Extremely Poor Numbers Posted for MCE 2005

“The prior incarnations of Media Center sold about 1 million copies, Gates said, adding that this version should prop that up by a factor of four or five.

“We are moving media center into the mainstream,” Gates said.

Will Poole, senior vice president of Microsoft’s Windows Client business, said now is the time for that move. “We look at all of those things and we say the market is hot and consumer interest is hot,” Poole said prior to Tuesday’s event. “ CNET’s Coverage of Microsoft’s Media Center Edition Launch, October 12, 2004.

One of the things that Gates mentioned in last nights key note speech was that Microsoft has now sold 1.4 million copies of the Media Center Edition software. While Gates certainly did not point to this number as a success for the product, my sense is that the 1.4 million number is significantly short of where Gates had hoped to be by this point.

To put things in comparison, let’s take a look at TiVo’s 4th quarter numbers last year (this year’s are not released yet). Last year TiVo’s 4th quarter number of additional subscribers represented half of the yearly growth in subscriptions. The reason for this seems simple. Holiday sales are a prime time to get consumers to shell out money for things like living room and media technology for the family.

If Bill Gates was hoping, as he’d said in October at the MCE launch, to push MCE from 1 million units to 4 to 5 million units, then this Holiday season can only be seen as a dismal failure for the company. To go from 1 million units to 1.4 million units most likely would leave the company well behind it’s goal of 4 to 5 million units sold of MCE 2005. Unless what Gates was really saying was that the jump from 1 million to 4 to 5 million should be expected to include MCE 2006, MCE 2007, MCE 2008 and MCE 2009, the company needs to make some fundamental changes to their product.

Will things get much better? Probably not in the next nine months. There will be increased competitive pressure from cheap and inexpensive cable HDTV DVR offerings, HP has announced a Linux based box that records HDTV which is bound to be less expensive than MCE and on the very high end TiVo’s HDTV DirecTV unit has been a more compelling HDTV DVR than what Microsoft is currently offering through it’s MCE box.

The reviews for the current incarnation of MCE 2005 have been less than glowing and there has been much criticism regarding the $20 million joint marketing program with Intel called “Digital Joy.” Critics have labeled the “Digital Joy” campaign, which involves public demonstrations of Media Center, as being poorly staffed and presented to basically an uninterested public that has not seemed to embrace or attend the demonstration.

So what does Microsoft need to do to get the sales numbers up on MCE.

1. Implement, and if not implement, announce, and if not announce, leak, information on an upcoming arrangement that will allow cable or satellite HDTV programming to be recorded on MCE machines. The announcement should include an easy upgrade path so that people don’t wait for this final box to be released, but rather buy the box now in anticipation of being able to add this feature.

2. Have early pre production versions of this new HDTV unit available to some key members of the blogosphere and media so that they can write and publish how great the product is.

3. Fix some of the remaining technical bugs that still reside in MCE 2005, little things like support for large .mp3 libraries, correct random photos, etc.

4. Aggressively push and build a micro content platform staffed by editors and aggregators who push internet based content into the MCE interface. This team would involve lower level negotiators to negotiate with everyone from high schools to churches to Little League to Universities to publish microcontent, preferably with some level of Microsoft exclusivity.

Millions of children play Little League. Millions of grandparents and parents would buy MCE boxes if this was the exclusive vehicle to DVR all Little League games. It would be a huge addition and promotion for the League to have this kind of service and they could probably even get some of the cost associated with these non live broadcasts subsidized by the League.

Additionally, there is so much content out there where emerging artists, producers and directors would allow free creative commons type access to for the mere promotional aspect of being showcased on the Media Center platform. The tail is indeed long but talented editors and aggregators are needed to turn MCE into the premier and exclusive platform for bringing much niche driven alternative content into the living room. This niche content when aggregated can drive sales.

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