Sharp's marketing strategy was typical of Internet TV manufacturers around the world. Spokesman Masaru Yamawaki explained "Users can easily operate an Internet TV with a remote control device. The Internet is just like one more channel on TV."
The Internet is not TV, nor is it suited to viewing on InternetTV-like devices. On the Internet, keyboards are not optional, and scrolling text does not mean that the show is over. Trying to read a technical article on a TV screen from across the room proves to be a maddening experience. Furthermore, families simply do not sit around surfing the web together. Fighting over the remote is bad enough without having to argue over which link to click.
Manufacturers have respond to such criticism by telling us that any day now hordes of webmasters will start creating content designed specifically for viewing on their devices. Unsurprisingly, it hasn't worked out that way.
So with all these technical and cultural problems, why is Microsoft offering $425 million to purchase WebTV? Because Microsoft has the resources to create its own content for these machines, and because Bill Gates understands the potential these set-top boxes represent.
Microsoft recently launched Seattle Sidewalk, an online guide to Seattle. It contains restaurant recommendations, movie and event listings, community information and classified advertising. By the end of this year there will be a dozen or so City Sidewalks opened for cities around the world.
An online city guide is not a new idea, there are already many such guides, and most are not profitable. Mircosoft's goal, however, is not to make a few dollars selling advertising. Gates is after a much bigger fish, and he needs to acquire WebTV to land it.
Computer users sneer at these inexpensive set-top boxes. WebTV is underpowered, unexpanadable, non-upgradable, and utterly inflexible. WebTV is also the future of the Internet. As far as the mass consumer market is concerned, WebTV will be the Internet's killer app.
The real market for these boxes is not those who want to see the Web on TV. The technology embodied in WebTV is belied by its name. These set-top boxes already contain the technology to act as home communication centers that would combine telephone services, Internet access, video broadcast, and news retrieval.
Imagine being able to turn on your TV and see the local movie listings; click on the title to see the trailer. Want to order a pizza during halftime? Perhaps check if anyone in your area has a sailboat for sale. And of course, the morning TV News will be tailored to your preferences and begin when you are ready to watch it. Rush-hour traffic reports will suggest alternative routes to the office.
The technology and infrastructure for such a system is already in place. It's just a matter of creating the content required to get a critical mass of consumers using WebTV's proprietary features. When that day comes, Microsoft will not only be providing content for this new media, but will control every aspect of the system on which it runs, and it will be in a position to take a percentage of every transaction that occurs over it. The classic Microsoft formula for success.
But we are getting ahead of ourselves. Let's return to the present where Microsoft is in no position to take on the world's media conglomerates. Today Microsoft is busy forging alliances with and assuaging the fears of traditional media companies.
At the annual Newspaper Association of America conference in Chicago, Bill Gates assured attendees that Microsoft has absolutely no intention of competing with newspapers. The Sidewalk projects would not being hiring journalists and would, in fact, complement print media.
Of course, Microsoft is already hiring journalists for its Sidewalk projects, and Sidewalk's basic business plan involves an assault on newspaper revenue mainstays like listings and classified advertising. So did this crowd of cynical, seasoned investigative journalists call Gates onto the carpet? No. They simply took him at his word.
Apparently, no one in the room remembered that in 1990 Gates was busy assuring then-partner IBM that MS Windows was in no way designed to compete with OS/2, and that the two products were, in fact, complementary.
As partial as I am to newspapers, I simply can't see them winning this battle. In fact I don't think they will even recognize that the battle occurred until long after they've lost. Most are only now realizing that the Internet is not a passing fad or a bastion of terrorism and child pornography.
In all likelihood, five years from now Microsoft will not only be one of the largest media companies in the world, but the majority of news delivered via the Internet, will be created, compiled, filtered, distributed and read using Microsoft products.
How Microsoft will stack up as a media company depends entirely on your point of view. If you consider a good media company to be one that maximizes shareholder returns, Microsoft will an outstanding media company. If you consider a good media company to be one that maintains notions of objectivity, truth and social responsibility, things look somewhat less rosy.
Last year, in true Orwellian style, Microsoft introduced a controversial clause in the licensing agreement for NT Workstation and then altered archived electronic documentation in an attempt to make it appear that the policy had been in place for years. In addition, the localization process of Microsoft's CD-ROM Encyclopedia, Encarta, involves not only translating the words, but rewriting history to make the product as salable as possible for each market.
Perhaps the most direct evidence of how Microsoft will conduct itself as a media company can be found in it's reporting of the Newspaper Association of America conference I mentioned above. A "transcript" of the conference is available at Microsoft's website, auspiciously for journalistic reference. However, all criticism of Microsoft seems to have been edited out, as were Michael Kinsley's derogatory remarks about the newspaper industry as a whole.
There is no question that these actions are completely legal, show great marketing savvy and work to increase profit. Whether they are the actions of a company that can be trusted to bring you the news is another matter entirely.
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