New Microsoft Group Targets Content Providers

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Microsoft's newly formed entertainment and technology group will court content providers as the company ramps up its home entertainment strategy, industry observers say.

"The group's mission is to get digital audio and video content flowing," said Rob Helm, analyst with Directions on Microsoft, of Microsoft's Media/Entertainment and Technology Convergence Group. Microsoft announced the new entity on Monday.

"Microsoft believes long-term, it can bump up PC sales by getting people to use PCs to manage digital audio and video in the home," Helm said. "The problem is getting content users like Blair Westlake's former employer to trust the PC as a platform. Because now it's a platform for stealing digital and audio via peer-to-peer networks."

Helm was referring to Blair Westlake, former chairman of the Universal Television and Networks Group. Westlake will head the new group.

The hiring of Westlake, a major TV industry executive, signals the importance of Microsoft's move.

"By bringing him on board, if they [Microsoft] can cultivate alliances with entertainment companies, in theory they could develop joint ventures through which Microsoft ends up owning a piece of the revenue pie," said Todd Chanko, an analyst specializing in digital TV for Jupiter Research, owned by the parent of this company.

The move will also exploit Westlake's global and international connections. "This group will develop cross-business partnerships between global media and consumer electronics companies and Microsoft and drive Microsoft's contribution to world-wide industry standards and technical and IP public policy," said Jodie Cadieux, communications manager for the new Microsoft group.

"Microsoft is determined to make sure that Windows plays a necessary role in the creation, protection and consumption of digital content," said Joe Wilcox, analyst with Jupiter Research, in a blog entry Monday. "The company's longstanding intellectual property policies and approach to theft, aka piracy, are assets when talking to content owners."

"Remember that Microsoft is rapidly ramping up its home entertainment strategy at multiple points," Wilcox said. He was referring to a variety of Microsoft products including TV Foundation, for content coming through the cable box, and Windows Media Center Extender, for making content available throughout the home, among others.

"They're really looking at a digital home," confirmed Charlene Li, principal analyst for Forrester Research. "It's a smart move. You need coordination between all the different areas of Microsoft to make it happen," Li said.

The new group comes on the heels of the formation of Advanced Access Content System License Administrator (AACS LA), a cross-industry effort that develops, promotes and licenses technology designed to enhance digital entertainment experiences. The consortium of Hollywood studios and music companies includes IBM, Intel Corporation, Microsoft, Panasonic (Matsushita Electric), Sony, Toshiba, The Walt Disney Company, and Warner Bros. Studios.