CES vs Jobs

January 12, 2007

Attended CES this year for work, and was one of those who felt like they went to the wrong party. While Apple was busy introducing what will inevitably be the most-talked-about product of the year (albeit vaporware at this point–they never used to do that!), Microsoft was busy acknowledging that the copy-restriction capabilities in Vista will in fact mean that you’ll probably have to buy new hardware–including an HDCP-compliant monitor–to play most forms of high-def video on a Vista PC.

I’m not sure that Peter Gutmann is completely right about Vista’s anticopying provisions ruining the entire computer industry, but Microsoft’s assurances to me in 2005–“oh, many content owners won’t even use these copy-protection provisions” (so then why did you build them in?) — are appearing more and more like desperate spin (formerly known as “bullshit.”) So Vista as home entertainment hub could be dead on arrival. Why buy a new $3,000 system when you can add individual, locked-down components (DVD player, HD cable set top box) to your existing system? Are benefits like being able to track your fantasy football players in real time while you watch the games and highlights really worth swapping out your whole system? (Of course, it won’t make a bit of difference to sales–every new consumer PC will come with Vista Home Premium whether you choose to use all the features in it or not.)

That said, Microsoft’s Home Server announcement was actually pretty interesting–automatic nightly backup, storage of all your digital media files, capacity only limited by the size of drives you add (HP’s hardware features four swappable drives, plus 4 USB connectors for additional drives), remote access via a URL (albeit tied into Windows Live Domains, which lets you register your own domain name via a third-party in Melbourne Australia, and was kludgey as hell when I tested it for Office Live), health monitoring of PCs on your network. They purposely left out firewall software, reasoning that you wouldn’t want to reconfigure your network, but simply add a storage device to it. They also left out security and auto updating, reasoning that a lot of people have laptops and want to be secure even when they’re not connected to the home network. Reasonable. ALso, it’s not a domain controller, which means you’ll still be using local accounts on each PC…essentially, it’s just a shared folder on a new box.

But the thing they haven’t announced yet, which will make it really attractive, is the price. Let’s just say cheaper than the cheapest PC. Priced more like a consumer electronics add-on.

Now, sure, as a friend pointed out to me, you can do similar things online. But most of those services have pretty low storage limits–25GB for the free version of MediaMax seemed to be the limit–and rely on you having a fast Internet connection. Personally, I’d rather rely on my home network.

A requiem for Media Center

August 8, 2006

The (excellent) Slate technology writer, Paul Boutin, throws down the gauntlet and says that PC-TV hybrids, such as Microsoft’s Media Center version of Windows and Apple’s FrontRow response, are aiming for an audience that does not and never will exist. Media Center enthusiast and blogger Thomas Hawk replies, saying that Paul is ignoring Windows Vista and Xbox 360, which together will change the game—Microsoft will market Vista’s Media Center capabilities to Xbox 360 owners, causing them to buy a new US$1,000 PC so they can get DVR on the US$400 Xbox they already own.

I’ve been covering Microsoft’s home entertainment strategy for five years, and I have to agree with Paul, primarily because the business model doesn’t make sense. Microsoft loses money—probably about US$100–on each Xbox 360 game console, and earns about US$90 every time it sells a Media Center version of Windows XP (presumably the price will be about the same for Windows Vista Home Premium—the Home Basic version does not, despite what Thomas implies, include Media Center functionality). The Xbox business model makes sense only if people buy at least eight games over the life cycle of the box, although sales of high-priced peripherals (hard drives, memory sticks, Wi-Fi adapters) and Xbox Live subscriptions could also help. Point is, Microsoft doesn’t want people to buy an Xbox 360 primarily for its home entertainment capabilities. (Assuming people want to do that anyway—802.11g can’t stream high-definition video, and who wants to watch anything less on their brand new 40-inch flat-screen HDTV?)

Working in the opposite direction, existing Xbox owners might find Vista’s Media Center capabilities appealing enough, along with the other improvements in the OS, to buy a new PC. But there will only be 10 million Xbox 360 owners by the time Vista launches. Consumers will buy nearly 100 million new PCs in 2007. The Xbox 360 owners are early adopter/tech enthusiasts and so probably would have been among the first Vista purchasers anyway. So Xbox 360’s effect on Vista sales will be minimal.

As far as owning the living room and online advertising and all that, I’m very skeptical until I actually see somebody other than Google capitalizing on the huge growth in one particular market—paid search advertising. But maybe I don’t drink enough Web 2.0 Kool-aid.

Beyond the questionable business case, Media Center and other PC-TV hybrids disobey my first rule of consumer electronics and technology: divergence beats convergence. Time and time again, consumers have shown they prefer to buy one device that does one thing very well, rather than a multifunction device that does nothing well. The PC itself is a bit of an exception, but most people still use their PCs for surfing the Web, sending and receiving e-mail, and perhaps one or two other programs. (My second rule, convenience beats quality, is a subject for another time….)

I suspect that Microsoft will downplay the PC-TV hybrid after Vista launches, and instead come out with a Zune-branded networked entertainment device based on Windows CE, probably for Christmas 2007. This would be a combination DVR (like TiVo) with home networking capability to connect to the Internet. Eliminates all the PC problems—patching, spyware, crashing, slow boot—that you don’t want when you’re in front of your TV. The problem here will be selling such a device at a high enough price to make a profit (or at least not to go US$5 billion into the hole like Microsoft has done on Xbox so far), without getting undercut by the cable TV providers, who are bundling DVR into their digital cable offerings, hardware included. The key is the combination of online and traditional TV programming—but Microsoft has to build up a truly great online content source. Which is exactly what it’s rumored to be trying to do with Zune.

Some anecdotal evidence to support my point: the eHome product group at Microsoft, which oversees Media Center, moved out of the Windows group and into the same large group as Xbox and Zune about six months ago. In other words, they report up to Xbox maven Robbie Bach, not anybody in the Windows group. There goes the Windows tax…