Spotlight on Television 2.0 Leaders: Microsoft Corporation
Emerging Media Dynamics, November 2006, Pages: 33
For three decades Microsoft has been a software juggernaut, dominating the PC operating system and office productivity markets, commanding the attention, envy and fear of Wall Street, Washington and Silicon Valley. Now, the Redmond-based titan is grappling with the challenges posed by the rapid rise of Internet-based rivals. As it copes with these new business realities Microsoft is spearheading developments in the TV 2.0 world in some surprising and truly innovative ways.
The most intriguing development is Microsoft's use of its broadband-enabled Xbox 360 gaming device and its Xbox Live web-based service to deliver TV shows and movies directly to the TV set, bypassing the traditional route of cable system and telco video distribution. Although Microsoft just launched the sale of video services via Xbox, it's already clear that this is a groundbreaking development that promises to position the company as a key player in the IP video realm.
The latest and final report in the Spotlight on Television 2.0 Leaders series delivers unique and early insight into just how much revenue Microsoft can expect to generate with its new Xbox-based video services, and how rapidly this business might grow. According to our preliminary analysis, the combined revenue from the sale of both TV shows and movies via Xbox Live could reach $92.25 million in 2007, growing each year through 2011, when the aggregate revenue from the sale of both types of content could top $726 million.
As impressive as that may seem to be, the total revenue generated from the sale of video via Xbox live could nonetheless still be an insignificant portion of Microsoft’s overall revenues. For example, if video sale revenue reaches $726.50 million in 2007, that amount represents only 1.6% of the total $44.2 billion that Microsoft generated in Fiscal Year 2006.
This unique and data-rich report, which features six tables and eleven charts, also provides concise and accurate summaries of Microsoft's full lines of businesses and detailed financial performance histories of the company's varied divisions. More importantly, this Spotlight report delivers a complete run-down on all of Microsoft's video and TV-related businesses, including:
- MSNBC, the joint linear video channel that spawned one of the top-ranked and increasingly video-intensive news sites on the Internet, MSNBC.com.
- Interactive TV Software Products, including Microsoft's platform for cable operators, Foundation Edition, and its more promising but still troubled platform for telcos, IPTV Edition.
- MSN Portal, which is coming back to life as Microsoft attempts to mount a user-generated video service to take on Google's YouTube; and
- Xbox Gaming Console, the hot device that is serving as a video distribution "Trojan horse" that few expected could turn into a major TV programming pipeline.
Don't be out of the loop on all the TV 2.0 developments at one of the most important companies in the tech world, and, indeed, one of the most important companies in the world. Download a table of contents or order right now. We'll send a PDF version of the report to you right away.
Introduction and Executive Summary 1
I. Brief History of Microsoft 3
II. Overview of Microsoft’s Businesses and Financial Performance 6
A. Overall Revenue and Profitability 7
B. Relative Contribution of Divisions 9
C. Client Division 10
D. Server and Tools 11
E. Information Worker 12
F. Business Solutions 13
G. MSN 14
H. Mobile and Embedded Devices 15
I. Home and Entertainment Division 16
III. Microsoft’s TV 2.0 Efforts 17
A. MSNBC 18
B. Interactive TV Software Platforms 19
C. Windows Media 22
D. Windows XP Media Center Edition 23
E. MSN 24
F. Xbox 360 25
IV. Financial Implications of Microsoft’s TV 2.0 Initiatives 28
About the Author 32
About Emerging Media Dynamics 33
List of Tables
Table 1 – Microsoft Business Divisions and Products 6
Table 2 – Selected Microsoft Cable Investments 19
Table 3 – Companies Deploying/Testing Microsoft Interactive TV Software 21
Table 4 – Multimedia Player Market Shares, 2003 -2006 22
Table 5 – Xbox Live Video Pricing Grid 27
Table 6 – Model: Sale of Video Programming via Xbox Live in the U.S., 2006 to 2011 30
List of Figures
Figure 1 – Microsoft Annual Revenue and Net Income, FY 86 to FY 06 7
Figure 2 – Annual Increase in Microsoft Revenue, FY 86 to FY 06 8
Figure 3 – Annual Increase in Microsoft Net Income, FY 86 to FY 06 8
Figure 4 – Breakdown of Microsoft’s FY 2006 Revenue 9
Figure 5 – Microsoft’s Client Division Revenue and Operating Income, FY 04 to FY 06 10
Figure 6 – Microsoft’s Server and Tools Division, FY 2004 to FY 2006 11
Figure 7 – Microsoft’s Information Worker Division, FY 2004 to FY 2006 12
Figure 8 – Microsoft’s Business Solutions Division, FY 2004 to FY 2006 13
Figure 9 – Microsoft’s MSN Division FY 2004 to FY 2006 14
Figure 10 – Microsoft’s Mobile and Devices Division, FY 2006 to FY 2008 15
Figure 11 – Microsoft’s Home & Entertainment Division, FY 2004 to FY 2006 16
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