Apple vs Microsoft in the Living Room

MCMThursday, November 9, 2006

The Street.com has a piece this morning about Microsoft's quality victory over Apple, which I was hoping someone would cover to some degree. It answers some of the questions I have about the service, but there are still others I think will better-decide the victor in this living room war.

First, price. Microsoft having lotsa shows and lotsa movies will only turn into lotsa users if the price is reasonable. Call me crazy, but I already think $1.99 for an episode of Lost is a bit much... I can't imagine the studios are going to sell HD quality episodes months before the DVDs for anything close to $1.99. They don't seem to be the types to willingly create a good value proposition for their customers. And if an episode (HD or not) of Lost sells for $2.99 or $3.99, would YOU buy it? I could go to the video store and rent a brand-new two hour movie for that. And since Apple's now selling standard low-def TV resolutions for the same $1.99, I don't know that the quality difference will seem big enough to convert users, if the price is too high.

Second, DRM. This one is pure speculation, but I'd say there's a decent chance that Microsoft will wrap their content with special license terms to make it harder to watch what you download. The Apple model has (thus far) been a short leash that keeps your music and video tied to your computer and your iPod. Logic suggests it'd extend to the iTV as well, which means you can continue to buy movies on the iTunes Store and watch half on your iPod and half on your TV. Microsoft has a bad reputation of bowing too much to the studios' demands in this space, which could mean you will be able to watch your $1.99 version of Lost only 3 times, and then have to pay more to keep it. Or watch it on your XBox and nothing else. Having the studios onboard for movies makes me think they've got some DRM ace up their sleeves which will make the suits happy, but make the end-user cringe.

All this is not to say that Microsoft will sputter and die in this battle, and it's not to say Apple will win. But I think basing the outcome on XBox penetration or quality-of-video is missing a big part of the puzzle... the user experience. But where Apple can't afford to ship these iTVs with a flimsy service, Microsoft can afford to bomb with theirs, because people won't really be buying XBoxes to watch downloaded TV anyway.

If anyone has any info on pricing or DRM on this Microsoft idea, please let me know.

Update: From MacNN, about the Zune. See, Microsoft makes deals with labels and studios that I would suggest don't always make good strategic sense, especially insofar as their customers are concerned. Universal doesn't deserve a chunk of Zune sales unless they stick something on the Zune. It's like saying Yamaha deserves profit participation in album sales because the artists use their keyboards. Anyone who willingly makes this kind of deal is probably not going to make a good video download service.

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