A minor update to MSN TV 2, Microsoft's product for accessing the Internet and getting other PC-like features from a TV set, adds new digital media and e-mail capabilities. The company is also offering a rebate that halves the price of the product.

Improvements Focus on Digital Media

Introduced in fall 2004, MSN TV 2 is the successor to WebTV, which Microsoft acquired in 1997 and later rebranded as MSN TV. It consists of a TV set-top box, bundled software, and a subscription service (dial-up Internet access from MSN is optional), and lets consumers use their TV screens to access the Web, send and receive e-mail and instant messages, play (but not download) digital audio and video from the Internet or from a PC over a home network, and display digital photos. MSN TV 2 is not related to Microsoft TV, the company's platform software for TV providers, which includes Foundation Edition for cable companies (which Comcast has deployed) and IPTV for delivering TV over IP networks (which SBC, Swisscom, Verizon, and several other telephone companies are preparing to deploy by early 2006).

In Aug. 2005, Microsoft delivered a software update to MSN TV 2 customers (because the box has no disk drive, all updates are delivered automatically over the network). The update offers enhancements in the following areas:

Digital media. MSN TV 2 now supports Windows Media DRM 10 for Networked Devices (code-named Cardea). This means that users who have content protected with Windows Media DRM on their PCs will now be able to play this content on MSN TV 2 by accessing it over a home network; previously, they could only access unprotected content. Users will have to download and install software called Windows Media Connect on their PCs to get this function. However, MSN TV 2 does not let users stream DRM-protected content directly from the Internet.

Users also have access to a new Music home page with more than 1,000 Internet radio stations, and get more playlist capabilities, such as the ability to order songs or play them randomly.

E-mail. Customers can set MSN TV 2 to check for e-mail at preset intervals, and they will be alerted to new messages via a light on the front of the box. In addition, customers can check POP e-mail accounts from other providers and create and manage group e-mail lists.

Photos. A revised Photos page displays thumbnail images of recently viewed photos, regardless of whether they're stored on the device, in e-mail, or on a home-networked PC.

Microsoft is also offering a US$100 rebate on MSN TV 2 through Jan. 31, 2006, cutting the price of the product in half (not including subscription fees).

Microsoft has not revealed subscription numbers for MSN TV 2, but the rebate could effectively test whether the product was priced too high—the original MSN TV cost only US$100 when MSN TV 2 was launched. Nonetheless, the monthly subscription fee of US$9.95 for users who already have Internet access from another provider could still hamper adoption, given that consumers can add a device that offers many more features, such as a full PC or an Xbox 360, to their home network for no monthly charge.

MSN TV 2 features and strategy are discussed in more detail in "New Boxes, Platform for MSN TV" on page 23 of the Nov. 2004 Update. MSN TV 2's home page is www.msntv.com/pc/.