Microsoft Kicking Apple's Butt In The Living Room (MSFT, AAPL)
There are many things about Apple (AAPL) that Microsoft is jealous about. But Apple's home entertainment business is not one of them. — Microsoft's (MSFT) Xbox 360 and its Windows Media Center software are quickly looking better than anything Apple offers.
Context & Ripple Effects
The living-room front in the Apple-Microsoft war has flipped before. In October 2005 Apple lobbed a grenade into Microsoft's media center camp with Front Row, and by mid-2007 Forbes was framing the broader Microsoft-versus-Google fight as one where Apple wins, with Microsoft cast as the aging incumbent.
As of May 2009 that script runs in reverse at the TV: Business Insider argues Xbox 360 plus Windows Media Center now outclasses anything in Apple's home-entertainment lineup, making the living room the one screen where Microsoft holds the position of strength it envies elsewhere. The rumored Apple media pad tablet — pitched as better than the iPod touch for web, movies and books without cannibalizing MacBooks — reads as Cupertino's candidate answer.
First-order effects
- Xbox 360 and Windows Media Center become Microsoft's proof points against the 'aging incumbent' narrative from 2007, while Apple TV stays the marginal product in Apple's own lineup.
- Content owners and studios eyeing digital delivery see one credible living-room platform (Microsoft's) rather than two, concentrating early distribution leverage with Microsoft.
Second-order effects
- Apple faces pressure to field a real answer, and the unconfirmed media-pad tablet is positioned exactly there: a movie-and-web device sitting between iPod touch and MacBook.
- Sony and Nintendo's consoles are pulled further toward set-top-box territory, competing with Xbox 360 for the same under-the-TV slot rather than just game sales.
Third-order effects
- If each company keeps one fortress screen — Apple mobile, Microsoft living room — competition settles into per-device-category battles instead of a single winner-take-all platform war.
- A durable Microsoft living-room lead would make console cycles, not PC software launches, the cadence on which the home entertainment market turns.
The trend: The Apple-Microsoft rivalry is fragmenting into separate battles per screen — phone, PC, TV — with each side dominant on a different one.