Is this article really saying that giant Microsoft is actively copying little old 5% Apple in order to be more successful? :)
IT is always fun to watch the giants at play and speculate, dare I say gossip, about them. This is a good article on one of those giants, Microsoft, and changes within their organization. It points out Microsoft's historical view of the world as a platform rather than a product and points out the Xbox division's increasing influence.
What the article does not mention:
Why did Microsoft agree to pay the music companies a fee for every Zune sold?
While the amount paid is still unclear, many feel this is a lousy precedent. One amusing conspracy theory is that Microsoft did it just so that Apple would also have to do it when their contract is up, thus financially sabotaging them. Much more likely I think is that the record companies demanded Microsoft pay them so they did. It's only money after all (which they have) and they needed a deal.
How different is it to compete with a company that effectively has infinite money?
Are success and failure relative terms that get defined and re-defined within each company culture? Probably so.
If you combine the loses of the first Xbox and the investment in the 360, the Xbox division is reportedly billions of dollars in the red. (Since these are internal divisions of Microsoft, it is hard to determine the exact amounts from the shareholder reports.) This is the kind of money that would put most other companies and all startups out of business but within Microsoft-world, the Xbox is unanimously hailed as a success. It is amazing how different things can look depending on where you stand.
Big companies have a notoriously hard time creating successful spinoffs and I think a big part of this is the transition of big company-think to startup-think. When you have unlimited money and a big bureaucracy, it is hard to think or act like a startup - people just react differently when they have a safety net. Not to mention the fact that in most company cultures, the bigger you get the more politics takes precedent over product.
One the other hand, Microsoft is famous for "version 3.0". Since they have the money to keep at it as long as they want to, it often takes them 2 or 3 versions before they hit the sweet spot and success.
Why doesnt the Zune work with Windows Media Player or their existing Plays4Sure music program?
Critics have mocked the Zune/Microsoft for these short-comings. While WMP is free, the Plays4Sure situation is especially galling to those consumers that bought into Microsoft's previous "latest and greatest" platform.
My hunch is that this is no conspiracy; it is just another example of big company realities. Zune is part of the Xbox division so it lives and works in an Xbox world - those other products are the built by other divisions and are effectively out of sight/mind. Or more probably, the Zune guys wanted them to work but were unable to get the organization to make it so due to political or bureaucratic reasons. Such is life in the big company.
Can you really succeed at selling the platform and the product at the same time?
There is an interesting quote here that Microsoft can have its cake and eat it too. I wonder.
After a brief foray with Apple clones, Apple has conspicuously gone it alone. They provide such a great user experience precisely because they control the user experience. Apple does not license the NanoOS or MacOS to third parties who then compete with Apple making PC's or iPods.
Some of the confusion with the Zune and Microsoft's embedded OS (which began long before the iPod as incorrectly implied in this article), is that Microsoft wants to do just that. For instance, they want Creative to push players on a Microsoft platform at the same time Microsoft builds their own players. Maybe it will work...
Closing
All in all this is a good summary article and we consumers will get to see the results in 2007.
The Xbox 360 is a solid product, much improved over the original Xbox. The 360 has great networking features (although you have to extra pay for them) and will probably be a great platform for selling downloaded movies (movies fit nicely with the game-playing audience). I think their main problem continues to be reaching out beyond their core customer base of 15-25 year old guys - the people who know what a "frag" or a "gib" is.
Apple on the other hand has an amazingly broad base with their iPod products which puts them in a good position to get more MacOS switchers as well as iTV customers. Assuming they can maintain their level of quality and focus on the customer.
All in all, I agree that "connected entertainment" is a great idea and one that will become increasingly realized. However there are a million decisions to be made in creating that reality so time will tell how long it takes for someone to build products that we consumers really want/like. There have been a lot of critics of Microsoft's attempts in this area so far but their infinite wallet means that they will be in the game as long as they want to.
Microsoft's Xbox Whiz Drives Strategic Shift
Bach Pushes Hardware Tied to Online Services; Cellphone Battle Looms
January 5, 2007
Wall Street Journal
Robbie Bach is the Microsoft Corp. executive who challenged Bill Gates's dogma by pushing the software company into making videogame machines. Now he's putting his stamp on Microsoft far beyond its game business.
For decades, Microsoft's business strategy centered on making its software a universal platform for other companies' products. Everything from cellphones to big server computers could run Windows. Microsoft would leave the risky business of making hardware to others.
Mr. Bach, 45 years old, bucked that model to make the Xbox. The videogame machine has all the traits Microsoft used to shun: It's manufactured by the company, its function is narrow and it doesn't use Windows. It was also a success, and helped Mr. Bach win a promotion as one of Microsoft's three co-presidents, in charge of pushing the company deeper into consumer electronics and managing its relationship with Hollywood.
...
He also says one of his goals is "to redevelop and reform our culture" at the 7,000-person Entertainment and Devices Division. He has brought in senior managers from Sony Pictures Entertainment and Sega Corp. as well as promoting internally. "We have in our division a lot of what I call 'old school' Microsoft folks," he says.
Years ago, Mr. Gates started directing Microsoft's moves into the consumer market. Typically, Microsoft followed the approach that was so successful in personal computers: build the basic operating-system software and license it to hardware makers. The strategy left the risk of manufacturing to others. Microsoft also encouraged other companies to build software that worked on top of its operating system.
In PCs, the result was a virtuous cycle of new software pushing new PC sales, which in turn encouraged more new software to be developed. The PC turned into a great general-purpose tool, running spreadsheets, games and everything in between. Microsoft, whose software runs on most PCs, was the biggest beneficiary.
As software became a big component of consumer electronics such as cellphones and TV sets, Microsoft originally assumed its model would continue to apply. It would make the software at the heart of the machine, and other companies would do the rest, including supplying the services that tie the package together.
...
By 2005 Apple seized a commanding market share in digital music players and Microsoft was struggling in the area. The company had followed its traditional approach, with its Windows group licensing music-player software to a multitude of companies. These companies fielded dozens of music players, none of which worked well with an equally broad array of online music services.
At a retreat in March 2005, Microsoft executives reviewed Apple's music strategy and heard Mr. Bach and his team explain their similar, Apple-like approach for the Xbox 360. Within weeks, Mr. Ballmer assigned Mr. Bach to devise a new strategy for music as well. Soon Mr. Allard and Bryan Lee, another Bach lieutenant, wrote a six-page paper calling for Microsoft to build an "end-to-end" music player, code-named Argo.
Mr. Gates asked Mr. Bach's team to explore whether Microsoft could design an easy-to-use device like the iPod but still license the design to multiple makers. "Can you have your cake and eat it too?" Mr. Bach says of the exchange. "Technically, it turns out it's hard." The team reached a compromise: follow both models.
