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Francisco Kattan

Insights on the Mobile Ecosystem

Microsoft Shows its Cards with Windows Phone 7

As the launch of Windows Phone 7 approaches the question in everyone’s mind is:  is it too late for Microsoft to secure a leading position in mobile? We’re now at year 3 “Ai” (After the iPhone).   In the last 3 years the landscape has changed dramatically:

  • Apple launched 4 successful phones plus the iPad
  • Google launched Android and quickly secured a market leading position
  • RIM has lost some ground with two under achieving devices (Storm and Torch)
  • Palm launched the failed Pre and ran out of cash
  • Once almighty Symbian faded
  • Nokia and Intel joined forces with Meego
  • Samsung launched Bada….

all this… and Microsoft has yet to make its first move.

In a platform battle that is surely to consolidate, in the limit, to likely one big winner plus niche players, it’s not a pretty situation for Microsoft.  But if you are in Redmond you can’t afford to lose in mobile.  PC shipments are an increasingly small share of device shipments, with mobile devices enjoying all the growth.  Losing in mobile would relegate the Windows platform from a virtual monopoly to a minority player in only a few years when looking at all connected devices.

The question is what cards does Redmond have to play (besides a ton of cash)?

The February preview of Windows Phone 7 in Barcelona and the recent news from Gamescom (see articles here and here) provide us with a strong clue:  Microsoft is going to play the Xbox card in a big way. Microsoft is going after gamers (users and developers) in a desperate move to gain relevance in mobile.   It makes sense for them.  When compared to market leaders Apple, Google and RIM, Microsoft’s advantage in gaming sticks out like a sore thumb.  Microsoft’s leading Xbox console and Live service will serve as Microsoft’s beachhead for its mobile attack.   In the same way that Apple leveraged iTunes to enter a new market and RIM is leveraging its enterprise base of email addicts to buy time, Microsoft will leverage its Xbox assets to establish a position in mobile.  This is obviously a big departure from Windows Mobile’s original base of business users (in case you haven’t been watching, Microsoft lost the battle among business users long ago).

As is apparent from the Gamescom articles referenced above, gaming will be the major differentiator for Windows Phone 7.   50 titles were announced as just the “first wave.”  In addition, Microsoft is planning to integrate the Xbox Live experience into Windows Phone 7 to make Xbox Live users feel at home on Windows Phone.   For example the Xbox gamer profile that contains your avatar, reputation, online status, and achievements will follow you seamlessly from console to mobile and back.   Many of the same titles you are already familiar with on the console will be in mobile as well and you’ll be able to easily play multi-player games on the Live service.  It has also been reported that Microsoft is paying iPhone developers to port their games to Windows 7, a tactic commonly used in the industry, but it is another clue that gaming is the key planned differentiator for Microsoft.  Another important clue is the emphasis on XNA as a way to create applications for Windows Phone 7.  XNA is Microsoft’s toolset and runtime environment for game development that supports the Xbox, Windows and is now a very prominent part of Windows Phone.  XNA was also a very prominent part of Microsoft’s recent training for developers.

The following recent quotes from Microsoft spokespeople provide clues to Redmond’s strategy:

  • “Windows Phone 7 is the launch of a major gaming platform for Microsoft,” Matt Booty, General Manager of Mobile Gaming at Microsoft Game Studios.
  • “We’re really approaching this as we would a console, so we have to deliver the breadth of games and the quality people expect from Xbox,” said Kevin Unangst, senior director of PC and mobile gaming. “To have this quantity and quality of games committed this far ahead of launch, with even more to come, is a statement of support that says Windows Phone 7 will be a big success.”
  • Kevin Unangst: “Starting with the announcement today, we’re going to bring a set of high -quality games and experiences, all using Xbox LIVE, to bear at the launch of the Windows Phone 7.”

Clearly Apple will fight hard in this segment of the market.  Despite original criticism that a device with a single button could not deliver a great gaming experience, Apple has proven critics wrong.  And with innovations such as the new gyroscope in the iPhone 4, Apple will raise the gaming experience another notch.  Still, there is a base of hard core gamers (see this post) that don’t buy into the iPhone as a gaming platform that can provide a seam for Microsoft to exploit.

I personally think it is going to be really tough for Microsoft to get in the game.   The market window is closing fast.  Traditional Microsoft OEM partners like HTC (Microsoft’s largest OEM partner) and Motorola are having great success with Android already.   However, I do think Redmond is playing a sensible card.  To have a shot Microsoft needs to pick a target segment and put all the wood behind that arrow.  Going after its own base of Xb0x users and developers a logical move for them.

This does not mean that Windows Phone devices won’t support other functions.  To be successful devices will need to attract other genres as well (social networking, music, etc.), but Microsoft devices don’t need to differentiate with them.   To borrow Geoffrey Moore’s terminology, gaming will be “core” to Windows Phone 7 and everything else will be “context.”  The strategy is to focus the innovation in gaming and copy others everywhere else.

What do you think?   Can Microsoft still get in the game and be a contender?   What other cards can Microsoft play?

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Written by Francisco Kattan

August 25, 2010 at 10:14 pm

9 Responses

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  1. Good post. I do think it’s an uphill battle for MSFT to get back in the game. While it’s an interesting move to go after its XBOX customer base, I’ve read reports of XBOX losing its prominence in the gaming industry. This is an interesting story to watch in the coming months.

    Vijai Shankar

    August 26, 2010 at 12:41 pm

    • Thanks for the comment Vijai. Relative to Apple and Google, the Xbox is a significant advantage, however. Of the handset OEMs only Sony Ericsson could neutralize this advantage with Sony’s PSP, but Sony Ericsson does not appear to be moving in this direction (in fact Sony Ericsson was announced as a Windows Phone 7 OEM partner).

      It is also worth noting that MSFT needed a portable version of the Xbox, and Nokia’s failure with N-Gage left the door wide open for Redmond to play this card.

      Francisco Kattan

      August 28, 2010 at 7:40 am

  2. Francisco,
    What does MS have besides a pile of money? TIME. I would suggest that by exploiting their gaming platform for mobile will make them attractive to younger male users. There may a lot of market to exploit there. By gaining a large share of teens and 20 somethings, they will be able to push into other areas (like enterprise) when they have an established base of maturing users. So IFF they are hit with gamers then maybe they can branch out… my $0.02

    Rob Marchi

    August 26, 2010 at 1:30 pm

    • Hello Rob, thanks for sharing your $0.02! This makes a lot of sense. Use gaming as a beachhead, then attack other segments.

      Generally, I would not say that MSFT has a lot of TIME to establish its position in mobile. Windows Phone 7 is way late to market (three and a half years after the iPhone). This is a sign of the lack of vision in Redmond as Carlos commented below. But I think you mean that they have time to focus on other segments later. Go after the younger audience now (with gaming) then branch out into other segments as this base ages. I think that is exactly what they are likely to do.

      Francisco Kattan

      August 29, 2010 at 4:51 pm

  3. Great post. A related post over at TechCrunch:

    http://techcrunch.com/2010/08/26/microsoft-half-billion-dollars-windows-phone-7/

    True, MSFT has lost the initial battle, but if history serves me right, MSFT will do what it takes to make Mobile part of their strategy. Maybe not Windows Mobile 7, but sooner or later, they will get it and catch up, they have the $$ to do so.

    Ballmer on the other hand, needs to go, has no vision at all and MSFT has been dragging under his leadership, failed Vista and other initiatives, like Zoone? or the failed Kin phone?.

    “We are selling Millions and Millions and MIllions of phones a year…” 1:10 into the video

    Also, just a a few short two years ago :-), Nokia was on top of the world, then Palm was the next darling with all the former Apple engineers, executives… Google killed the Nexus… So this mobile landscape, unlike PC’s moves at the speed of dial. Today’s top mobile phone could be tomorrows “old-fashioned-out-of-style-brick”.

    And, from a developers perspective, it is a nightmare to maintain different source code environments to produce quality apps, seamless across the different platforms. Think about that as well.

    Carlos

    carlos

    August 27, 2010 at 7:31 am

    • Hi Carlos. Thanks for putting this into perspective. On the one hand Windows Phone 7 is a very late reaction to the iPhone, on the other hand you argue that given the rate of change in mobile, there will likely be many more market share shifts over the longer term. This is a good point. However I think there are “waves” of change that are kicked off by specific disruptions. Many years ago we saw the transition from analog to digital that caused then No. 1 Motorola fall from grace. The iPhone kicked off a new wave as mass market consumers shift from feature phones to smart phones. If Microsoft misses this wave, it may have to wait for (or cause) the next major disruption in the market.

      You make a great case for a change in leadership in Redmond. It’s amazing how, even after the launch of the iPhone, Ballmer didn’t have the vision to “see” what was to come.

      Thanks for sharing the TechCrunch post, BTW. It seems like MSFT is playing two cards in mobile: 1) a ton of cash and 2) the Xbox. The TechCrunch article focuses on the first ($500M to launch WP7) and this article focuses on the second.

      Francisco Kattan

      August 29, 2010 at 4:55 pm

  4. […] Francisco Kattan shuffles the tea leaves and picks apart Microsoft’s strategy with Windows Phone 7 through the lens of the XBox. Really good read and kind of makes you want to look at bit harder at the seemingly disparate moves by other companies in and around the mobile space. […]

  5. Wow that was unusual. I just wrote an incredibly long comment but after I clicked submit
    my comment didn’t show up. Grrrr… well I’m not writing all that
    over again. Anyways, just wanted to say great blog!

    • Thanks for the reading the blog and for the comment. Sorry to hear your original comment was lost. Now I’m wondering what was in your mind 😦 Hope you give it another try. I’ll be writing a new post soon.

      Francisco Kattan

      May 8, 2013 at 9:45 pm


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