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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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DECEMBER 7, 2004
Inside Microsoft's Consumer Strategy Xbox honcho Robert Bach talks about the software giant's wide-ranging pursuit of "integerated innovation" and how these moves could play out Few companies in techdom are diving deeper into consumer electronics than Microsoft. Comcast (CMCSA ) recently began offering set-top boxes that run Microsoft (MSFT ) software to its cable customers. The tech giant just opened the doors to its online music store and released software for portable music players that works in concert with the store. Microsoft's partners have already sold 1 million new Windows XP Media Center PCs that connect directly to TV sets to record programs onto the computer's hard drive. And consumers have purchased roughly 16 million of its Xbox game console, including more than 1 million who've signed up for the Xbox Live online gaming service. The pace won't let up. The Colossus of Redmond just introduced a new breed of consumer-electronics products, Media Center Extenders, that let customers pull video, music, and pictures wirelessly off Media Center PCs and play them on any TV or stereo around the house. Audiovox (VOXX ) just started selling a new mobile phone that uses Microsoft technology to also store and play songs. And analysts expect Gates & Co. to launch the next generation of Xbox by Christmas 2005, giving it a leg up on rivals Sony (SNE ) and Nintendo, who aren't likely to match that timing. Behind the scenes, Microsoft is busily trying to link all its consumer efforts to give it more bang for its buck. It has created something called the Consumer Leadership Team, a group of top execs including Chairman Bill Gates and CEO Steve Ballmer. The goal is to ensure that consumer innovations ginned up in one part of the company are available to execs running Microsoft's other consumer businesses. Another team member, chief Xbox exec Robert J. Bach, is tapping Microsoft's growing consumer software expertise to build the next Xbox and expand its tech dominance beyond the workplace and home offices. Bach recently talked about Microsoft's consumer strategy with BusinessWeek Seattle Bureau Chief Jay Greene. Edited excerpts of their conversation follow: Q: You've talked in the past about how success in Xbox would feed some of Microsoft's other businesses such as MSN or Windows Media Center PCs. Has that happened yet? A: It's one of those things that's in the process of happening. You see the opportunities for integration coming. We're taking advantage of those. It takes time for that to take effect in the marketplace. A digital lifestyle is developing that incorporates things you do online with things you do with entertainment, with things you do with gaming, with things you do with music, movies, TV. As that all comes together, Xbox is certainly going to play an important role. And that means it needs to integrate with other parts of Microsoft that are going to play an important role as well. Q: Are there key products to look for from Microsoft? A: You're going to see us take a paced approach to this. It's important at the foundation level for things like Media Center, MSN, Xbox to be successful in their own right. You're seeing with all three properties that their success is broadening. Then the opportunities to integrate them become more palpable. The Extender product, which I use at home, is a great product and proves that integration can deliver great customer benefit. The number of people doing distributed video in the home today is not large now. It's increasing. It's a market for the future. But you're not going to see, and nobody should expect, huge numbers for that product. What they should see is a great customer scenario that proves that we're going to be able to deliver value over time. Q: How close is the time when it will be commonplace for consumers to have networked devices in their living rooms? A: Picking a time frame is tough, but I think you're going to see that trend over the next five years continue to accelerate. It's like PVR [personal video recording, a la TiVo]. It's like online gaming. You're going to see analysts saying it's going to happen in the next two years, and you're going to see analysts say it's not going to take place for another 10 years. And just like PVR, which is now starting to take off in a big way, nobody got the date right. I try to think in five-year windows, and I think in the next five-year window it's going to be an important part of what people want to do. Q: That might suggest that the next version of Xbox would need to enable these scenarios in ways that are better than the current version. Is that right? A: Well, we haven't talked about the next version of Xbox. But people know we're working on it, and people have to assume it's going to be the world's best game console. That's the place where it needs to start. But we do think there are going to be opportunities to enable what we've called "integrated innovation" scenarios. You can assume that everything we do -- the gaming side and things that integrate with other forms of entertainment -- is going to get better and better and better.
BW MALL
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