How Microsoft loses the TV space

Google yesterday officially confirmed the existence of Google TV, a "not so secret" project hints of which have existed for quite awhile. A number of key Microsoft engineers wandered into permanent positions on Google campus while I worked for Microsoft as part of its Mediarom division (Google's Mountain View headquarters is less than a mile from Microsoft's large office in Silicon Valley).
Written by John Carroll, Contributor

Google yesterday officially confirmed the existence of Google TV, a "not so secret" project hints of which have existed for quite awhile. A number of key Microsoft engineers wandered into permanent positions on Google campus while I worked for Microsoft as part of its Mediarom division (Google's Mountain View headquarters is less than a mile from Microsoft's large office in Silicon Valley). Of course, it didn't take a rocket scientist to see that Google had designs on video entertainment. YouTube is the single most popular destination for Internet video. Much as the iPod docking interface is the standard around which digital music peripherals are built, YouTube integration is a baseline feature in many consumer-oriented video products.

Will Google TV change the TV space? Though details are still to be digested, I think it has a better chance of doing so than the Apple TV experiment, as innovation isn't confined to a Cupertino lab (the same dynamic that will lead to Android's eventual triumph over iPhone, in my opinion), and the service orientation of TV entertainment plays more to Google strengths than Apple's. In my opinion, Google TV would be better served getting a few carriers to offer their customers Set-Top Boxes (STBs) that run the Google TV software. Though the barrier to entry is certainly lower, cost-wise, than was the case for Google's "direct to consumer" Nexus One cell phone experiment, I'm not so sure consumers will race to install their own web-enabled STB. But, Google's strategy is to get OEMs to build devices that use their software, and it is those OEMs who have the carrier relationships that will put boxes in customer hands. It doesn't hurt that, like Android for mobile phones, Android for television is 100% free as in cost (and free in the sense that makes Richard Stallman's smile visible through his beard).

But, until I get my hands on the software (and I will), I'll put off a deeper analysis for a later day. In the meantime, I'll give voice to my frustration with Microsoft's TV efforts. From a television standpoint, I feel that Microsoft is in the same position today that their mobile division was in the day after Apple's announcement of the iPhone (or at least shortly before, as the success of Google TV is a definite "maybe," while I had a hard time believing the iPhone would be anything but successful). All it takes is one savvy competitor with the right product to transform billions in TV-focused investment into so much oil gushing across the seafloor in a certain warm southern body of water.

Microsoft has been focused on the potential of televised entertainment for a VERY long time. Some theorized that Bill Gates almost missed the dial-up Internet boom in 1995 because he was too focused on interactive television service which required broadband network speeds. A former manager at Mediaroom worked on one of those early projects in the late 90s. He recalled big stacks of 500 MB drives (the biggest at the time) that cost ungodly sums of money and had a hard time keeping up with streaming requirements, something that would have made it difficult to build a Video on Demand (VOD) system of sufficient size and video quality. Microsoft also bought WebTV in the late-90s, a startup focused on bringing the Internet to televisions, many of whose engineers served key roles in Microsoft IPTV (later renamed Mediaroom) once that project got off the ground.

Today, Microsoft has multiple pokers in the TV fire. There is Media Center, a "television atop the PC" concept that is notable for its customizability. There is Mediaroom (formerly Microsoft IPTV) that offers an end-to-end infrastructure targeted primarily at telecommunications companies with broadband services and the need to compete with cable. XBOX, though not strictly a "televised entertainment" play, is attached to the TV and offers video rentals through the XBOX Live store as well as access to streaming services like Netflix. One could argue that Windows CE is also a player, given the existence of TV-oriented add-on packages designed to encourage third parties to build STBs atop Windows CE. That, however, is a bit like calling LEGO an architectural firm because someone built a house out of LEGOS. (UPDATE: Talkback participant basharkokash noted Microsoft's new End-to-End Platform based around Silverlight and IIS Smooth Streaming; as I've noted before, I think Microsoft should make Silverlight their default interface on ALL devices, so this is a notable addition;  I also think Scott Guthrie - a key backer of that initiative - is one of the smartest strategy guys currently working at Microsoft).

That's a lot of efforts, though to be fair to Microsoft, each group approaches the market from slightly different angles. Given how early Microsoft was to the space, striking off in multiple directions makes some theoretical sense.

On the other hand, I think one of the fatal flaws in post-millennial Microsoft is its inability to move with a coherent purpose across product lines, or even product streams. As I've discussed in past articles, Microsoft has a history of letting different teams attack the same problem simultaneously. In theory, parallel effort will dig up useful detail that can only be gleaned by attacking the problem in more than one way. In the end, the winning bits of all streams can be merged into a common whole, allowing Microsoft to cover more ground than if they put all their eggs in one technology basket.

Can, however, doesn't mean such a merger WILL happen, particularly when control over billions of dollars is at stake...just ask Enrique Rodriguez. The reality is that "mini-companies" within the Microsoft whole are a poor substitute for real-world competition. Internal companies don't face the same consequences as companies that fail to catch on in the open market, and thus are shaped by different incentives. There are fewer gains to be derived from compatibility with other groups, or compromise for the sake of consistency. Code equals power at Microsoft, and given that engineers who love to code (and Microsoft is full of them) would perform a bumper to bumper redesign of a Ferrari if given half a chance, there is a huge impulse to amass as much code uniquely customized for JUST your project as possible. Compatibility and consistency suffer as a result.

Inter-team politics can grow somewhat silly. Media Center was "the enemy" to many in Mediaroom because it had the potential to be a real existential threat to the existing home-grown client, particularly as it had a vastly more powerful User Interface framework than anything that existed, at the time, within Mediaroom.

XBOX is the most frustrating part of the Microsoft TV strategy, at least for me, as someone who wants Microsoft to embrace their potential and, along the way, justify their investment in so many market segments. I love my XBOX, but I will simply never understand why the powers in control of the only TV-attached product made by Microsoft thinks it makes any sense to restrict the network access of custom applications (well, unless you are Facebook, Netflix, Last.fm or another favored company). I really have no problem with paying the XBOX Live yearly subscription fee. Just give third parties the ability to write TRULY network-aware applications so that they can build something unique in the living room.

The wrangling and resultant duplication of effort slows things down, making divisions slow to adapt to change. Such slow adaptation was the thing that brought down Windows Mobile, leaving Microsoft in the position of having to completely reset their entire mobile phone strategy. Given how fast technology moves these days, I think they will have even less time to adapt in the TV space.

Do I think Microsoft can change things? Maybe. I have high hopes for Microsoft's plans to embed Media Center into TVs. I still think that Media Center is a great product, something which should have been leveraged everywhere Microsoft was doing anything in TV (which means: teams involved in the space should not have been allowed to avoid compatibility with it). Does this mean that Embedded Windows (which I presume is what will be used for the embedded version) can truly be deconstructed to the point where it is cost-effective to do this using the existing Windows code base? I sure hope so.

Few who has read anything I have written would confuse me for an enemy of Microsoft technology. As a development platform, my preference is .NET, and when I choose an operating system, I favor Windows, PC or otherwise. But it's hard to ignore Microsoft's surprising capacity to squander its first mover advantage. Five years ago, Microsoft could honestly say they were the only company in cell phones, TVs, PC / Servers, and everything in between. Today, that is no longer the case. Cross-device advantages that should have been leveraged by Microsoft are now being pursued by a company that was non-existent a little over 10 years ago (Google), and another that almost went out of business around the same time (Apple).

It only took one iPhone to turn Microsoft's mobile strategy upside-down. I think the same thing applies to television, and that is how Microsoft could lose the TV space.

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