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For six years, the Internet Nexus served as my technology blog, but I've since started blogging at the SuperSite Blog instead. If you're looking for the blog, please head there. --Paul

Monday, October 18, 2004

Microsoft's Strategy: Be Apple

Ah yes. Another clueless analyst gets history wrong. Let's take a look at this car crash and explain why this lack of insightful "analysis" is oh so wrong.

Tuesday, Microsoft (Nasdaq: MSFT) announced a strategy of bringing digital entertainment to users in the home, at the office, or on the go.

Actually, on Tuesday, Microsoft shipped the third version of a product--Windows Media Center--that was first announced in January 2001, almost four years ago.

[Microsoft] also said it had rolled out the first official US release of its MSN Music Service as well as new music players compatible with its Windows Media Player 10. The list includes devices from Creative Technology (Nasdaq: CREAF), Samsung, and iRiver. Samsung also introduced [a Portable Media Center, the second to market: The first appeared in August], which is capable of taking recorded TV, music, videos, and the like on the road. You'll pardon my skepticism if we've heard much of this before. Like maybe from -- oh, I don't know -- Apple.

I'll have to ask for your pardon, actually, because I don't believe Apple has any products that record TV shows or let you take recorded TV shows, movies, music, and digital photos with you on the road using portable audio/media devices, notebooks, Tablet PCs, and PDAs; or throughout your home using set-top boxes and other devices.

Check out this write-up at the Apple website that outlines the company's strategy to make the Mac a "digital hub." Look closely and you'll notice that the story is from 2002.

Yep, it sure is. And, if you do a bit more research, you'll notice that Microsoft announced its own "digital hub" strategy before Apple did. Sigh.

Since then, Apple has rolled out a megahit in the iPod and bundled its various digital entertainment software into a suite called iLife that now includes a tool for budding composers called GarageBand.

Put another way, Apple has released a bunch of software applications that only run on the Mac, which has 1.7 percent market share. Now let's examine what Microsoft has done: Delivered on an industry ecosystem that includes several online music services (some with subscription content), several online video services (some with subscription content), hundreds of portable media and audio devices, several set-top boxes that play back content from those aforementioned audio and video services (including Media Center Extenders, the Xbox video game system, and Windows Media Connect-compatible devices), new versions of XP Media Center (a DVR solution with a 10' UI), a portable version of Windows Media Player 10 that runs on PDAs and smartphones, and numerous other technologies and products, many of which aren't PC-based but rather oriented around "your digital entertainment anywhere." In other words, where Apple has flash but precious little beyond a closed digital music solution, Microsoft has delivered complete end-to-end scenarios for digital music, video, photos, and recorded TV. It's no contest.

Microsoft clearly wants to be better than Apple at, well, being Apple.

This is the biggest lie (if the guy has a brain in his head) or misconception (if he's the boob I think he is): Microsoft is trying very hard not to be Apple. Again, instead of picking one limited scenario and ignoring everything else people want to do with digital photos, videos, and recorded TV, Microsoft is stepping up to the plate with the total end-to-end solution. Instead of offering consumers only a limited subset of what's possible (as Apple has done), Microsoft is going for the gold. It is decidedly an un-Apple-like strategy.

What's scary is that Mr. Softy has the resources to do it. Microsoft's 2004 research and development budget was $7.7 billion. Apple's was $489 million.

What's scary is that Mr. Beyers doesn't see that that's specifically why Microsoft can do what Apple can't. With its comparatively limited resources, Apple has to fcous only on specific markets where they can compete.

So. Now you're all pissed off and getting ready to fire off a nasty email. Don't bother. You're wrong. Instead of fighting over what should be obvious, let's examine what Apple can do to correct its limitations. Clearly, cash is an issue, so the company will need to partner with other companies to achieve this goal. My advice:

Partner with TiVo. Get an aluminum TiVo device for sale on the Apple Web site and load it up with Apple software that will interact with the iLife applications on the Mac. Make a version that works with Windows too, Steve. But wait a little while on that.

Partner with Sony. There should be aluminum versions of the PlayStation 2 and PlayStation 3, also for sale on the Apple Web site. They should also be loaded up with Apple software so you can playback digital photo slideshows from iPhoto on TV, accompanied by music from iTunes. Obviously.

Partner with Microsoft. There, I said it. Most consumers who have Macs also have PCs. Make the Mac the ultimate partner to PC-based multimedia, and make it (and iTunes) compatible with Microsoft's formats. You'll be giving Mac (and Apple) customers more choice. And just by entering the game, you can make sure those customers are using Apple products, not PC products. This one is so obvious--and will be so violently objected to by Mac fanatics--that I question the need to even mention it.

Partner with Palm. Make TiVo interoperate with portable devices in the same way that iTunes interoperates with iPod. It can be an iSync extension or similar application. Let people watch recorded TV shows on their PDA or smartphone.

Why is any or all of this possible? Despite the fact that Microsoft has the better (i.e. more complete) solution, Apple still has the coolness factor. That can only last so long if Apple sticks to its go-it-alone roots. If Apple is everywhere, they'll be that much harder to unseat.

OK, Apple, get busy. Believe it or not, I'd like to see you succeed.

[ Posted at 8:24 AM | Permalink ]