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Old 10-02-2007, 07:00 PM
Jeremy Charette
Editor Emeritus
Join Date: Dec 2004
Posts: 1,049
Default 1st Party vs. 3rd Party... or What's Wrong with Media Center

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.
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