Commentary: Microsoft repositioning itself for digital television

The problem with WebTV is not Microsoft's technology or its marketing of this interactive TV service. The problem is television's low resolution.

Current TV technology is good enough for watching screen-sized images, but it is not nearly good enough for reading Web pages.

	See news story: Microsoft offers free WebTV service to MSN subscribers

TV delivery of Web information will only make sense when--or if--digital television ever appears with much better screen resolution. Basically, Microsoft is using WebTV to position itself for the digital TV era, which the TV industry keeps hinting is right around the corner.

As a positioning move, WebTV is a reasonable marketing strategy, and Microsoft's new offer of free WebTV to new MSN subscribers is part of that strategy. If digital television takes hold, WebTV will have already earned Microsoft a major presence. If it does not, Microsoft can afford to write the entire venture off. Meanwhile, the company may be able to make up the marketing costs of giving away the WebTV equipment through incremental additions to its MSN subscriber base and other incidental income.

For Microsoft, combining WebTV and MSN helps it build its online presence and unify its brand. This is an important move in its competition with Sony, which has a clear, unified vision of how it wants to combine digital television, game consoles, PC-based services, and even personal digital assistants into a unified consumer online experience.

Digital television itself faces major challenges in North America, however. First, the expense of rolling it out across the United States will be huge. Second, digital television will require extra bandwidth per channel; and the TV industry would probably prefer to use that same bandwidth to provide extra channels and thus sell more advertising time. With no major public outcry for improved TV resolution, the industry has little incentive to invest in digital television.

TV over the Internet may actually be closer to reality and may be the way that these two media are ultimately combined. As Internet transmission speeds increase, this will eventually become practical. The radio industry is already moving onto the Internet, enabling people to hear stations from around the world on their computers. TV stations certainly must be considering this as well. Basically, for an incremental extra operating expense, they open a new channel that may bring them an extra audience. Whether that audience will materialize, however, remains to be seen.

META Group analysts David Cearley, William Zachmann, Peter Burris, Val Sribar, Mike Gotta, Jack Gold and Steve Kleynhans contributed to this article.

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