Microsoft shadows the Disney deal
The tech giant stands to win from a Comcast takeover, but it's eyeing a bigger prize: home-media convergence.
By Chris Cobbs | Sentinel Staff Writer
Posted February 22, 2004
The world's richest and most powerful technology company looms over the effort by Comcast Corp. to buy Walt Disney Co., as the software gurus at Microsoft Corp. ponder a possible new flavor of Windows to control the future of home entertainment and information.
Microsoft's Bill Gates, with an estimated $6 billion stake in Comcast, is using his ringside seat at the takeover attempt to look for new business opportunities as the digital worlds of computers and television come ever closer to merging in American homes.
On the content side of the equation, Microsoft is working on Disney and other companies in the hope they will use its software to guard against piracy and to make their programming more readily available to those who want it.
While Microsoft is big enough to take over either Comcast or Disney if it chose to do so, it is probably not interested in controlling Disney's entertainment assets or Comcast's distribution system, technology analysts and others say.
Instead, Microsoft wants to create lucrative new software for coming generations of home entertainment and information, and having a stake in a combined Comcast-Disney could strengthen and amplify its influence over the media industry as a whole, they say.
Even if the merger doesn't take place, they add, Microsoft doesn't stand to lose because its vision goes beyond mere companies to embrace the entire realm of digital home entertainment and information.
Whether information is carried into the home by Comcast, another cable provider or even a competing technology from a telephone company or satellite-based service, Microsoft hopes its software will be the glue linking televisions, computers, music players, video recorders and a host of other devices, analysts said.
In the interconnected digital world that is just a few years off, all of these gadgets would communicate with each other using hardware still under development.
Whatever hardware emerges -- whether it's a smarter version of today's TV set-top box or another product -- Microsoft wants the fingers manipulating the remotes in the nation's dens and bedrooms to be using its software.
"They are working hard to make sure Microsoft software is the control center of the digital home," said John Borland, staff writer for CNET, a Web news site that specializes in technology coverage.
"The vision is of ubiquitous access to digital movies, video and music, all in a Microsoft format on machines using Microsoft operating systems."
Microsoft would not comment for this story, but analysts and others familiar with its strategy provided insights into the software giant's vision.
It starts with today's clear separation of televisions and computers.
Both can be fed content, like news, sports, movies and music, through high-speed fiber-optic lines that connect either to the TV's set-top box or the PC's cable modem.
A few years from now, however, technology will enable televisions, computers and a host of other gadgets -- DVD recorders, cell phones, PDAs, music players and the like -- to easily share programming over in-home networks, wired or wireless.
And Microsoft, which has been working for years on software for the new digital home, plans to be the 800-pound gorilla in that market, just as it is in the world of computers.
"This is a business opportunity that just might be as big as Windows," said Allen Weiner, analyst for Gartner Inc., a Stamford, Conn., technology-research firm, alluding to the operating-system software used by the vast majority of the world's hundreds of millions of PCs. "Microsoft is always looking for a new cash cow."
Microsoft already has a version of Windows, called Media Center PC, that lets a home computer function as a digital hub, incorporating television and the Internet in one system.
Connected to the outside world by a digital cable-TV service, the system allows the user to view and record TV fare while also having access to the World Wide Web and standard computer programs.
The Media Center PC concept provides a gauge of what Microsoft has in mind for the future.
"We are looking at a blending of digital-entertainment devices through next-generation technology," said Greg Ireland, senior analyst for consumer markets for Interactive Data Corp., a Bedford, Mass., tech-research firm.
"Ultimately, Microsoft wants to create a standard way for everything to be interoperable through its software," he said. "The big step is distributing content, like movies, TV and music, anywhere in the house."
It's not clear yet if the digital nerve center will be a device like today's set-top boxes, used by millions of cable-TV customers, or some new gadget that's more like a computer.
But it's of little concern to Microsoft if content is piped into people's homes via cable-modem technology or the alternative, known as DSL, provided by telephone companies such as BellSouth Corp. and Verizon Communications.
Cable controls about two-thirds of the broadband market, but DSL is gaining, analysts say. For example, Comcast's growth in the final quarter of 2003 slowed compared with the previous quarter, while telecom firm SBC Communications showed a gain in subscribers compared with the third quarter.
Microsoft, in fact, is hedging its bets with a strategy of developing software both for set-top boxes -- hooked to cable-TV or DSL wires -- and for computers with TV-like capabilities.
Microsoft is also working with the microchip makers and other companies developing interactive television and on-demand video, which let a customer order a movie or program and watch it at a convenient time, said Bill Gilliam, vice president of broadband Internet services for Bright House Networks, Central Florida's largest cable-TV operator.
"TV and home entertainment are the next frontier for Microsoft," he said. "They are looking for another platform to extend Windows, and this is the growth frontier."
With its huge stake in Comcast, Microsoft enjoys access to the future strategy of the nation's largest cable-TV provider. And if Comcast acquires Disney, Microsoft would be a sizable shareholder in the merged company.
Comcast now relies on software vendor Gemstar for the interactive program guide used by its cable audience. But Microsoft has begun testing next-generation software for possible use by customers of Comcast and, potentially, other cable operators, said Jeff Matsuura, director of the University of Dayton law and technology program.
"Bill Gates now has a great opportunity to learn what Comcast customers want," Matsuura said.
"Microsoft is also learning about the universe of products and services for the digital home. I believe Gates feels it's as productive right now to be learning as to be actually influencing the cable world. He's learning a ton about where the cable world is going."
Information from wire services was used in this report. Chris Cobbs can be reached at ccobbs@orlandosentinel.com or 407-420-5447.
Copyright © 2004, Orlando Sentinel
http://www.orlandosentinel.com/busi...2,1,2299657.story?coll=orl-business-headlines
The tech giant stands to win from a Comcast takeover, but it's eyeing a bigger prize: home-media convergence.
By Chris Cobbs | Sentinel Staff Writer
Posted February 22, 2004
The world's richest and most powerful technology company looms over the effort by Comcast Corp. to buy Walt Disney Co., as the software gurus at Microsoft Corp. ponder a possible new flavor of Windows to control the future of home entertainment and information.
Microsoft's Bill Gates, with an estimated $6 billion stake in Comcast, is using his ringside seat at the takeover attempt to look for new business opportunities as the digital worlds of computers and television come ever closer to merging in American homes.
On the content side of the equation, Microsoft is working on Disney and other companies in the hope they will use its software to guard against piracy and to make their programming more readily available to those who want it.
While Microsoft is big enough to take over either Comcast or Disney if it chose to do so, it is probably not interested in controlling Disney's entertainment assets or Comcast's distribution system, technology analysts and others say.
Instead, Microsoft wants to create lucrative new software for coming generations of home entertainment and information, and having a stake in a combined Comcast-Disney could strengthen and amplify its influence over the media industry as a whole, they say.
Even if the merger doesn't take place, they add, Microsoft doesn't stand to lose because its vision goes beyond mere companies to embrace the entire realm of digital home entertainment and information.
Whether information is carried into the home by Comcast, another cable provider or even a competing technology from a telephone company or satellite-based service, Microsoft hopes its software will be the glue linking televisions, computers, music players, video recorders and a host of other devices, analysts said.
In the interconnected digital world that is just a few years off, all of these gadgets would communicate with each other using hardware still under development.
Whatever hardware emerges -- whether it's a smarter version of today's TV set-top box or another product -- Microsoft wants the fingers manipulating the remotes in the nation's dens and bedrooms to be using its software.
"They are working hard to make sure Microsoft software is the control center of the digital home," said John Borland, staff writer for CNET, a Web news site that specializes in technology coverage.
"The vision is of ubiquitous access to digital movies, video and music, all in a Microsoft format on machines using Microsoft operating systems."
Microsoft would not comment for this story, but analysts and others familiar with its strategy provided insights into the software giant's vision.
It starts with today's clear separation of televisions and computers.
Both can be fed content, like news, sports, movies and music, through high-speed fiber-optic lines that connect either to the TV's set-top box or the PC's cable modem.
A few years from now, however, technology will enable televisions, computers and a host of other gadgets -- DVD recorders, cell phones, PDAs, music players and the like -- to easily share programming over in-home networks, wired or wireless.
And Microsoft, which has been working for years on software for the new digital home, plans to be the 800-pound gorilla in that market, just as it is in the world of computers.
"This is a business opportunity that just might be as big as Windows," said Allen Weiner, analyst for Gartner Inc., a Stamford, Conn., technology-research firm, alluding to the operating-system software used by the vast majority of the world's hundreds of millions of PCs. "Microsoft is always looking for a new cash cow."
Microsoft already has a version of Windows, called Media Center PC, that lets a home computer function as a digital hub, incorporating television and the Internet in one system.
Connected to the outside world by a digital cable-TV service, the system allows the user to view and record TV fare while also having access to the World Wide Web and standard computer programs.
The Media Center PC concept provides a gauge of what Microsoft has in mind for the future.
"We are looking at a blending of digital-entertainment devices through next-generation technology," said Greg Ireland, senior analyst for consumer markets for Interactive Data Corp., a Bedford, Mass., tech-research firm.
"Ultimately, Microsoft wants to create a standard way for everything to be interoperable through its software," he said. "The big step is distributing content, like movies, TV and music, anywhere in the house."
It's not clear yet if the digital nerve center will be a device like today's set-top boxes, used by millions of cable-TV customers, or some new gadget that's more like a computer.
But it's of little concern to Microsoft if content is piped into people's homes via cable-modem technology or the alternative, known as DSL, provided by telephone companies such as BellSouth Corp. and Verizon Communications.
Cable controls about two-thirds of the broadband market, but DSL is gaining, analysts say. For example, Comcast's growth in the final quarter of 2003 slowed compared with the previous quarter, while telecom firm SBC Communications showed a gain in subscribers compared with the third quarter.
Microsoft, in fact, is hedging its bets with a strategy of developing software both for set-top boxes -- hooked to cable-TV or DSL wires -- and for computers with TV-like capabilities.
Microsoft is also working with the microchip makers and other companies developing interactive television and on-demand video, which let a customer order a movie or program and watch it at a convenient time, said Bill Gilliam, vice president of broadband Internet services for Bright House Networks, Central Florida's largest cable-TV operator.
"TV and home entertainment are the next frontier for Microsoft," he said. "They are looking for another platform to extend Windows, and this is the growth frontier."
With its huge stake in Comcast, Microsoft enjoys access to the future strategy of the nation's largest cable-TV provider. And if Comcast acquires Disney, Microsoft would be a sizable shareholder in the merged company.
Comcast now relies on software vendor Gemstar for the interactive program guide used by its cable audience. But Microsoft has begun testing next-generation software for possible use by customers of Comcast and, potentially, other cable operators, said Jeff Matsuura, director of the University of Dayton law and technology program.
"Bill Gates now has a great opportunity to learn what Comcast customers want," Matsuura said.
"Microsoft is also learning about the universe of products and services for the digital home. I believe Gates feels it's as productive right now to be learning as to be actually influencing the cable world. He's learning a ton about where the cable world is going."
Information from wire services was used in this report. Chris Cobbs can be reached at ccobbs@orlandosentinel.com or 407-420-5447.
Copyright © 2004, Orlando Sentinel
http://www.orlandosentinel.com/busi...2,1,2299657.story?coll=orl-business-headlines