Could a "Microsoft TV" service succeed?

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By now you've probably seen the reports that Microsoft is considering some kind of "Microsoft TV" service (see ITWorld's coverage, or the original Reuters post). Details are pretty vague, but it seems like the Xbox 360 and Windows Phone 7 will be the target platforms and the potential service is at least 12 months away.

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So the big question everyone is asking, in the face of Google TV apparently struggling (I'm pretty sure at this point all the major networks are blocking Google TV and Sony cut the price of its Google TV-enabled Blu-ray player by $100, at least temporarily) is whether or not Microsoft can pull this off.

My answer is: it depends. The problem is that the report mentions two vastly difference services. One is as a 'virtual cable operator' where users would pay a subscription fee and get access to all the networks. I don't think Microsoft will be able to pull this off any more than Google has been able to. It's really hard to find a business model that pleases the networks and that will still be palatable to consumers. For whatever reason, consumers who pay for a subscription (other than to their cable company) don't expect to see ads. That isn't logical, but it's just the way things are. So could Microsoft charge $20-$25/month to deliver ad-free, current content? I doubt there's enough cash their to keep the networks happy. How about $50? At that point consumers are going to balk.

In order for a 'virtual cable operator' system to work, Microsoft would have to get every network on board so users could comfortably cancel their cable TV service. As long as a user needs cable to get that one station they want but can't get from Microsoft, then Microsoft TV is a supplementary service and needs to be priced as such. To do that means ads in the content, and that won't fly with consumers. I think the 'virtual cable operator' idea is doomed to fail. Google can't seem to pull it off (yet) and I don't see how Microsoft would have any better luck.

The other system being thrown around is an à la carte model. Microsoft already has its toe in these waters with the ESPN service it has on Xbox Live now and people seem to like it. If Microsoft could get HBO or Showtime (two examples given in the Reuters piece) on board then they could have some success, depending on price. HBO could be a real coup given how popular some HBO series are, and HBO seems determined to blaze it's own trail with HBO Go rather than allowing its content to be streamed on a service like Netflix. HBO Go needs hardware to succeed though, and the Xbox 360 could be a great fit. (In the meanwhile, CNET reports that HBO just partnered with AT&T to put HBO Go on AT&T's U-Verse service.)

In fact, it's hard to imagine Microsoft not continuing to expand its Xbox Live tv offerings. It addition to its Zune Marketplace, it has Netflix and ESPN now, with Hulu Plus coming early in 2011. These additional non-gaming services seem popular and help people keep engaged with Xbox Live (at a cost of $60/year, I might add). I'm not sure I'd call these à la carte offerings "Microsoft TV" but I do think they're inevitable and that they will succeed, assuming Microsoft gets the pricing right.

Agree? Disagree? Please leave a comment. I'd love to hear what you would or wouldn't pay for on your Xbox 360.

Peter Smith writes about personal technology for ITworld. Follow him on Twitter @pasmith.

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