Microsoft drops Ultimate TV project

By
EE Times
(01/24/02, 02:28:16 PM EDT)

SAN MATEO, Calif. Microsoft Corp. may be one of the early victims of the consolidation of the satellite TV business in the United States.

Signs of the contracting market intensified with the disclosure last summer by EchoStar Communications Corp. (Littleton, Colo.) that it plans to acquire Hughes Electronics Corp.'s DirecTV satellite TV business. Instead of retaining the Microsoft-designed DirecTV system, however, EchoStar will use an entertainment system designed by Moxi Digital Inc. (Palo Alto, Calif.).

Although careful not to mention the EchoStar-Hughes deal, Microsoft said Wednesday (Jan. 23) that it will dismantle its Ultimate TV group. The team comprised 420 employees who designed software, hardware and services for DirecTV's high-end satellite set-tops.

Earlier this month at the Consumer Electronics Show in Las Vegas, EchoStar announced its partnership with Moxi, a startup founded by WebTV co-founder Steve Perlman. EchoStar has embraced the Linux-based, all-in-one home entertainment media center developed by Moxi.

In a cable or satellite business where service providers rather than systems OEMs control technology decisions, Microsoft may soon find it tougher to pit its proprietary platform against open set-top solutions that use standards-based software and hardware.

Ultimate TV was one of Microsoft's many attempts to infiltrate the living room with a Microsoft-based TV platform. The system, which the company pioneered a few years ago, is integrated with a satellite decoder, hard-disk drive for digital video recording and has Web surfing capabilities.

The Moxi Media Center developed by Moxi combines the features of an advanced digital cable or satellite receiver and a personal video recorder, CD/DVD player, music jukebox, Internet gateway digital subscriber line or cable modem and home media server in one package.

While downplaying the breakup of the Ultimate TV group, Ed Graczyk, director of marketing at Microsoft's TV division, acknowledged that any big merger plans such as the one between EchoStar and DirecTV will have a huge impact on Microsoft.

EchoStar, which may soon become the only satellite provider in the United States, will this year deploy the Moxi software platform on its mainstream satellite receivers, according to the company. "We've been working with EchoStar over the last 18 months on hardware and software definitions," said Moxi's Perlman. EchoStar is also an investor in Moxi.

Rethink on resources

As EchoStar bets big on Moxi rather than on Microsoft, the software giant has been forced to streamline its digital set-top-related operations. Further, Microsoft needs to rethink how best its engineering resources can fulfill the company's dream of becoming a dominant technology player in the consumer TV/living room space.

Although Microsoft's Graczyk insisted that Ultimate TV products are not going away, those who designed the core software, hardware and services will no longer fill that role nor work together to help steer next-generation Ultimate TV development. Such an engineering task, if necessary, will be taken care of by system OEMs such as Thomson Multimedia and Sony Corp. the two consumer electronics companies who manufactured the Ultimate TV products, rather than Microsoft, Graczyk said.

Previously, Microsoft touted the Ultimate TV project as a showcase of the company's advanced interactive TV expertise.

Of the 420 people in the Ultimate TV group, "two-thirds will be redeployed, while one-third of the positions will be eliminated," Graczyk said. As far as redeployment is concerned, those who worked on chip designs and hardware engineering for set-top boxes at the Ultimate TV group will be subsumed into Microsoft's Xbox division the only other consumer hardware-engineering group within Microsoft.

Rationalizing the elimination of the Ultimate TV hardware-engineering team, Graczyk noted, "As more and more chip companies like STMicroelectronics and Broadcom are making great chips, Microsoft no longer needs to do the work in-house."

Those who worked on the Ultimate TV service team will be absorbed into the MSN group. Meanwhile, the Ultimate TV group's software-engineering team "will be working with us at Microsoft's TV division," whose main focus is the development of Microsoft's TV platform, according to Graczyk.

Microsoft has had some design wins for its TV platform, including a deal with TV Cabo, a cable operator in Portugal. It also recently announced an agreement with Charter Communications Inc. to deploy Microsoft TV software in one million digital set-top boxes over the next seven years in the United States.

Still, Microsoft has failed to achieve significant success, in terms of actual deployment, in either the domestic or the international digital TV markets.

Asked about the readiness of Microsoft's TV division to offer software products based on such emerging standards for software as Europe's Multimedia Home Platform (MHP) or the United States' OpenCable Application Platform, Graczyk said, "None of our customers network operators are demanding either MHP or OpenCable-compliant solutions today." He added, however, "But of course, when the need arises, we will be developing the standards-compliant products, as we've always promised."