MSN TV Now Part of Microsoft Subscription Software Division

REDMOND, Wash., May 6, 2003 — The MSN TV service offers the Internet experience via the most common consumer electronics device in the home — the TV. Formerly known as Web TV, the MSN TV division was recently re-aligned within MSN with the Subscription Software Division (SSD). PressPass spoke with John Nicol, General Manager of the MSN TV and MSN IA (Internet access) groups within SSD, about the MSN TV team.

John Nicol, General Manager, MSN TV and MSN IA. Click on the image for a high resolution photo

PressPass: The MSN TV division was recently re-aligned within the Subscription Software Division. Can you explain the move?

Nicol: The mission of the SSD is to build and deliver subscription services that make users more productive in their daily lives. The Internet-access business within SSD aims to deliver our suite of services to users. This move was a natural fit in that MSN IA delivers the set of MSN services to subscribers on PCs, and MSN TV delivers the suite of services on their TVs.

PressPass: How is MSN TV performing?

Nicol: MSN TV is a successful niche business for Microsoft. Last fiscal year, our revenues were in the nine-figure range and returned a healthy profit to the bottom line. We also contribute over 1 million users to the MSN family.

And we feel there is still a great opportunity to grow this business. Our research tells us that there are over 30 million technology newcomers in the United States who do not have MSN TV. As a pioneer and market leader in this space, we feel we are well positioned to continue growing in this segment of the market, a segment that is truly unique for Microsoft.

PressPass: What are the main challenges that MSN TV faces right now?

Nicol: The early years of MSN TV had high expectations for the adoption of our product and service. PC prices were high, Internet access levels were low and our product was seen to have mass appeal. Over time the market dynamics changed. The price of PC’s dramatically decreased and the ability to gain Internet access became generally prevalent. As these market conditions changed, so did our expectations for MSN TV adoption. Today, we realize that our product and service appeals to a sub-segment of the population. This sub-segment is what we call the
“technology newcomer”
audience. Within this audience MSN TV has been very successful in acquiring new customers and creating a solid business model. Our main challenge moving forward is to evolve the technology and continue to penetrate the technology newcomer audience segment in ways that will result in subscriber base growth while returning profit to Microsoft.

PressPass: You’ve referred to the

technology newcomer

a couple times now. Can you tell us a little bit more about this group?

Nicol: We define technology newcomers as people who have not used a PC or do not have access to the Internet. We have identified two main reasons why this group has avoided PCs and the Internet. First, newcomers consider themselves beginners when it comes to technology, and therefore many of them find a PC too daunting in terms of set up and ease of use. Secondly, there is a definite affordability factor. Even though the price of PC’s has come down dramatically in the past years it is still a large purchase for many people. These factors are why MSN TV has been successful. Our users purchase our hardware for US$99 and can get set up and be on the Internet in 10 minutes — from the comfort of their couch. Overall, it is a great customer experience for our subscribers, reflected in our most recent customer satisfaction level of 88 percent.

PressPass: Can you explain Microsoft’s efforts to develop software and services for the television?Nicol: We have three efforts.

First, MSN TV (formerly WebTV) provides easy-to-use and affordable Internet access for the technology newcomer market. The MSN TV service is available on MSN TV branded set-top boxes that connect to a TV. MSN TV users pay a monthly fee to access the Internet via the MSN TV service. MSN TV is sold directly to the consumer.

Our second TV effort, UltimateTV , is also sold directly to consumers. It is a service that provides DVR (digital video recording) functionality and capabilities to subscribers. The current deployment of UltimateTV is on a DirecTV satellite receiver box. Users of UltimateTV pay a monthly fee to use this service

Third, Microsoft TV , a part of the Microsoft Home and Entertainment organization, is focused on developing and delivering a digital-TV software platform for cable and other network operators to offer enhanced digital-TV services to their subscribers. Microsoft TV’s customers are cable and satellite operators around the world.

PressPass: MSN TV has recently announced two service upgrades: a new software update delivered to subscribers MSN TV devices, and an upgrade of the technology architecture of the MSN TV Centers. Can you explain this change?Nicol: MSN TV is MSN’s offering on the television, and as such it is critical that we offer a consistent MSN experience from the PC to the TV. Due to our proprietary hardware architecture, it has been challenging for us to integrate MSN features and functionality. Only through the hard work of our teams in Silicon Valley and Redmond have we been successful. Moving forward this integration will become easier due to our recent technology enhancements.

This week we’re announcing a software update that has been delivered at no additional charge to MSN TV Service subscribers. This software update will provide our subscribers with enhancements and improved online functionality including greater access to Web sites, new protocols for MSN Chat and MSN Messenger, and added security for secure online transactions.

Also, in February we launched a new back-end platform designed to speed delivery of MSN TV content, leveraging .NET technology and the latest XML standards. The new platform also allows pages in five MSN TV centers — News, Sports, Money, Entertainment and Around Town information centers — to load up to 48 percent faster than they did previously, which is great for our customers.

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