Kurt's Thoughts

Holy crap!  We just acknowledged that the Xbox360’s USB-connected HD-DVD drive will work on Windows Vista seamlessly however it will still require a 3rd party player like Intervideo’s DVD.  (This is likely for the purposes of obtaining an H.264 license as well as using software that conforms to the rigid requirements of the DVDforum – mostly to prevent easy HD content duplication)

I think this is a really big deal!  I think this announcement shows a few more of our bigger strategic cards on the table.   More importantly it also demonstrates how broad our decision maker’s thinking is – something I’ve always been proud of.   I mean, just think about it.  This move impacts:
– Windows Vista’s advancement against competitors like Apple & Linux
– Xbox 360’s advancement against competitors like Sony & Nintendo
– HD-DVD’s advancement over competitors like BluRay

NOT JUST MICROSOFT ANYMORE
I would surmise that a move like this implies that the XBox360 HD-DVD drive is not just a tool to develop interest in the Xbox360 itself.  This implies, liked I’d mentioned the other day that Microsoft is not the only source of subsidization for the Xbox360 HD-DVD drive’s cost.  In fact, I’ll bet (although I have no actual visibility into this part of the company – it’s just my hunch) that the DVDForum/Toshiba is in on this as well to help advance the standard on next-generation desktop systems and further permeate the hobbiest world that isn’t interested in purchasing a $1000 BluRay drive or a $600 Playstation 3 console. 

IT’S ABOUT WINDOWS VISTA
Another thing to note is that they clearly state "on Windows Vista".  I’ll bet $1000 right now that the drive is not supported on Windows XP.  This would be a good marketing tool to encourage individuals to adopt the HD-DVD standard along with Windows Vista for media-a-philes, which I think we can all agree will eventually become the next desktop OS standard.

SONY’S DILEMMA
WOW.  And the implications of this are huge relative to the next generation HD standard a.k.a. the BluRay vs HD-DVD war.   Sony’s discounted BluRay player is embedded into the PS3, and they’re marketing the PS3 as "the way to get a cheap HD quality video player".  By tying the drive however to their game console, they’ve essentially locked themselves out of a huge opportunity to move BluRay forward.

• – On one hand, if they continue to make PS3 the "way to get BluRay", then they miss out on the PC crowd while people buy XBox360 HD-DVD drives for their systems on-the-cheap.
• – On the other hand, if they subsidize the creation of a low cost PC connectable BluRay player for ~$200, they’ve just taken the wind out of their "buy a PS3 for a cheap BluRay player" argument.

They’re at a strategic disadvantage on either BluRay or PS3 – one or the other.  Given that PS3 is make-or-break for the company, I doubt that they will opt for the latter option and instead hope that HD-DVD doesn’t grab a foothold as rapidly as it could.

THIS MOVE HAS PRECEDENT
And y’know what?  This move actually has precedent in our history.  In 1995, Microsoft and Chinon subsidized the cost of a PC CD-ROM player to enable a next generation of developers and users to start installing Windows 95 via CDROM instead of installing using the 25 3.5inch floppies that the OS required.  I think the cost was something like $100 for the drive with the purchase of Windows 95.  It was a huge hit and people actively bought Windows 95 for the CDROM drive (and only Windows 95 supported CDROM using high throughput 32-bit drivers) or people that wanted Windows 95 likely took advantage of the CDROM drive just so that they could start to take advantage of the multimedia playback capabilities of the new OS.

It was a very successful move that put CDROM actively on the map.  Some might argue that CDROM would have been successful without this deal, but I think historians have acknowledged that the offer was one that made greatly accelerated CDROM’s adoption – especially on the Windows platfrom – and recognized it as the technology replacement for floppies instead of things like Iomega’s Zip Drive technology which, while it arrived on the scene later, never quite got a foothold in the marketplace because it was never recognized by either PC manufacturers or Microsoft as a "must have" storage medium.

Had it been, we might be booting up to Zip drives instead of CDROMs, USB keys, and external USB-connected Hard Drives like we do today.