Forget the fact that Microsoft is being overshadowed by Google and that Google is looking like the 800lb gorilla beating down Microsoft. Microsoft has other plans they’ve been working on — plans that have been really coming together the past few weeks and that quite frankly, I’m sitting here in amazement.
Earlier this week, Microsoft’s Xbox 360 division announced partnerships with CBS, MTV Networks, Paramount Pictures, Turner Broadcasting, UFC and Warner Bros. Home Entertainment to “Digitally Deliver TV Shows and Movies to Gamers.” This is Microsoft’s first move into digital movie and TV show sales — and is also another move towards turning their Xbox gaming system into a full-fledged digital entertainment system (note: they want to become the center of your living room). These digital movie and TV show partnerships for their Xbox 360 unit, will likely turn into sales through their future digital media sales service Zune.com and playback on their upcoming handheld Zune device. Xbox 360 up until this announcement has only let users download select music videos and movie trailers. Last week, Microsoft sent a major update to Xbox 360 consoles that now allows users to now stream video from a PC or portable device (note: their handheld Zune device has wireless capabilities built-in) — previously, only users with Windows XP Media Center Edition installed could stream video to the Xbox 360.
Last week, Microsoft launched the website for their handheld digital music/video player Zune, which comes out next week (November 14) — Microsoft is taking on Apple’s iPod with their Zune device. And less than 2 weeks ago, Microsoft launched the latest version of their Windows Media Player (WMP), version 11, which takes over for Windows Media Connect and allows users to manage connections for sharing media (between PC, Xbox 360, Zune) within the new WMP player. One shocker is that Zune is not using Microsoft’s own “PlaysForSure” framework that other digital music etailers and manufacturers embraced (Napster, Musicmatch, Wal-Mart, URGE, MSN, FYE, etc) since Apple has not let etailers sell to iPod owners (due to Apple’s proprietary DRM, which DVD Jon recently cracked) and Apple has not let other manufacturers make devices that can work with iTunes-purchased media. Zune will be proprietary as well (like the iPod) and won’t be allowing etailers to get their media on it — Zune will not support PlaysForSure.
Since September, Apple has been selling movies online via iTunes, which iTunes at the time had 40-60 million copies of their software installed on user machines. Less than a week after launch, Apple announced $1mm in digital movie sales (125k purchases).
What does all of this mean? Microsoft has a serious strategy to dominate digital entertainment. Microsoft already has a very successful gaming console (Xbox 360) that allows users to play games, watch movies, buy movies, buy TV shows, stream video from their computer, stream music from their computer, and I’m sure buying music from URGE is in the gameplan — not to mention the social networking features that allow Xbox 360 users (and maybe Zune users, considering the wi-fi built-in?) to chat with each other in games, send messages to each other, add users to their friends list, etc.
The other device that has entered millions of homes over the years is the DVR. Microsoft has already been using DVR-related technology in their Windows XP Media Center Edition 2005 operating system (OS). In fact, if you own this OS, you can login to Microsoft’s online TV listing guide and setup their MSN Remote Record service, which then allows you to browse TV listings from any computer and click a button that will set a TV program to record to your home PC. I’d guess that in the future, there will be an accessory for my Xbox 360 that plugs into one of the Xbox 360 USB ports, hooking my cable TV into my Xbox 360, and allowing me to easily record TV shows to my Xbox 360 (note to self: short TIVO).
Apple may have millions of users using iTunes and millions of owners of iPods, but they lack a gaming console (which PriceWaterhouseCoopers predicts the gaming market will be $54.6 billion by 2009), they lack a DVR unit, and they won’t let manufacturers and etailers sell to their users. Currently, Apple’s strategy for getting into your living room is the anticipated iTV, which is rumored to be a set-top box for your TV and will allow you to stream movies, TV shows, and music from your iTunes software. Apple is also planning to sell basic games through iTunes, which iPod owners will be able to play. Could there be a gaming console (Nintendo WII? Sony Playstation 3?) purchase or partnership in the future for Apple? Could there be an Apple purchase of TiVo? (note to self: long TIVO)
This strategy by Microsoft is impressive and we’ll begin seeing how it all plays out over the next couple months of the holiday season — as buyers put up their money for an Apple iPod or a Microsoft Zune and/or Xbox 360.
Yes, their strategy is impressive. I have a gut feeling that Xbox 360 will do better in sales and execution than PS3 because it can connect to so many other devices and has good content.
Apple’s living room strategy will get them a big chunk of the pie too. They need more content on iTunes and iTV really needs to exist. Front Row just is not that good, but iTV will do the trick.
-Amit
http://www.ipatrons.com
I think this could be a big mistake by M$. They have been licensing this DRM to others, and it runs just about every music store other than ITMS. The fact that M$ decided to go another direction is going to piss all these people off. The most hyped MP3 player of all time (remember, the iPod was a failure at first) will not work with their stores, it is as useless as an iPod to them.
Plus, if M$ had stuck with PlaysForSure for the Zune, they would have had customers with songs already formatted for the Zune, ready to load up. Now, any one who purchases a Zune has to basically start over, any music that was purchased before will no longer work. Way to alienate future customers and current clients.
On Xbox 360, M$ execution has been brilliant. Not only did they beat Sony and Nintendo by a year, but they just recently released – Gears of War. This is the top rated game on Gamespot.com. This will surely be as big a hit as Halo, generating $100 million plus in revenue. Xbox live is superfast on downloads thanks in part to its partnership with Limelight.
What I’m not to sure of is how the cable companies will react. They have their own plans of delivering HD content to the TV via set-top boxes. Also, Xbox 360 drives are pretty small. It will be difficult to store HD media on the device.
M$ has everything to get a huge success with this strategy…
But for me it will only succeed if interoperability is realy there, so we could use their devices in a very flexible way. And for the moment I quite doubt M$ and all their business units could team and get to that kind of “circle ergonomy” !
I think the main thing is :
Microsoft is freaking out about Apple’s growing business
and Google’s new take on office apps
I think that bill will lose it soon.
what happen to all your instances of retail? They are all showing up as “etail”.
Anyways, great article, I’ve been amazed by Microsoft’s strategy lately as well.
Oh, and @Xu you look absolutely moronic every time you write M$.
MS’s push is impressive, but I don’t know if the XBox 360 is the device to become the family room’s centerpiece. It’s still too much of a gaming machine, and one catered towards 12-25 year old males. Over the years, I see them trying to shake this targeting and expand to a larger market.
I envision the next Microsoft XBox (the 361
) to include HD Receiver (e.g. cable and satellite) capabilities. Maybe they’ll partner with Motorola, or buy that division, to deliver it. Even better – they could partner with the cable companies so that you get a free XBox 361 free with Hi-Def cable … this would be HUGE.
Got to say I’m hardcore Apple all the way, but the Zune is a great product with features that I hope find their way into the next iPod Rev. XB360 is just a great example that MS needs to find a way to bring real innovation to their other “core units” by looking from the outside in. In many ways.
If only Microsoft could do with a browser and OS what they’re bringing to entertainment. Are Balmer & Gates really the problem?
Me!
Further as to Games:
1. Xbox has the most robust selection of games
2. They recently semi-open sourced thier engine to allow for small indie game development.
3. Its been pretty well known in the gaming industry for awhile now that the convergence between multimedia/gaming/home entertainment/social spaces is going to take place. Especially where you start having significant traction against handheld and mobile games (GDC in March in SF has a large offering around mobile games this year) etc.
4. Digital download of games, is putting incresing pressure on the large publishers, and retail game outlets (theres only one left anyhow) are hurting, because digital download allows for lower costs of distrobution (long-tail effect) and more selection
5. I’m a bit bummed MS went with MySpace. I’m sure that will change in the future…..
Some breakdowns for the gaming market:
US gaming is a 9b industry annually, with approx 26m+ consumers.
Korea: 4b annually, 14m consumers heavy on mobile games, and social networking (cf. neopets etc.), also the highest penetration of broadband of any population.
Japan: 2-3b annually 10m consumers
China: 4-8m and growing exponentially (just ask Vivendi), annual purchase escapes me but its also growing radically
Europe: Add another 6-9b 24-28m consumers.
Austraila and India are picking up as well….
btw: anyone who knows a good site localization company please email me directly…I need one for future refferance. (meaning when we have some money)
The problem the publishers and the companies are facing is control issues (same as old media vs new media) over the platform and the market, they are not necessarily married anymore, development costs are to high for blockbuster games, and the technology and engines are cheap enough for 5 guys in a garage to make a game in 1 year with some market traction. Same with content, and multimedia….looks like MS is on the ball a bit more than people here are thinking…..
PS: Steve Jobs: You need a console badly….and make it open source and the above paragraph becomes inapplicable).
Just some thoughts….
Sean,
i have been having the same thought recently , should Balmer & gates step out?
Just wait until the $100 holiday pricedrop of the XBOX 360 takes place. They are going straight to the throats of Sony and Nintendo. Their biggest problem lies in quality 3rd party games. Beyond Gears of War, Call of Duty and Halo – there unfortunately isn’t much worth playing. I could tell you that I resisted the urge to pick up an XBOX 360 yesterday about 5 times after the reviews of Gears of War came in.
I’ll be impressed when Microsoft’s Home & Entertainment division starts turning a profit. Since that’s not about to happen soon, it’s a safe bet that this latest bright idea of theirs will succeed about as much as Microsoft Bob succeeded in revolutionizing the desktop.
BTW I am posting this from my Microsoft Origami. Not. LOL
Faisal,
Gates is already out, er sort of. Balmer no way, his ego is so big. Anyone that heavy who will dance around like a sprite in front of thousands of people without regard for the metal scaring it might cause obviously has no intention of steping down from their perch even if new blood would be best for the company. (And dare I say good for the computing world?) You’ll have to excuse me I’ve got to go throw my chair at an employee and curse Photobucket!
-Sean
F Photobucket! I’m buggy & Beta
mental
overcast,
You obviously haven’t looked too hard at the third party offerings currently available — Oblivion, Burnout Revenge, Call of Duty 2 & 3, Dead Rising, F.E.A.R., Just Cause, Prey, GRAW, Test Drive Unlimited, Tom Clancy’s Rainbow Six Vegas & Splinter Cell Double agent all come readily to mind. There are others that I’m forgetting, but it’s already a pretty decent list & growing every week (especially this time of year…)
I highly doubt we’ll see a $100 price drop *this* holiday. Maybe next year.
In the meantime, go pick up a 360 Premium at Wally*World and get a free copy of Burnout Revenge with it. Or wait a couple of weeks and get a Wii. I’d wait a few months for the inevitable first-run defects to be worked out of the PS3 before even considering one (go ahead, name a Sony console in the last 6-7 years that didn’t have major issues at launch…)
2 things:
1) When will Microsoft start making money off of the “Entertainment Domination Plan” ?
Last time I checked they are losing a significant amount of money on the Xbox and they already said they will be losing money on the Zune. Do you think they can recoop this loss through music and movie sales? iPod is already in full control of music, there’s already some players in the movie market but its still up for grabs. Even so, I’m not quite sure Microsoft can pull this off.
I wouldn’t call it domination until I see some profit.
2) I’m sure Apple has been well aware of what Microsoft is doing long before everybody else. I would not be surprised if Apple already has a plan set in motion that is comparable or even better than what Microsoft is doing. Apple is very good at keeping things under wraps.
Hey Steve, you forgot just two missed angles still to come:
Pc-To-X360 synch with Vista
and Mobile-To-X360 with WM6.
That really starts out with playanywhere and Ms using their own money ecosystem along with a unifed idtag system (zunetag-gamertag-Mobcard=the same id)
Mystakill – It’s been confirmed from some pretty reliable sources that there is going to be a significant price drop this holiday season. Furthermore, those titles you listed are available on just about every console and or pc. I guess I should have been more clear on major “exclusive” titles, rather than overall. But, if the XBOX will be your ONLY source of games, then I guess the list is fairly decent. However, I’m not interested in FPS on the console, PC all the way.
Microsoft’s strategy to dominate digital entertainment may hit its true stride is after a few false starts (notably Windows Media Center Edition). Despite all the Apple worship that happens in the industry, they have some notable disadvantages — their highly controlling ways and a predilection for Disney. If Microsoft doesn’t screw up on execution and things like DRM, they can really use the XBox as their new vehicle for domination, as players like Google continue to eat into their flagship Windows and Office business model.
Read more at http://www.numenorean.net/blog
I still think that a lot of paid for content is over priced and the content developers are missing a massive trick.
if you have a came coming out why charge a 150 points for a gamer picture when you could give it away and be more likely to get a sale on the actual game. if they actually used the themes as marketing tools instead of trying to make a quick buck they would increase sales I suspect.
The arcade games are over priced too, the pool game on there is a good example. it costs 1200 points, which seems expensive to me. Now if they priced it at 600 I think they would sell 3 times the current amount.
The zune looks good but they are using points again and I can’t help feeling that the uk users will end up paying more for thier points than the US users.
I think 20 gig is ok if you have a pc to move files between.
Poland you have nailed it.
In the future there will be no Apple in the game. There will be Sony and there will be Microsoft.
In terms of the next generation I expect Microsoft to take it out unless Sony develop some sort of synergy between their hardware (which I believe they will).
Sony has the advantage in all of this – they are actually the ones that manufacture. Microsoft and Apple don’t.
The Zune has been all over the front page of digg for a while now, I thought they were all microsoft haters
You forgot to mention the completion of Vista aswell
Stuart
http://www.earnersblog.com
This article is very poorly written. Many grammatical mistakes. Very unclear at times. FYI. I don’t think this lives up to the TechCrunch standard.
I think when you’ll buy the new Xbox 360 for Christmas, you’ll get the Zune for free!!
M$ is scared as hell that Apple and Google are eating their lunch in front of their own noses. And no, I don’t look moronic cuz I write M$. They earned it, it’s like a trademark for M$ and universally recognizable M$ is M$ clear?.
Microsoft is playing catchup in many fields…but it uses the late-entry to collect the best of the gold-plating from all the competitors and launches a product which has everything what everybody has to offer and maybe at a lesser price…this is the microsoft way of killing competition
FWM – So? They are the most powerful company on the planet because of it.