Microsoft May Be A TV Star Yet
FEBRUARY 7, 2005, BusinessWeek
After a decade of stumbles, the giant is winning over cable and telecom players
History will remember Microsoft Corp. (MSFT ) as one of the greatest business success stories. But the company has suffered its share of ignominious failures, too. There has been no business where Microsoft has spent so much for so long and achieved so little as its foray into television technology. Advertisement
Until now. After more than a decade of trying to crack the TV software business, Microsoft's persistence is starting to pay off. The first sign came last November, when cable-TV industry leader Comcast Corp. (CMCSA ) rolled out set-top boxes running Microsoft's TV software to its Seattle customers. Since then, Microsoft has landed deals with two Bells -- BellSouth (BLS ) and SBC Communications (SBC ) -- as they charge into competition with cable operators. And BusinessWeek has learned that Verizon Communications (VZ ) Inc., the Bell that's making the most aggressive foray into television, plans to use Microsoft's technology for its TV service, beginning with its initial rollout in the second quarter. "We have a shared vision of how the world is evolving," says Shawn Strickland, director of Verizon's new service, FiOS TV.
Microsoft's burst of progress comes just as the TV business is on the verge of massive change. Deep-pocketed telecom companies are starting to move into the market, challenging cable players that are offering telephone service over their networks. The resulting battle has both sides racing to roll out new, sophisticated TV services, including vast libraries of movies on demand and personal video recording.
ENORMOUS POTENTIAL
The key technology for delivering these services is something called Internet protocol television, or IPTV. The technology can be used to offer a dizzying array of options: Desperate Housewives anytime you want it, the Super Bowl from a dozen different camera angles, and a nearly limitless number of channels. Telecom companies are embracing IPTV since they're building their TV systems from scratch. Cable companies, which use older technology, are likely to begin migrating to IPTV over the next five years. Analyst Hervé Uteza with the Diffusion Group Inc. estimates that 15.3 million homes will subscribe to IPTV services worldwide by 2008, compared with 184 million using traditional cable technology.
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IPTV does away with that design. Only one program shoots into a set-top box at a time. When a viewer clicks to a new channel, the set-top box notifies a computer server at the IPTV operator's facilities to instantly send a new stream of programming. This superefficient design gives viewers no end of choices. Down the road, IPTV providers expect to be able to let customers roam the Internet in search of interesting video too -- whether it's news clips, blockbuster films, or a blogger's home movies.
Gates is confident that consumers will want IPTV. "People care about the TV viewing experience. If you can really make it better, it has a really profound impact," he says. If Microsoft can pull this off, it might be able to turn its decade-long slog in TV technology into a sprint. This show is about to get interesting.
By Jay Greene in Redmond, Wash., with Heather Green in New York and Andy Reinhardt in Paris |
