explosion of interest in Internet TV.  Take this Associated Press story on Internet TV that fails to mention Microsoft other than to note that the Sony PS/3 is a better Internet TV option because it also offers a Blu-Ray player.  Or take my walk into the Microsoft Store the other day where Internet TV is barely to be found.  You can find a mention of the Xbox’s ability to stream video as well as play games, and a section devoted to watching TV on your PC with Windows Media Center, but there is no area focused on Internet TV/Home Theater or whatever else you want to call it.  Ditto for Best Buy, where the Google TV offerings from Sony and Logitech have the most visibility (along with the WD HD Live offering, surprisingly enough) and Microsoft has lots of Xbox gaming visibility but no Internet TV visibility.  Add in little swats, like HP (which previously got out of the dedicated Windows Media Center configurations and WMC Extenders offerings) just announcing it was dropping its Windows Home Server offering, and Microsoft just isn’t top of mind in home entertainment outside of gaming.

The good news for Microsoft is that the market for Internet TV gadgets this year is highly fragmented.  There is no killer product that will take over and relegate everyone else to obscurity, as the iPod did with portable music players.  The number of Xbox’s being used to stream Netflix will probably give Microsoft a significant share of actual Internet TV usage, if not mind share.  And the real battle for a dominant vision of Internet TV will likely be fought in the Holiday 2011 season.  Perhaps by then they will have a clear and competitive offering for those of us who want to watch Internet TV on all the screens in our house.

In the mean time, I’m going with Roku.

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One Response to Is Microsoft going to miss the Internet TV/Streaming Video revolution?

  1. Alique Williams says:

    Well Microsoft is making greater moves with internet TV via it’s Xbox live update coming soon. The only problem I have with it is that they should have dealt directly with the production/distribution companies of film instead of going through the providers/telecommunication companies such as comcast and Verizon.

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