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Microsoft Decides TV Is No Longer King

On Friday, Microsoft disclosed that it had dumped all its Comcast stock by the end of 2008. It's most likely a signal that Microsoft has finally given up on the whole set-top-box idea, started more than a decade ago when the company made its initial $1 billion investment in Comcast and also bought WebTV. The investment in both probably seemed like a good idea at the time, since there were plenty of opinions that the TV might be at the center of the Internet revolution. But it didn't turn out that way.

Surely you remember WebTV. The company was purchased by Microsoft in 1997. It offered a way to access the Internet through a dial-up connection (and later through broadband), using either a wireless keyboard or a remote control. Its $300-$400 price wasn't a bargain by today's standards -- remember, the display was a TV that wasn't included in the price. The product is still around, but only as a shadow of its former self. Microsoft still owns the WebTV domain, but now it's billed as MSN TV.

The WebTV idea became increasingly irrelevant in a world of low-cost notebooks and netbooks. My whole family likes to multitask; it's not unusual for us to all be using notebooks at the same time we are watching TV. I can write a blog entry, IM with friends, or even read content that's related to the show I'm watching at the same time the TV is playing.

Microsoft built an even more ambitious box called UltimateTV that was supposed to be a "TiVo killer." UltimateTV still survives as well, but only as a set-top box that's available through DirectTV. In the meantime, DirectTV announced last year that a new HD TiVo is on its way in 2009. TiVo may still die, but it won't be because Microsoft killed them. (I have two TiVo HD boxes and love them, though.)

Part of the reasoning behind the Comcast investment was that Microsoft wanted leverage to get their own software into set-top boxes that Comcast would deploy. With set-top boxes seeming a lot less strategic, there also isn't a lot of strategic value left in Comcast for Microsoft. If anything, the future of entertainment seems like it's in the Internet IPTV and mobile devices. If users want to view content on their TV sets, Microsoft can still deliver it with platforms like Windows Media Center and XBox that are much more in tune with the company's strengths.

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