Photo: John Atherton via Flickr
Microsoft has been in talks with TV providers about launching a new service with TV content late next year, according to a Reuters report this morning. Details are sketchy: the service could be delivered via the Web, through the Windows Media centre interface, through Xbox Live, or some combination of all those media plus devices we haven’t even seen yet.You’d think Microsoft would have learned its lesson by now. It’s almost impossible for a technology company to change TV distribution in a meaningful way and make money.
There are countless reasons for this. Content providers won’t sell TV programs to new distributors unless they’re willing to pay the same prices that cable companies do, which leaves new distributors mostly with second-tier content. Consumers hate complexity and don’t want to pay another fee on top of what they’re already paying their current providers. Incumbent distributors have every incentive not to cooperate with new initiatives (look at how long it took CableCARD to get off the ground).
If anybody should know this, Microsoft should. Look at all the times Microsoft has failed in the TV business:
WebTV. This wasn’t really a TV content service, but allowed users to surf the Web and send and receive e-mail from their TV sets. (It’s worth revisiting because it’s conceptually similar what Google TV is trying to do now.) Microsoft paid $425 million to acquire the company in 1997, only to find out that nobody wanted to buy a separate device to get Internet access on their TV. The service peaked at about 1.1 million subscribers and was later rebranded MSN TV, before it finally slipped off into obscurity.
Microsoft TV. This was a set of interactive and advanced TV platforms that Microsoft tried to sell cable providers in the 1990s, only to find that cable providers were happy with their legacy platforms. Microsoft even invested billions in cable providers, including $5 billion in to AT&T’s cable business in 1998, in hopes of spurring adoption. (That investment later turned into a stake in Comcast, which Microsoft finally unloaded a couple of years ago.) None of the platforms ever got traction, and in 2001 Microsoft scrapped the whole initiative and started over with smaller ambitions, including a new interactive program guide. Comcast briefly deployed it in Seattle, but later canceled it.
Ultimate TV. This DVR device and accompanying service for DirecTV was launched in March 2001 to almost zero interest from users. A year later, Microsoft killed the product group and reassigned its workers to the Xbox and other products. The product’s no longer for sale, and existing subscribers got their last update in 2007.
Media centre. Microsoft first introduced Media centre in 2002 as a special edition of Windows XP. It includes a remote controllable interface and DVR, and was sold only with PCs that included TV tuner cards. Turns out that consumers like their TVs to be simpler than a Windows PC could ever be. Although partners like HP liked the high margins they earned on these complicated PCs, sales were slow. So Microsoft eventually allowed Media centre on to all kinds of PCs, promoting it as a remote-controllable interface for playing DVDs and multimedia files. It later built Media centre into the premium consumer versions of Windows Vista and 7. Microsoft has sold hundreds of millions of copies of Media centre, but the number of customers who are actually using it to watch and record TV is probably in the low millions–Microsoft has never said.
Mediaroom. After giving up selling TV platforms to the cable companies, Microsoft focused on telcos, who wanted a simple answer to cable’s triple-threat of video, Internet, and voice. The company found some customers–most notably, AT&T in the U.S. uses it for its U-Verse service. But Microsoft hasn’t announced deployment numbers since passing 2 million in 2008, and platform updates and new deployment announcements have become rather scarce. This is a shame–Mediaroom has some good qualities, and makes the on-screen guides from cable providers look like dinosaur technology. But the fact of the matter is that most customers aren’t switching to IPTV from cable.
The most likely outcome of these talks? Microsoft might get access to some more second-tier programming, like it got with ESPN3 on Xbox Live. Consumers will yawn and continue to watch their programs on cable and satellite, with occasional visits to Hulu or other Internet-based services when they’re at work or otherwise away from their TV sets.
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