Q&A: Providing a Richer Television Experience for Consumers

LOS ANGELES, Dec. 15, 1999 — At this week’s Western Cable Show conference, Microsoft made several announcements that demonstrate momentum for the Microsoft TV platform. In a special roundtable discussion with PressPass, Microsoft senior vice president Jon DeVaan, platforms group general manager Phil Goldman and WebTV Networks president Bruce Leak explain Microsoft’s vision for the TV platform and how it fits within the broader scope of Microsoft’s strategy in the TV space.

PressPass: How will television change within the next 5 to 10 years?

Goldman: TV in the next century is going to be very different from TV today. When you think about it, there have actually been very few advances in television since it’s advent decades ago. There’s been the change to color television, which was very nice, although TV also worked reasonably well in black and white. Other changes have been the remote control, and the fact that people have a little bit more choice these days. But we see the biggest changes to the TV experience coming in the next several years with the introduction of incredibly compelling, enhanced television services. And it won’t necessarily be that people are impressed with the “whiz-bang” nature of new TV. When they look back on that quaint old 20th century television, they’re going to laugh at how we put up with what we put up with today, just as we laugh when we hear about people watching rickety, old cabinet TVs that had to be fine tuned.

Leak: Yes, people are going to be astounded that
“way back in the 20th century”
you actually changed the channel, and you didn’t know what was on. Or that you passively watched TV, and there were no options for you to interact with TV programs. Or that you were limited only to broadcast information, and you didn’t have access to the Internet. Or that you could only watch shows when they were being aired, instead of when you wanted to watch them. Once we can do these things, that’s going to really change the way people use their TV.

PressPass: Changes like these have been predicted for years. What makes the timing right now?

Leak: The timing is right for a number of reasons. One factor is that television is changing from analog delivery to digital delivery. That’s very liberating because it makes it possible to provide more channels with better quality. And most importantly it provides the ability to deliver data along with the video. TV watchers are also ready. They want to interact with their favorite shows. People have been talking back to their favorite shows for a long time. Now they can interact with them by chatting, playing along or voting.

Goldman: Another big change is that TV operators around the world have realized that with these new technologies come great revenue opportunities. Combine that with the amazing growth in the Internet and network operator’s growing experience and expertise with the Web and you have operators who are very motivated in ways they weren’t before to adopt some of these new technologies and make money off of them.

DeVaan: The timing is also right because of improvements in bandwidth and especially in computing power. Moore’s Law has brought us to the point where we can bring that revolution not just to the personal computer, but also to the TV. Another factor is that governments around the world recognize the value of progress in this area, and many, including the U.S. government, are being proactive in helping to move over to new forms of television.

PressPass: What are some of the ways consumers will use their TV in the future that they commonly don’t do today?

Goldman: Fundamentally, you will still use your TV set to watch TV, but it will be a lot better now than it was before. Right now, we see the enhanced capabilities that TV will provide falling into three main buckets. The first one is Internet TV, having the Internet well integrated with the TV experience. For example, we think people are going to want to watch a TV show at one point, and look at the Web site for that TV show at another point. Or they’ll want to chat with their friends while they’re watching TV. Internet access will be a baseline capability, and many of the other enhancements that provide viewers with information will be leveraged off of this component.

Leak: Another category of Enhanced TV is interactive programming, which is simply extra information broadcast along with the video you’re watching that allows you to interact with what you see on screen at the same time you’re watching TV. Whether you’re watching a game show and playing along at home, or watching an ad for a music video and you want to see the lyrics — all of these things are very easy to do with interactive programming. Interactive programming is already happening today. If you have a receiver on your TV, you can already pick up over 350 hours of interactive programming in the US every week, and eventually many network operators are going to provide it to consumers.

DeVaan: The third category is Personal TV, which includes digital video recording or DVR. That’s the ability to do things like pause a live TV program and record programs to a hard disk instead of a video tape. The fact that it’s in a digital format gives you a lot of flexibility about how to play back the video. You can do things like create your own instant replay because you can instantly jump back 10 or 20 seconds. You can also pause your TV to take a phone call. Personal TV also includes things like setting up channels tailored to your own tastes and rich electronic program guides that serve as your starting point for television viewing. When people see these capabilities, they’re very excited by them.

PressPass: What are the components of the Microsoft TV platform and how will they benefit their respective audiences?

DeVaan: The Microsoft TV platform is an entirely new effort by Microsoft, and it includes two major pieces. The first is the client software, called Microsoft TV, which is an adaptation of Windows CE. Microsoft TV is the software that runs on an advanced digital set-top box, and makes it possible to watch Internet on TV and interact with TV programs. It also serves as the basis for all kinds of applications. For example, our network operator partners will be writing applications that run on top of the client software to make their service very compelling for consumers. So the value of Microsoft TV will be huge.

Goldman: The second main piece is Microsoft TV Server. TV Server is built on top of Windows 2000 and draws from our experience operating a large-scale commercial service at WebTV. It builds upon many of the clever techniques we’ve developed for managing operations, scalability and the robustness of a server. We’re able to package that all on top of Windows 2000 and deliver that as a software platform for network operators who want to provide their own services for TV. Either they have an existing service for PCs and they want to augment that with a TV service, or they’re starting from scratch and need a complete solution. We run the gamut. We can help them build a complete solution, and we also integrate well with systems they may already have, such as billing.

Leak: In addition to the platform components, Microsoft also offers a family of some of the most popular Internet services that network operators can use to add further capabilities to their enhanced TV offering. Whether they’re interested in offering email, online communities, or vertical services in areas such as personal finance or travel, network operators can draw on the capabilities we have in our MSN services and incorporate them into a total enhanced TV service instead of having to develop and manage all of these capabilities in-house.

PressPass: What’s the difference between the Microsoft TV platform and WebTV?

DeVaan: Microsoft TV is a software platform that we want to license broadly to consumer electronics hardware manufacturers and network operators so that we can help make TV all that it can be. WebTV, on the other hand, offers enhanced TV services and digital technologies that combine Internet TV, interactive TV and personalized TV service directly to consumers. We provide the service to our own subscribers and work with original equipment manufacturers to create devices that support WebTV. So one’s the broad platform that enables enhanced TV services and the other is the television-service that actually delivers enhanced TV services.

PressPass: How do the WebTV service and the Microsoft TV platform fit in with Microsoft’s overall strategy for television?

Leak: Our vision for the TV space is to make television more useful, fun and engaging for consumers. Our overarching strategy is to make enhanced TV successful, and the Microsoft TV platform and WebTV are coming at this goal in two different, but complementary, ways. WebTV is a complete offering for the consumer. Consumers can buy a box made by Sony, Philips, Thompson, Echostar or any other WebTV partner, and get complete service. The Microsoft TV platform is really intended for the network operator, or the original equipment manufacturer who’s going to work with the network operator. We’re working with them as partners and they’re delivering their own service to the consumer.

Goldman: The Microsoft TV platform and WebTV service allow us to offer both breadth and depth. The partnerships we develop with the TV platform allow us to hit the breadth of opportunities around the world. At the same time, WebTV is focused on providing a deep and complete solution. These two avenues allow us to promote Internet access, interactive programming and personalized TV in two different ways. And between the depth and the breadth, we’ve got a great way of approaching enhanced TV.

PressPass: What have been the big wins so far for the Microsoft TV platform and WebTV service?

Goldman: I think the big win for WebTV is offering the complete enhanced TV experience while others only offer “Internet on your TV” or digital video recording. WebTV has it all. It also has a large number of subscribers who are very faithful to WebTV, the majority of whom use it every single day. The great news for the Microsoft TV platform is that we’re off to a tremendous start. Customers like AT & T in the US, United Pan Communications in Europe and Rogers Cable in Canada are motivated to adopt the platform now, with more network operators coming soon. When we got started, we were worried that network operators were going to be overly conservative and not ready to commit. But they are committing right now, and it’s very gratifying to see.

Leak: The other big success has been our ability to leverage existing technology and combine it with new technology to create a great solution. And the proof of this great combination is the fact that we have over 100 original equipment manufacturers and independent hardware vendors that are actively developing for the TV platform. That wouldn’t have been possible unless we came up with a leveraged technology and infrastructure solution to support that so quickly. What’s interesting is that this is really just the beginning. The real action happens in 2000. That’s why the Western Show is so timely. It’s a chance to tell everyone about the breakout year that we’ve set up for ourselves.

PressPass: What kinds of partners is Microsoft working with to promote its TV platform?

Goldman: We have a variety of partners we’re working with that represent all sides of the industry. We’re thrilled to be working with AT & T, and we continue to make more progress together, moving toward deployment in 2000. We’re also working with a company called United Pan Communications (UPC), one of the largest and fastest growing cable companies in Europe. We think the Microsoft TV platform is a great match over there, and we’re excited about working with a great partner like UPC.

Leak: We’ve also announced with Rogers Cable, the largest cable company in Canada, that we’re going to be partnering together using the Microsoft TV platform, as well as many of the MSN services designed for TV. Rogers is another valuable partner for us, and we like the fact that they’re being very aggressive about their desire to get enhanced TV to their subscribers.

DeVaan: And we’re also working with a number of original equipment manufacturers like Thompson, Philips and Sony. Just about everyone who’s in the business of making set-top boxes has announced support for the Microsoft TV platform. We’ve also developed partnerships with interactive programming partners through the Advanced Television Enhancement Forum or ATVEF as well as a number of third-party content developers and independent hardware vendors. Content and application developers are working on features like TV chat and DVD technology, which really helps move the business forward. So it’s a very vibrant ecology. It’s an honest to goodness platform effort where everyone’s working together, and everyone’s set up to add value in a place where they really truly add value.

PressPass: Why are standards important to the future of the television industry, and what is Microsoft done to support standards in this space?

DeVaan: Without standards, people don’t know what to do. And if you let the technologies get fragmented, no single technology gets enough critical mass, and you actually defeat instead of build the market. Microsoft has been very active in standards in the TV space. The Advanced Television Enhancement Forum is a standard for the content format and how you insert it into the video stream. As that standard builds momentum — and you’re already seeing it with the large amount of interactive advertising and programming that’s available now — it allows the market for these advanced services to come to fruition.

Goldman: We’re a very big proponent of open standards. Different companies have proposed and implemented interactive programming in a variety of ways, and almost all of them have been proprietary. Broadcasters have told us that these closed solutions will not work for them; they will not rally behind a proprietary or a limited solution. So we were one of the founding members of the Advanced Television Enhancement Forum (ATVEF), which has more than 100 members and founders at this point. The open message has been very successful, and we feel we’ve been a leader there. We’ve been a leader in promoting ATVEF and in pulling together the disparate groups.

PressPass: How will the expanded ATVEF consortium that Microsoft is announcing at the Western Cable Show help to promote standards?

DeVaan: What you’re seeing with this announcement is the next level of support of ATVEF as a standard and the incredible momentum it has achieved in a short time. As the number of members grows, we increase the ability to drive that standard inside the industry. This announcement shows we’ve achieved the next step in broad industry acceptance.

PressPass: How do Microsoft’s announcements at the Western Cable Show fit within the company’s overall TV platform strategy?

DeVaan: The announcements we’re making at the Western Show demonstrate the significant momentum behind the Microsoft TV platform and the success of our strategy to partner with the leaders in the industry to make enhanced TV a reality. This is the show where people see that Microsoft TV is real and has broad support.

Leak: We’re announcing some new partners that show the momentum we’re building for our TV platform — and how much original equipment manufacturers, independent hardware vendors and even independent software developers believe in this platform. We have so many partners ready to demo so many exciting advances using the Microsoft TV platform at the Western Show, that we really don’t have enough space for all of them. That’s a wonderful problem to have.

Goldman: We’re also announcing that Excite@Home will be providing value-added applications and operating a service for enhanced set-top boxes on cable based on the Microsoft TV platform. This is a natural because it plays to both of our strengths. We’ll be actively engaging network operators on this combined offering for deployments, which could start as early as next year. We’re very excited about that, and we think this announcement clarifies for the entire industry that not only can we work together, but that we are working together with Excite@Home.

PressPass: For years, Microsoft has articulated its intent to be a good partner in the cable industry. How has Microsoft delivered on that promise?

DeVaan: Honestly, I think some network operators have been skeptical that Microsoft can be a good partner for them. And my point of view is that we have to prove it every day in our dealings with our partners. Are we delivering on our commitments? Are we really creating the opportunities that create a mutually-beneficial situation? I think we are, and I think announcements of new contracts and commitments from network operators are the proof that we’re doing that. Every day we’re going in and working to make enhanced TV a reality, and our partners in the cable industry are realizing that we’re a great solution for them.

Goldman: We feel strongly that we’re in a position to be a leader in enhanced TV, including the software that powers the enhanced TV experience for cable. And we feel a responsibility as a leader there, not just to compete with other people who are pushing hard, but also to help build this market in general. We can always compete, but right now the main focus has to be on helping to build the market. We know that the interest is there from end users. So we need to be a good partner and help these network operators by whatever means we can to bring successful deployments of enhanced TV to their customers.

Leak: I think the very notion of a platform makes us a good partner. We’re not trying to do everything. We are trying to take the piece where we add the most value, in the place where it’s most difficult for our partners to deliver and innovate. And we’re generating a lot of interest throughout the industry through events like the AT & T co-sponsored developers’ meeting at the Western Show. We’re being very active in helping ATVEF be successful, and we’re working to help jump start the companies that can really make a difference and move enhanced TV forward.

PressPass: What are Microsoft’s future goals for the TV platform?

DeVaan: Our main goal is to enable network operators to deploy the TV platform, accelerating the time to market for enhanced TV offerings. There will be showcases with our key partners in 2000 — a breakout year for the platform. That’s an immediate goal. Beyond that, we want to enable a lot of creativity in the set-top box space so people can bring interesting new functions to the TV. The TV platform is just garnering its acceptance and showing its success, and that’s the first step. Once we have an established TV platform, we can expand it to do more things that provide more opportunities for our partners. Our overall television strategy is really to provide great value in software so that we broaden enjoyment opportunities for consumers and bring more business opportunities to our partners.

Goldman: It’s important to note that we’re really just at the beginning. In 2000, we’re going to focus on a few opportunities that prove that this whole thing we call enhanced TV can work on a large scale. We have a great solution, and we’re going to do everything possible to work with all parties to make 2000 a huge year for enhanced TV.

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