Microsoft Surface: What Media Center should have been - analyst opinion

  • When I was briefed on Surface (previously code-named Milan) a few days ago, I was incredibly impressed.  Having gotten used to disappointments like Origami, Zune, and even the Media Center PC where Microsoft didn’t actually finish the offering, this product was a breath of fresh air, largely because it was complete.

    As they walked me through the implementation, it was clear that they had thought through the user interface, the hardware, the initial customer set, service, and economics. It does not happen too often with any vendor, that I do not leave thinking they forgot something with regard to the product. But when I left Microsoft, I felt they touched about pretty much everything, except the fact how much this product was likely to really upset companies like HP, Dell, and Gateway.   

    But before we go there let’s talk a bit about what Milan is.

    Milan:  Surface Computing

    Milan, in many ways, is Microsoft actually channeling Apple (and their iPod) really well for once. What makes the iPod special is that it is a complete offering that includes hardware, software, services and content. Milan is all of that, but it is targeted at a different audience (at least for now, though, I think you will want one of these things at some point).

    Picture a table that is a PC with a protected high resolution screen and virtual objects you can touch.  Also imagine no connection to the traditional Windows. While Windows Vista is the engine you only see the simplified interface much like you would see a simplified Mac OS interface with the iPhone or AppleTV.The closest thing to the initial interface is the TouchSmart interface HP created for their desktop TouchSmart PC, except unlike the HP, you stay within this interface all of the time. This is consistent with the TiVo interface that hides Linux and is as visually attractive as anything Apple has done to date (Leopard isn’t out yet so it doesn’t count).   

    Once you touch something, you will get an animation (much like Apple and HP) as the object opens into the application which also uses touch (there are no mice or keyboards needed for most activities).  The screen actually “sees” things, it isn’t a digitizer it uses actual cameras.   This means when you put your glass on the table it knows it’s a class and could provide information on what your are drinking (not too exciting), but it could also see your credit card (if it had the right coding) and after showing you your bill, all you’d have to do is place your card on the table, add a tip, and you are on to the next club.  (I hate waiting for the bill).  

    Yes, initially this product isn’t for your living room, much like the original Atari pong systems this starts in bars, hotels, and restaurants.  

    Perfect Zune and group gaming

    Let’s say you want to put new music on your wireless Zune (or Microsoft Smartphone). All you do is place it on the table, the code on the back tells the table how to communicate with the Zune, logs you into your account, and now you can visually select the songs you want to add to the player. If you like the songs the DJ is playing at the club, or in the hotel, with one quick motion they can be on your Zune (or other compliant wireless player.)
    The same could be true of movies or TV shows that you pick up in airports or hotel lobbies.   

    But interactivity goes farther. Since the table can “see”, you can have generic puzzle pieces, clear pieces of glass with codes only the table can see. When you place them on the table the video or pictures can be projected through them, and then they become, visually, something else.  Think of game pieces like jigsaw puzzles that are videos that you could move around. Of course, I was thinking of the battle chess like game that was in the Episode IV Star Wars movie and how something like that could be made to work here (this thing would be perfect for Real Time Strategy Games).

    What the Media Center should have been

    Within three minutes of seeing the product in use, it was clear this is closer to what the Media Center Computer should have been in terms of simplicity and ease of use.   Granted you wouldn’t have needed the touch interaction (though it would have been cool for high-end devices) and would have used a remote instead.
    The Media Center PC failed and HP the market leader exited, because the product wasn’t easy enough to use. Milan does a fantastic job correcting this mistake.  

    As mentioned above, the interface is as good or better (I would argue “better” because it is more graphically rich) than Apple TV and it is in line with the top interfaces we have seen at CES for several years now.  

    You can live in the interface which would mean no walking up to the screen with a keyboard and mouse to change settings, and because the system is services based, any settings could be made from a remote desktop PC or by a service on your behalf.    This is the user experience the Media Center PC should have had and didn’t get.

    Why the PC vendors will likely be upset

    These guys have been asking for a product like this from Microsoft for some time.  The fact they actually built it but, not for the OEMs, for themselves is likely going to do more than raise a few eyebrows over at Dell, HP, and Gateway.  HP and Gateway, in particular, massively invested in specialized Media Center hardware that would have likely been successful had Microsoft done for Media Center what they did for Milan.  They didn’t and both companies were hurt as a result and had to abandon their efforts.   
    The OEMs have already been grumbling about the Xbox which also came closer to what they wanted. Milan is likely to create even deeper concerns that Microsoft is going into the hardware business and increasingly becoming a competitor.  Concerns like these motivated Dell to make a move with Linux on the desktop and others may increasingly be motivated to find an alternative to Microsoft as a result of Milan.   

    Of course, this could be undone, at least mostly, if Microsoft uses Milan to create the right Media Center product and/or licenses Xbox to the OEMs for future offerings bringing them back into the ecosystem.  This is consistent with Bill Gate’s historic strategy but Bill is less and less involved at Microsoft and it isn’t clear if his vision is Microsoft’s going forward.  

    When you will get Milan for the living room

    As it currently exists, Milan costs between $15,000 and $20,000 which is ok for the audience (bars, hotels, restaurants) it is initially targeted for. It will take at least three years for the technology to drop enough in price to be attractive (probably around $4000) for the high-end of the broad consumer market, and another two or three years to drop below $1000. So, you won’t be getting one of these things, at least as it is currently being demonstrated, anytime soon, unless you have a lot of cash on your hand.  

    Much like it was in the early days of Pong, this is a device we will likely want long before we can afford it and those who find a way to get, will have serious neighbor envy benefits. The question is how long it will take Microsoft to realize that the interface could turn an entire category of products into more successful offerings for the broad market.

    The other question is, given both how well this was done and that the hardware OEMs were bypassed, how much of the “new”, post Gates, Microsoft does this represent? At least from the standpoint of actually completing offerings, if this is a sign of things to come, it is a good sign.

    Rob Enderle is one of the last Inquiry Analysts.  Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them.  Currently he provides his services to most of the major technology and media companies.