Microsoft loves competition. The more the better,
especially in emerging categories.
Despite lawsuits to the contrary, the Redmond giant thrives
in a competitive market -- or the guise of one. The best scenario is when the Redmond
giant has to face off against a fragmented gaggle of small and mid-sized companies,
desperately seeking customers. Microsoft becomes one huge mouse against a bunch of scrawny
amoebae. It has the brand name and strength that the tiny competitors lack.
This strategy worked in the desktop software business, it
worked for enterprise accounts -- and now Microsoft expects it will work in the
interactive TV realm.
No one understands Microsoft's love of a fragmented market
better than long-time rival Oracle, which has competed with Microsoft in enterprise
software for years. And the lesson has been learned by Liberate Technologies Inc., which
had its roots (as Network Computer Inc.) within Oracle's "emerald city," as the
headquarters is known.
That's why Liberate is on an acquisition juggernaut. It has
been probing and poking among the start-up interactive TV companies to gauge their
interest in teaming up (i.e. being bought out) to create an interactive TV juggernaut
capable of battling Microsoft TV.
So long as ICTV, Interactive Channel, MoreCom, OpenTV,
PowerTV, Wink, WorldGate and a handful of other interactive-TV hopefuls are picking off a
project here and a test site there, Microsoft remains the dominant interactive-TV vendor
-- even if it only has a couple of small test sites under its own belt.
Of course, Microsoft wears a money belt, enabling it to buy
a big role in interactive-TV projects. It also retains the option of buying out promising
competitors, although that strategy seems less likely while the Justice Department's
antitrust case is pending.
Although executives of the target companies decline to
discuss the offers being made to them, Liberate's chief strategist acknowledges that the
company is on a buy-up binge, armed with its freshly minted currency -- stock from last
year's initial public offering.
If any such roll-up actually occurs, even if it involves
only a few of the current interactive-TV venturers, Liberate would be able to confront the
cable industry as a much stronger, larger -- and, arguably, more viable -- competitor.
MSOs (even ones on which Microsoft has showered funding)
might consider using the Liberate interactive-TV platform. For now, they can easily
postpone interactive-TV decisions altogether, as they endlessly ponder the proposals from
a half-dozen small suppliers.
Looming over the entire interactive-TV decision-making
process is the specter of AOL TV, due to debut in the next few months. America Online is
one of Liberate's investors, along with General Instrument, Lucent, MediaOne, Rogers
Communications, Nintendo, Sony and Sun Microsystems.
Sun, of course, is another veteran Microsoft antagonist and
current AOL ally. It's gruesome to imagine a brainstorming session (not that any such
collusion ever occurred) in which Sun, AOL and Oracle egged Liberate to buy out the small
competitors and launch a mega-attack against Microsoft on the killing fields of cable.
The intricate interconnected holdings and letters of intent
between interactive-TV hopefuls is already creating a very muddy field, of course. Among
the most intriguing deals unveiled at last month's Western Show were the ones from
Excite@Home, which crafted almost identical alliances with both Microsoft TV and Liberate.
Excite@Home plans to work with both companies "to
co-develop applications and services optimized" for enhanced and interactive
television. It's nice to see Excite@Home become an arms merchant in the battle ahead,
bringing with it a client list of its current MSO partners and investors.
Although Microsoft unveiled its latest -- and much improved
-- TV-platform technology at the Western Show, many experts still believe Liberate's
platform holds a slight edge in quality and performance. Microsoft, however, has an
overwhelming lead in content -- notably, its alliance with dozens of programmers though
its WebTV and software-development pacts.
For its part, Liberate has been recruiting middleware and
content/service providers to deliver services bundled into its package. Its newly launched
"PopTV Program" is recruiting content and technology partners to accelerate the
creation of interactive-TV offerings. Excite@Home is among the first members of this PopTV
Only a few content partners were showcased at Liberate's
Los Angeles convention booth, and most didn't have the brand-name recognition of
Microsoft's content brood. Nonetheless, Liberate's lineup did include attractive and
These small, start-up suppliers -- many of which are also
developing for the other interactive platforms -- might appreciate a consolidation among
interactive-TV packagers. They wouldn't have to split their own limited resources so much
if there were a bigger sure thing to ride.
Indeed, Microsoft's content allies -- many of which are
hedging their own bets by exploring relationships with other interactive-TV-platform
suppliers -- would appreciate the reduction, too.
Acquiring smaller interactive TV companies won't
necessarily bring Liberate a content cornucopia, but it will strengthen its pitch that it
can deliver a competitive interactive-TV service. The immediate challenge is convincing
the fiercely independent and competitive entrepreneurs who are now seeking places in the
But there are bigger issues. How could -- or would --
Liberate integrate those ventures if it can get its hands on them? And when will Microsoft
-- with its unending money belt -- begin buying up these competitors to prevent Liberate
from picking them up or to get them out of the way?
Whatever the answer to those questions, the major
imponderable remains: Even if the interactive-TV business consolidates, what will it take
to make MSOs realize that it's time for them to make decisions about deploying interactive
I-Way Patrol columnist Gary Arlen feels like rolling up to
take a nap until the buying binge actually begins.