Microsoft Poised to Rule Entertainment, Devices World: Part 2

By eweek  |  Posted 2007-05-03

Microsoft Poised to Rule Entertainment, Devices World: Part 2

LAS VEGAS—Robbie Bach, president of Microsofts Entertainment & Devices Division, spoke with eWEEK senior editor Darryl K. Taft at the Microsoft Mix conference here. This is Part 2 of the interview.

For the first part of this interview, click here.

I looked back at my notes from the Microsoft Financial Analyst Meeting last summer and you talked a lot about communities, especially around Zune, but also around other products. Can you expand on that?

Sure. Zune today probably isnt a great example in the sense that community is part of the process for Zune that we believe in, and we havent...really created the community environment. Now, thats something were obviously working on, and youre going to see a lot more of that from us. But today we have a store, we dont have a community, and thats something thats missing, and its part of why I dont think the product is complete yet, and something were going to continue to expand. And the people who have bought a Zune will get access to that community, too, so it will be a perfectly good environment for them.

More generally, we think about community as a place where people to go create their social network. And Ill be a psychologist for a moment here. I think the tensions and pressures of the world today, the pace with which we work, the pace with which things happen, the degree to which people move around, your social fabric just isnt very strong. Its not like you grew up in Appleton, Wisc., you went to school, you come back to Appleton, Wisc., you take your dads business there, and that was 30 years ago. That doesnt happen anymore. In that old world your community was the neighborhood you grew up with, its the friends you went to church with, its the kids of your parents friends.

In the new world your community is all over the country, and its your friend from high school who went to a different college, its the friend who moved away, its the person who my son plays on an AU basketball team with and has a bunch of friends who dont go to his school and dont live in his community.

And yet we have a strong desire to have community and to have social connections. So, what do we do? We use technology to create it. Thats what MySpace is about. Thats what Xbox Live is about. Its what the Zune social experience will be about. Its what creates that—thats what YouTube is about, although less so in their case, obviously. Most of the social experience happens actually in MySpace, with YouTube providing the vehicle to get the media back and forth. But youre going to see that continue to expand.

You use that social community actually as a marketing opportunity, because not only does this generation of people work harder to create their social community, theyre also perhaps the most cynical consumers weve ever had about advertising.

And the challenge that raises for the advertising agencies and the advertisers is your ad has to be more credible, more engaging, more real than ever before.

For me as a marketing person I say, yeah, thats true, but even more importantly what I have to do is Im not advertising to everybody necessarily, Im advertising to the influencers in your social network. Who are the people you look to for advice? Who are the people you look to for feedback? When a new movie comes out, what happens? Well, yeah, theres some advertising, but the first group of people that go to it come back and talk about it, they blog about it, they go to their space and say, Hey, did you see? They send a text message, and you watch what happens there, and instantly you know. And you know whether something is going to catch on or whether something is not going to catch on.

With that, what you were talking about, what kind of opportunities do you see for developers in that challenge?

Well, the premise Ill make today is I will say, hey, what Ray showed you yesterday was cool. Its going to give you a great set of tools. Youre going to be able to do amazing things. Thats exciting. Now, how are you going to get it to somebody? How are you going to distribute it? Who is going to know you did something cool? And how are they going to learn about it? And how do you use the same tools and concepts that you use to create this product or device or service or whatever it is to actually market and sell to your customers?

So, if Im a developer, on the one hand I say, gosh, I want to do cool work, and on the other hand I say I want other people to see my cool work.

Next Page: Can Microsoft be a consumer electronics company?


Does Microsoft have what it takes to operate a consumer electrics company? And how do you balance that with your traditional OEM strategy?

Well, I think the thing you have to do is you have to look at each product and category differently. From a balanced perspective there are categories where were not going to do devices. We dont do phones. We dont have plans to do phones. Because we dont think it fits for the category. And weve got great support from our operators and from the handset manufacturers.

There are other places like Zune where because of Apples success, and frankly because of the uneven experience we were able to deliver just by being the platform provider, we decided we had to do it ourselves. I have no desire to do hardware. I have a desire to produce a great end-to-end experience for consumers. If I can do that just with software and services, thats easier for me honestly. If I need to do hardware, I am building the expertise hands down to be able to do that when I have to.

Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate. It just taxes way more of anything you could possibly want to do. Zune technically speaking is dramatically easier. Almost any other device you could describe to me would be dramatically easier than producing what we did in Xbox.

And so by becoming experts at doing that, we are building core skill sets that we can leverage other places if we think the business requires it. But its not a hardware first model. We believe the experience has to be great, and then we decide which pieces of that we have to add value to based on the category.

You touched on this earlier, and it was something that I would ask a few people here. The thing that Ive always liked about Microsoft is the fact that you guys always wanted to win, compete hard, win, not at all costs so much but just win. But in your area there are so many areas that you have to compete in, how do you decide where to put the emphasis?

Well, the interesting thing is some places we have uphill battles, some places we have downhill battles. So...we picked four areas that we think are critical. We believe in connected entertainment. I believe people are going to want an entertainment experience thats always connected regardless of the device and the location theyre in. If I want to do that, Ive got to be great at video, Ive got to be great in music, Ive got to be great in games, and I have to be great at communications. Those are the building blocks. Without those things, if I dont have music, Im missing something. Apple, because they dont have games, is missing something, and they dont frankly really have video yet, and theyre just barely getting under the surface of communications. Theyve got music in spades, Ill absolutely submit to that.

So, the challenge for us is building scale in each of those spaces. Forget the competitive thing for a second. I dont actually think, hey, gosh, lets go into that category because there was a competitor that looks like theyll be tough to beat, and I like to compete. I actually think more of we have to be strong in video to do connected entertainment. OK, who does that mean I have to compete with? Frankly, in the video space right now its not exactly clear who, because that whole market is going through such dramatic change. The gaming space its quite clear who we have to compete with, in the phone space its quite clear who we have to compete with, in the music space its absolutely clear who we have to compete with. So were going to go do that.

And youre right, we are competitive. I like to think of myself as a nice guy. I hate losing. Losing sucks...Im not in the business to be kind of a nice second. We want to win. We want to do it the right way. We want to be a company people respect. But we do want to win. And we dont go into a category if we dont think we can win.

Click here to read Part 3 of the interview, including Bachs thoughts on the competition.

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