Microsoft's long-term media plans
Quietly munching a bit of this and a bit of that
By Alan Breznick
If at first you don’t succeed, buy, buy again.
That’s the approach that Microsoft is taking in the emerging market for interactive TV services in the U.S. and abroad.
Largely stymied in its efforts to crack the interactive market with its Windows operating system software for digital TV set-top boxes, Microsoft keeps buying one stake after another in major cable TV companies and interactive service providers to cram its software into more set-top devices.
In the latest example, Microsoft shelled out $57 million last week for slightly over a 20 percent chunk of Intertainer, a Southern California startup that’s prepping to launch a video-on-demand (VOD) movie and TV programming service over digital cable and phone lines this spring.
As part of the deal, the Intertainer pay-per-view service will be blended into the Microsoft TV software, giving Microsoft another carrot to offer reluctant cable operators, phone companies and other network operators.
"It certainly gives the cable multiple system operator the option to take Intertainer without any further integration," says Jonathan Taplin, president and chief executive of Intertainer, who has high hopes for the new alliance. "We’re co-marketing the service with Microsoft."
The embattled computer software giant is assuming the minority position in Intertainer and grabbing four seats on the firm’s 12-member board despite its avowed disdain for the TV programming and web content business lately.
In fact, right after the purchase of Time Warner by America Online three weeks ago, Microsoft representatives sought to portray their company as merely a neutral, harmless content enabler, not some big, scary all-media monster like the proposed AOL-Time Warner monolith.
"AOL is actually getting into the development-of-content space," a Microsoft spokeswoman said then. "That’s not where Microsoft is going…Microsoft doesn’t want to compete with those who provide content."
But Microsoft, which now owns sizable stakes in AT&T, Comcast, MSNBC, Wink Communications, Road Runner and now Intertainer, is really just taking a less high-octane approach to the content business than its AOL archrival.
Blessed with huge financial reserves, it plans to keep sprinkling its cash relatively quietly among interactive content and service providers, as long, that is, as it manages to stay one big company.
"It’s not that we haven’t put money into the content industry," says Alan Yates, director of the Microsoft TV platform division. "I wouldn’t rule anything out…We’re trying to be the catalyst in ways that make sense."
In spite of continued industry rumors that Microsoft might try to gobble up NBC, its equal partner in MSNBC, industry analysts still doubt a big content play by the software king, particularly while it’s under the tight antitrust scrutiny of the U.S. Justice Department.
They think the company will keep focusing on placing its operating system software in broadcast, cable, satellite and phone company set-top boxes by making more strategic investments in its corporate customers, just as it successfully did in the computer industry.
"This is the IBMization of Microsoft," says Josh Bernoff, principal TV analyst at Forrester Research. "They become the backend of everything."
But it’s far from clear that Microsoft’s hordes of cash will gain it the dominance that it seeks in TV set-top boxes. Despite investments of as much as $5 billion in such large cable operators as AT&T, Comcast and Canada’s Rogers Communications Inc. over the last three years, the company has enjoyed only limited success in pushing its Windows software into digital TV set-tops. If anything, such software rivals as AOL-backed Liberate Technologies have made far more advances in the interactive TV space in recent months.
"Microsoft does have oodles of capital," Bernoff says, "but money doesn’t buy everything."
At least not yet.
-Alan Breznick covers cable and technology from Washington.