know the other...
know the other top executives at Microsoft, they were talking about negotiating
this and that funding, and cutting back products to the point where they no
longer made sense. I said, “Look, can’t we all agree on what is the right objective
for the whole company and then fund that? I don’t care if it’s in your group
or my group or whatever, but we should do the right thing.” It didn’t work that
way and, of course, any big company is like this. People have certain things they
control. That’s why there’s politics in large companies.
I can’t operate in that environment. I’m just far too focused on the end
result. And so for all those reasons—the fact that they were very resistant to
Steve Perlman 187
adopt other technologies that they felt might be competitive, and the fact it was
just a large organization, no worse than any other large organization, I’m sure,
but, nonetheless, it was a large organization with a lot of politics—it became
unbearable.
But I think in the end they recognized that WebTV was a profitable thing
for them, because they ended up investing in it more, and now it’s become
MSNTV. And it actually is a significant profit sector. WebTV was marginally
profitable in its 18th month of operation and has been profitable every month
since then, to this day. In 2005, 10 years after founding, WebTV (now called
MSNTV) grossed about $150 million for Microsoft with 65 percent gross margins.
Over its 8 years in the market, WebTV has grossed over $1.3 billion. We
never expected people would still be using a dial-up connection and browsing
on their TV in 2005, but there’s still a significant market there for a device like
WebTV, primarily for older people who want to be connected to the Web and
email, but just will never buy a computer.
The other things we did with it that I was very excited about—that I was
hoping to really capitalize on, which was moving to satellite with DVR and
adding more interactivity and eventually moving to broadband cable—they
have not been successful at pursuing. I think with the satellite stuff they actually
introduced a couple of reasonably good products, but they got tripped up in
the business negotiations with that, and the cable operators are very resistant to
working with Microsoft.
Now their new thrust, which I think there’s some significant opportunity
with, is with IPTV. And that sort of is what the legacy of WebTV moved into.
Peter Barrett is heading up that effort. He was the person who created the first
browser on WebTV. And here he is still at Microsoft—over 10 years later, if you
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