By eweek  |  Posted 2007-05-03 Print this article Print

Ultimately, I think it has a lot to do with audience segmentation. For the people who are hard-core gamers or the people who are hard-core entertainment enthusiasts, I think a high percentage of them will want it, partly just because it has the right acronyms, so it has HDMI [high-definition multimedia interface]. If that is a big thing in the end or not, people want it. Partly because those people tend to be very hard-disk intensive, they want to store a lot of things there, they download a lot of TV shows, they save a lot of games, so theyre going to want the extra hard disk space. And partly because those enthusiasts like the black color. So, I think in that enthusiast audience youre going to see … very strong demand. Then the question is, in the broader audience, … at that price point how much uptake do we get, and I think at the price points were at now, I think that will be modest. I think the sweet spot is going to be the pro SKU—the $399 SKU—and then the real price-sensitive people, and frankly outside the U.S. a little bit more, the core SKU will continue to be a reasonable percentage of our business.
And youre going to see that evolve over time. At some point the price point of the 120GB version gets down low enough that even somebody whos just a casual buyer is going to say, "Hey, for whatever the extra is Ill buy it," but were certainly not there now. Its like asking at $500 how many people are going to buy an iPhone. It may be a good product, but at $500, its going to appeal to Apple enthusiasts. And theyll sell to that group, and that will be fine, theyll probably do fine from a business perspective. Its going to be a small percentage of the total phone sales. Just mathematically thats true. Its not a knock on the product, its just—
And I was actually going to ask you about it. Yeah, the answer would have been its an interesting product, we think the phone space needs lots of different phone designs, and at $500 their audience will be a certain set of people who were not even really trying to target. Is Verizons FIOS based on Microsoft IPTV? Sort of. So, their FIOS system was originally based on a combination of our IPTV system and our Foundation Edition system. Their FIOS TV system is a hybrid between a pure IPTV implementation and a cable implementation. And so they took software from us both from our cable infrastructure and from our IPTV infrastructure, and we merged that into one product, which the first, I dont know, 300,000 or 400,000 of their subscribers are actually on. Weve since evolved that relationship where were just doing a pure technology provision to them going forward, and theyre actually carrying the service themselves. Because its such a unique service, its hard for us to scale to that specificity for them, where in the IPTV space the basic infrastructure of what AT&T, British Telecom, Deutsche Telekom, Swisscom are using is all the same. The FIOS system is really specific. So, for us its a little bit of a better model. They wanted to do more of the development themselves. So, going forward, it will be their own technology based on some intellectual property that we provide. Check out eWEEK.coms for Microsoft and Windows news, views and analysis.


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