Lichtenberg+Strategy+Report

Lichtenberg L.

TO: Proximity video team FROM: Lucas Lichtenberg DATE: March 1, 2010 SUBJECT: Microsoft strategy report

Here is my Microsoft Strategy report. Microsoft is a huge corporation that participates in virtually the entire technology sector. The following will show the strategy Microsoft should take concerning their XBOX 360 and ways they can increase their leverage over Sony by looking at Gen-Y and their feelings toward videos and home entertainment. Microsoft dominates the home computer market but some think that the XBOX 360 may have a better way for people to watch videos in the comfort of their own home while also offering its gaming service. For a number of years, Sony and Microsoft have been allowing users to play online against each other and now they have added web browsers to their internet service. This concept of acquiring videos has affected the entire video market and has shown success to the video consoles. Sony and Microsoft have been battling to acquire bigger market shares and attract more consumers to their consoles.

Microsoft was founded in 1975 and is currently traded on the NASDAQ stock exchange. Microsoft works in five different business segments; Client, Server and Tools, Online services business, Microsoft business division, and the entertainment and devices division. Microsoft is the biggest home computer producer in the entire world. Microsoft commanded the computer operating systems market with MS-DOS in the mid 1980's with about 70% of all personal computers being run by a Microsoft operating system. The Windows line of operating systems followed and Microsoft saw major growth in the late 1990's to 2000. During this time Microsoft became the biggest software maker running 90% of all personal computers in use and generating over $1 billion dollars of Free Cash Flow per month. Microsoft has added many new products over the years and is now competing in the gaming industry where it produces the XBOX 360.
 * Profile**


 * Competitive Landscape **

The new thing in the market today is the online gaming networks that attract many players all over the world. Microsoft produced an XBOX Live network and Sony made Playstation network that allows their individual console buyers to compete. These consoles also offer web browsers so that users can get online and look at websites. Microsoft and Sony have also teamed up with Netflix to provide instant downloads of TV shows and movies straight to the consoles by either renting or purchasing the media. “Under the deal, customers who have an Xbox 360 console attached to their TVs and who subscribe to Microsoft's Xbox Live Gold service, and who are also Netflix subscribers, can download Netflix movies at no additional cost. The service will launch in the fall and feature more than 10,000 movies and TV shows available for immediate viewing, Netflix and Microsoft said in a joint statement Monday” (McDougall, 2008). Microsoft charges 40 dollars per year for their online subscription. They have surpassed Sony on the amount of people using the consoles to gain internet access even though Sony offers the internet service for free. “ And in a recent survey on online gamers, NPD Group found that half of those who use a console for online play use an Xbox; that's compared with 29% for Nintendo Wii and 20% for Sony PS3” (Bulik, 2009). Sony is Microsoft's biggest threat because of the high-powered Playstation 3 but even the Nintendo Wii can allow users to gain access to Netflix now too.

People watch movies by ordering them from Netflix, going to the nearest RedBox, or streaming them online nowadays. Purchasing DVD’s is not the most popular way to watch videos anymore. ** Microsoft Business Strategy  ** Initially Microsoft and Netflix made an agreement to deal but when Sony found out they challenged to not allow any Sony Pictures be allowed to show on Netflix. Recently, Sony has adopted Netflix and the Nintendo Wii has just made an agreement with Netflix as well. This shows that the agreement with Netflix is seen as profitable in the large video market.

"It was the Xbox 360 and the launch of the Xbox Live Marketplace—with its virtual storefront of not only hard-core-gamer candy but also the Xbox Live Arcade, featuring lots of old-school and female-friendly downloadable games, vide o-game and movie trailers, plus full movie, TV and music- video downloads—that expanded its base" (Bulik, 2009). “Increasingly, Microsoft is positioning the Xbox not just as a games console, but as a platform for launching music and video content” (McDougall, 2008). The goal of Microsoft is to stay above Sony in the video console market so that their online network is the very best. Recently, Microsoft has added a higher capacity drive that users can buy so that they can store more video content from the web. Microsoft’s vision is to make the XBOX more accessible to everyone and not just hard core gamers. “In the coming years, MSFT will focus on creating seamless user experiences across multiple devices, from PCs to cell phones to PDAs to home entertainment consoles and devices, for all the various tasks users engage in, from communications to productivity to e-commerce to entertainment” (Poors, 2010). Microsoft has started to change the entire video market by allowing users to watch movies in their own living room the easiest it could ever get. Netflix sends movies straight to their customers gaming consoles through an online connection. The costs of these movies are very low and the quality is above adequate. There are TV shows from MTV, VH1, Comedy Central, Turner Broadcasting and CBS. Warner Bros., Paramount, and Disney have all added movies to Netflix that are available for download. This is something our clients need to pay attention to because of the growth that Microsoft has seen since the start of their online network. “Xbox users are used to using the console to connect to the web. Of the more than 28 million Xbox owners today, more than 17 million, or about 65%, pay for Live, or internet-connected, service, according to Microsoft. Since the launch of 360, more than $1 billion has been spent on Xbox Live, with no signs of slowing -- spending on Live was up 84% in 2008 vs. 2007” (Bulik, 2009). “The Netflix Watch Instantly offering, introduced six months ago via the New Xbox Experience, has propelled Xbox ahead in its digital-living-room strategy. By February, 1 million Xbox Live users had downloaded the application and streamed 1.5 billion minutes of TV and movie content from Netflix. That means about one-tenth of Netflix's 10 million subscribers have watched via Xbox 360” (Bulik, 2009). This new technology has already hit the market very hard and many people are attracted to it. This shows that Gen Y likes easier interaction when attaining videos. Going out to the store and buying DVD’s is practically history. The new way to watch movies is to download them to your video console. All major video consoles have adapted this technology and have started seeing profits. Cable companies such as Comcast, Direct TV, and Verizon are going to experience losses because users won’t be willing to pay for their service let alone pay for pay-per-view, Cinemax, or other premium movie channels. = Bibliography  = Bulik, B. (2009, March 30). //Advertising Age//. Retrieved from Xbox Is Not Just for the Hard-Core Gamer Anymore: http://adage.com/digitalalist09/article?article_id=135559 McDougall, P. (2008, July 15). //InformationWeek//. Retrieved from Netflix To Stream Movies Over Microsoft's Xbox Live Service : http://www.informationweek.com/news/personal_tech/TV_theater/showArticle.jhtml?articleID=209100187 Musgrove, M. (2010). Coming Soon to an Xbox Near You; Microsoft and Netflix team up to stream films, TV shows. //The Washington Post//. Poors, S. &. (2010, March 2). //NetAdvantage//. Retrieved from Microsoft Corp.: http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/simpleSearchRun.do?ControlName=HomePageSearch
 * Implications for Gen-Y **