Microsoft IPTV: At Long Last, Progress

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To keep up the progress, Microsoft will not only have to eliminate glitches but will need to find ways to make its basic TV service stand out vs. cable and satellite rivals. MediaRoom, the most recent makeover of its IPTV software, includes many slick features, such as the ability to see a thumbnail video of what's playing on each station in the program guide. But for Microsoft to really cash in, it will have to help carriers go well beyond basic TV, with a type of interactivity that really matters to consumers. Over the past 15 years, there have been a slew of interactive TV efforts with features that failed to impress viewers—say, the ability to order a pizza without picking up the phone, or to choose the camera angle for watching Monday Night Football. "[The industry] has tried and failed in a number of ways to figure out what interactive TV means," says Enrique Rodriguez, corporate vice-president for Microsoft TV.

To avoid repeating history, Microsoft seems to be making progress in another critical area: getting independent software developers to create more innovative services. Since Microsoft rolled out new programming tools in June, a number of developers have begun work on a variety of applications, such as visual voice-mail that lets you see who has called you, right there on the TV screen. "They've got a great road map," says Donal O'Connor, a product manager with London-based Emuse Technologies, which develops software that targets ads to particular viewers. "A few years ago I wasn't sure they would succeed, but I genuinely [believe they will] now."

Redefining Interactivity

Rather than using the set to order pizza or pick a camera angle, Microsoft now is emphasizing the need for the TV to work well with other digital devices. A big test of Microsoft's IPTV mettle could come early next year, when gamers will be able to use MediaRoom on their Xbox game consoles. Besides giving 12 million gamers one-click ability to jump from watching a TV show to playing a video game or buying music, this will mark the first time MediaRoom runs on hardware not specifically designed for it. It won't be the last, however.

Rodriguez, who was recently given authority over Microsoft's Media Center PCs and its HD-DVD strategy, envisions a day when all manner of content—from family photos on the PC in the den, to the latest episode of 24—will be available on whatever screen you choose. Those are big promises from a company that still has much to prove. But for the first time in a long time, there's some reason to think Microsoft just might deliver.

Burrows is a senior writer for BusinessWeek, based in Silicon Valley .