Microsoft and your TV

There was a small announcement from CES the other day regarding Microsoft and the Xbox 360. They indicated that the 360 would be capable of doing IPTV soon. Basically that MS will be integrating set-top features into the 360, just not over your cable.

When MS first announced the Xbox, I told all those who would listen (and there weren't many of them... I didn't have a blog then so my statements are date-stamped) that MS was going to use this as a stepping stone to supplant cable companies. And I thought they were taking an excellent route. What was that path? The same pattern as early PCs - follow the games. In this case, create a game-first system and then leverage that later when it gains a high penetration. Heck, throw money at it, lose billions now for gain later. I believed at the time that MS was hedging its PC position with an ubiquitous device that blends in with other living-room items. They would use their proven technique of "get it out there and iterate towards the best product."

So far this has been keeping with that idea. They still use an x86 processor (their strength) in their device, the second gen is better than the first, the UI is continually improving and, importantly, they have embraced something that caused them to stumble on the PC: the Internet.

Making the device usable by non-PC-experts was the first step. Creating a platform where they control the OS and hardware was the next. Making it network accessible is the last - now they can start using this platform for other things like delivering services. Services like "TV".

Sure their initial offerings will probably suck, but over time they will get better. Eventually the service will be so good that a few people will try it and realize that it seamlessly provides things they never knew they needed. They'll casually mention it to other people they know and soon everyone will "discover" the cable-tv service in their gaming device. Then people will decide they don't need "extra boxes" and just get the Xbox Whatever instead. Just like with DVD and HD-DVD now - why pay more for a standalone device when you can get a great gaming platform plus an HD-DVD for less than an HD-DVD player!

What's my point? I think that the cable companies (particularly the ones who I work for) should pay close attention to this and prepare to meet it. It's going under the radar of the cable companies because of the "game console" guise. If MS can deploy something compelling to that install base... There is still time left - who knows how long it will take MS to complete this idea. But they will complete it and the form it will take is unknown.