TV Division Changes Signal New Realism About Market

Responding to low demand for interactive TV (iTV) services, Microsoft has reorganized its TV Division, eliminated its UltimateTV business unit, and introduced higher prices for its iTV developer program. Although the UltimateTV service will continue to exist, the moves signal Microsoft’s growing reluctance to subsidize the iTV market by operating its own services, creating and licensing hardware reference designs for set-top boxes, and maintaining low prices on its iTV software and development tools.

What the TV Division Did

Microsoft’s TV Division encompassed three lines of business:

Microsoft TV (MSTV) platform. MSTV consists of client software for set-top boxes, which is based on Windows CE and technology from Microsoft’s 1997 purchase of WebTV, and iTV server software, which runs on Windows 2000 and SQL Server. Microsoft sells MSTV to cable and satellite network operators such as AT&T, the Netherlands’ United Pan-Europe Communications (UPC), and Portugal’s TV Cabo, often investing in these operators. The operators then use the platform as the basis for iTV services, often incorporating applications and content developed by other parties. (In Feb. 2002, Microsoft sold its entire stake in UPC.)