How Microsoft lost its vision with WebTV
By Mike Yamamoto and Stephanie Miles
Staff Writers, CNET News.com
October 12, 2000, 4:00 a.m. PT
MOUNTAIN VIEW, Calif.--It was supposed to have been the crucible where the elusive goal of interactive television would finally become a reality, introducing the Information Age to the American living room.
But for all its promise, Microsoft's $425 million purchase of WebTV was anything but revolutionary. So unclear was the software company's direction that some speculate it bought WebTV simply to keep it out of the hands of the competition, a tactic alleged in technology markets ranging from Java to streaming.
Even outside the company, Microsoft's culture is cited as a key reason for the conspicuous lack of progress throughout the interactive TV industry. Former executives say the historical tension between the computer and TV industries was exacerbated by the company's perceived arrogance and cutthroat reputation in the three years since the WebTV purchase--an unexpected move that came as a seismic wake-up call to TV networks.
Whatever the reason, Microsoft has lost a clear lead in interactive
television, widely thought to be the Holy Grail of high technology's next generation. Companies from the communications, media, entertainment and consumer electronics industries are cooperating with and competing against computing stalwarts in positioning themselves for the day that two-way television becomes a mass-market staple.
A series of recent missteps have jeopardized contracts with players as large as AT&T, leaving Microsoft vulnerable to competitors as diverse as America Online's AOLTV, a challenger to WebTV, and Liberate Technologies, which makes software for interactive TV boxes.
Along the way, early WebTV crusaders have seen their idealistic mission reduced to a business clich?, losing its fire and identity to the rigid ways of a large corporation--and providing a cautionary tale for all new companies.
A case of remote control gone awry
The transition following Microsoft's purchase of WebTV was slowed by
problems ranging from corporate politics to needless delays in technology, according to former executives and others familiar with both companies.
For Apple refugees, a sense of d?j? vu
The infusion of Microsoft culture was particularly difficult for some of WebTV's early crusaders: Many came from Apple Computer, where they had fought bitter wars against the software empire, only to lose their idealism to Microsoft's agenda.
Microsoft TV: Not ready for prime time
The culture clash between Silicon Valley and Hollywood has been cited as a major obstacle to the marriage of the personal computer and the TV set. The issue is particularly familiar to Microsoft, whose track record in mass media is dubious at best.
Go to: A case of remote control gone awry
Microsoft's once-commanding position in the interactive TV market has suffered several setbacks in the past few months:
AOLTV is officially unveiled, the first head-to-head competitor WebTV has ever faced. Although reaction to the AOL set-top box is mixed, analysts say the online service and portal company is a potent threat to WebTV because of its brand recognition among consumers. AOL, which is using software from Microsoft rival Liberate Technologies, recruits many of WebTV's partners to its team, including Philips, DirecTV and Circuit City.
Microsoft reshuffles key management positions in the television group, essentially removing WebTV co-founder Phil Goldman from his role as head of the Microsoft TV group. Because of repeated delays completing and shipping Microsoft TV, sources say the technology group is now directly overseen by Microsoft executive Jon DeVaan.
Microsoft announces it is integrating components of Microsoft TV into Whistler, its next-generation operating system for the PC. The move is seen by analysts as a step back from digital set-top boxes as the primary method of providing interactive programming.
United Pan-Europe Communications, one of Europe's largest cable providers, agrees to use Liberate's software in its digital cable boxes. UPC says it looked to other software companies, including OpenTV, Excite@Home and PowerTV, after it became clear that Microsoft was moving too slowly. Microsoft has an 8 percent stake in UPC.
After taking $5 billion from Microsoft and agreeing to use Microsoft TV in its cable set-top boxes, AT&T shifts gears and announces that it will begin trials with Liberate software. Sources say AT&T, thought to be one of Microsoft's closest allies in the interactive TV market, was frustrated by repeated delays and missed deadlines.