updated 07:50 am EDT, Mon August 31, 2009
MS on TV and iTunes Moment
The TV industry needs to find a convincing online strategy or else risk handing the market over to Apple, Microsoft's UK managing director of consumer business Ashley Highfield warned this weekend. Speaking at an international TV industry festival in Edinburgh, the executive warned that TV could "face its iTunes moment" in two to three years and hand over control of online video to Apple. Without a quick shift in emphasis to TV on the web instead of traditional service, customers are predicted to flock to paid download services and bypass regular providers altogether.
Solving the problem will likely involve pushing targeted ads, bought through an auction-based system. Although it wouldn't fit the conventional TV model of buying ads based on the overall likely audience, it would boost the worth of ads to where advertisers would have more incentive to pay for TV shows online than on old, declining services like cable or satellite.
These changes should take about two to three years themselves, according to Highfield.
The warning is a reference to Apple's seeming control of the digital music business. In 2003, Apple took advantage of music labels desperate to provide a viable alternative to online piracy and obtained terms that were favorable to its own iPod sales, offering songs at a fixed, relatively low 99 cents per track. While the move jumpstarted the digital music market and gave portable media players real acceptance, it led to Apple controlling 69 percent of US digital music and Universal Music Group chief Doug Morris infamously describing his label as being in "golden handcuffs" as it's often beholden to Apple for success.
Highfield's statement is also an unusual concession of the digital video market for Microsoft, as it makes no mention of the company's own TV efforts. The company offers TV shows both through the Xbox Video Marketplace as well as the Zune Marketplace in the US. The two are expected to integrate soon, but neither have gained large traction compared to iTunes or to alternative business models like Netflix.