1st Party vs. 3rd Party... or What's Wrong with Media Center

[Jeremy Charette]

Microsoft's recent announcement about upcoming Media Center Extenders got me thinking. The way to sell a product is to create a brand. Generate consumer awareness. Engineer a product that is interesting, different, and satisfies customer needs. Hit a price point which encourages mass adoption. Apple has done this brilliantly with the iPod and the iTunes Music Store. They have worldwide brand and product recognition, staggering sales, and have dominated the portable media player market. They don't license the hardware or the content portal, but do make a nice buck with the "Made for iPod" licensing program.

Microsoft tried to compete with iTMS by creating "PlaysForSure". They licensed it to a variety of hardware vendors and content providers. The user experience was mixed at best, brand awareness was abysmal, and ultimately it was a market failure. If you want something done right, do it yourself. Finally somebody at Microsoft "got it", and they launched the Zune. First party player, first party content portal. While it hasn't set the market ablaze, they've sold over a million players, and gained far more brand recognition and market share than PlaysForSure ever did.

With the release of these new Media Center Extenders, I have to wonder when someone in Home and Entertainment will "get it". The folks in the Xbox division do. You won't find a licensed 3rd party Xbox console for sale, and licensing for games and accessories is tightly controlled. Microsoft Game Studios produces industry leading games in house, and provides extensive support to third party developers. They have their own content portal, Xbox Live Marketplace. The Xbox brand has global awareness.

What Microsoft needs to stop doing is licensing Windows Media and Media Center to 3rd parties. They need to own the property. They need to create massive brand awareness. They need to get the word out that the Xbox 360 is not JUST a game console, but also a fantastic way to get a world of entertainment into your living room.

If the market dictates it, produce a less expensive FIRST party extender device, at half the price of the 360 or less. Hit a $149, or $199 price point. Or take the hit on the hardware, sell it for $99, and make up the loss through a Microsoft controlled content portal ala iTMS, accessible directly through the extender interface. Integrate the Zune brand into the fold, allowing content to pass from PC to 360 to Zune seamlessly.

Licensing is not the way to gain market share. Thought leadership is. Fragmentation does not drive sales, but total integration will.

[Jeremy Charette]

Microsoft's recent announcement about upcoming Media Center Extenders got me thinking. The way to sell a product is to create a brand. Generate consumer awareness. Engineer a product that is interesting, different, and satisfies customer needs. Hit a price point which encourages mass adoption. Apple has done this brilliantly with the iPod and the iTunes Music Store. They have worldwide brand and product recognition, staggering sales, and have dominated the portable media player market. They don't license the hardware or the content portal, but do make a nice buck with the "Made for iPod" licensing program.

Microsoft tried to compete with iTMS by creating "PlaysForSure". They licensed it to a variety of hardware vendors and content providers. The user experience was mixed at best, brand awareness was abysmal, and ultimately it was a market failure. If you want something done right, do it yourself. Finally somebody at Microsoft "got it", and they launched the Zune. First party player, first party content portal. While it hasn't set the market ablaze, they've sold over a million players, and gained far more brand recognition and market share than PlaysForSure ever did.

With the release of these new Media Center Extenders, I have to wonder when someone in Home and Entertainment will "get it". The folks in the Xbox division do. You won't find a licensed 3rd party Xbox console for sale, and licensing for games and accessories is tightly controlled. Microsoft Game Studios produces industry leading games in house, and provides extensive support to third party developers. They have their own content portal, Xbox Live Marketplace. The Xbox brand has global awareness.

What Microsoft needs to stop doing is licensing Windows Media and Media Center to 3rd parties. They need to own the property. They need to create massive brand awareness. They need to get the word out that the Xbox 360 is not JUST a game console, but also a fantastic way to get a world of entertainment into your living room.

If the market dictates it, produce a less expensive FIRST party extender device, at half the price of the 360 or less. Hit a $149, or $199 price point. Or take the hit on the hardware, sell it for $99, and make up the loss through a Microsoft controlled content portal ala iTMS, accessible directly through the extender interface. Integrate the Zune brand into the fold, allowing content to pass from PC to 360 to Zune seamlessly.

Licensing is not the way to gain market share. Thought leadership is. Fragmentation does not drive sales, but total integration will.

[Jason Dunn]

Great post Jeremy - you hit the nail on the head. Media Extenders have been largely a failure because they're too expensive, too sluggish, and generally deliver a poor experience. My original Xbox as a Media Extender? Great. The Xbox 360 as a Media Extender? Even better!

[possmann]

Exactly... but I would like to add that when they do this - get it right from the get-go (unlike Zune not playing with Vista for sometime - ugh). Make the claim and back it up. I don't see a whole lot of other people rushing out to market with these either - which could be a mixed blessing if you think about it...
I love the XBOX360 adapter - works like a charm - I just wish I had more abaility to customize controls within it...

[alese]

I don't think it's that "simple".
Yes Apple has success with iPods and iTunes and yes Microsoft is reasonably sucessfull with xBox, but there are two things to also consider.
One is Microsoft's history. The whole company was built on the model where Microsoft provided platform (DOS, Windows...) for others to use and implement. I'm sure Microsoft wouldn't be as dominating if they would "lock" their platform to only their hardware.
The other thing is choice - all Apple can offer to a customer are iPods and iTunes, but what if you want something different or something more, or for that matter if you can't use iTunes because it's not availabe in your country... Zune is even "worse" in that regard, beeing availabe only in USA.
So going with platform approach and multiple partners has it's merrits. Maybe it's not as profitable (especially at the begining), but it has far more reach if done right (Windows and Windows Mobile...)
Of course there are problems, you depend on partners to deliver their part and in case of Plays for Sure they didn't, maybe in Media Center/Extenders case that ultimatelly won't be the case.