Microsoft Shifting Away from PCs to Entertainment Focus in New Big Way?

Microsoft made two fairly mind-blowing announcements today at an event in its home town of Redmond, WA:

First, it announced it will be giving away Windows 10 later this year. Huh?

Second, it announced that, around that same time, it will begin shipping HoloLens, a competing entry in the emerging field of 3D holographic virtual reality gear.

Presumably there will be clear connections between the new Windows and HoloLens development which could move the OS closer to the entertainment boxes that make up an increasing share of Microsoft’s revenue and market clout.

I’ll get to the 3D stuff in a moment. But first…

WTF? MICROSOFT IS GIVING AWAY WINDOWS!!??

Time was, Windows was the primary revenue source for the Redmond behemoth. Turns out, that’s not so true any more. And this move makes it even less true.

The company recently changed the way it reports revenue to make it all but impossible either to find out how much revenue each product line generates or to compare new results with past years. I consider that kind of obfuscation to have one purpose: to allow them to be sneaky. Which I guess is one of the Corporate America Bill of Rights or some such. So I had to piece through this article on ZD-Net to figure out that MS gets the biggest chunk of its income from licensing to businesses and consumers, most of which comes from Windows operating system and related products (like Windows Server) and Office.

But the third largest segment (14%) comes from consumer hardware (read “XBox). Until recently, the links between Windows PCs and the XBox have been relatively tenuous and uncommon. But there’s been a trend in the last year or so to start moving those two platforms — along with Windows mobile devices — closer and closer. That strategy, which mimic Apple’s precisely, is obviously smart business.

But MS has always had a problem — which has grown worse in the last two major releases — of getting its users (commercial and consumer) to switch to the new versions of Windows as they were released. There are a lot of good reasons for this which I won’t go into here. Needless to say, by giving away Windows 10, MS will almost certainly see a huge increase in the rate of conversion to the new OS. And given the continuing shift toward more convergence of all three platforms (PCs/enterprise systems, phones and XBox), that bodes well. The free offering is almost certainly a great idea.

(By the way, it’s worth noting that the free release is limited to existing users of the last two versions of Windows (7 & 8). That is a good transition tactic.

HoloLens: Driving a Stake Into Facebook and Friends

Microsoft_HoloLens__pictures__-_CNET_-_Page_3In offering the new VR headset called HoloLens, Microsoft opens a competitive front against Facebook, Samsung and Sony, who have bought heavily into Oculus Rift, a technology company Facebook acquired last year.

On one level, I find their decision not to adopt and further enhance work on the Rift as a bit unfortunate. I’m a huge fan of 3D/VR technologies and although fragmented markets can often lead to more rapid innovation, in this case I’m concerned that the slow-to-emerge demand for this kind of tech on the part of consumers may be further slowed by this competitive stance.

On the other hand, the HoloLens has one key design difference that may cause it to overtake the Rift: it is a see-through lens rather than a blackout lens. This means two things to potential early adopters.

First, it means that VR doesn’t have to be an isolationist experience. The Rift technology is essentially a blackout hood; the user lives inside the holographic projection and experiences only that reality. With HoloLens, it will be possible to engage in what is called Augmented Reality (AR) where 3D objects and VRs are superimposed over the real world image visible through the transparent viewing screen/lens. My guess is that many more people, particularly in the early going, will find that a preferable experience.

Second, it means that developers interested in creating holographic and VR games and entertainments will not be forced to recreate entire backgrounds and universes. They can rely on the user’s surroundings — even if they want or need to control them to some extent (e.g., by having them put up a green-screen or dropcloth backdrop). This should also greatly improve responsiveness and therefore the sense of immersion reality.

(If you want a cool look at HoloLens technology, check out this piece on Wired.com from last fall when the editors got an exclusive first look at it. There are even some cool videos to give you a better feel for what’s in store.)

I’ve been telling my wife for years that the day is coming — and I expect to live to see it — when holographic projection TV will put the characters of movies and TV shows right in our living rooms where we can interact with them, view them from a 360-degree perspective and otherwise more totally integrate them. That combined with AI research suggests a near-term (25-year horizon or less) major shift in the consumer entertainment space that is both promising and frightening. It will be interesting to see what developers and their bosses choose to do with it.

I’m assuming that the HoloLens will require Windows 10 or higher, which may turn out to be one of those category-creators at which Apple has become so adept over the years that drives huge sales volumes in the direction of Redmond.

Meanwhile, Rift technology has a significant head start on HoloLens and the backing of a number of major players. That should make for an interesting couple of years while the technologists and the buyers sort this out.

It’s a fun time to be alive!

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