Is it a sign of Trouble at’ Mill? Or just another corporate shake-up while business goes on as usual? Microsoft yesterday announced the departure of leading Entertainment and Devices executives Robbie Bach and J. Allard. Microsoft CEO Steve Ballmer will take charge of the division, with Don Mattrick running the Xbox side and Andy Lees the mobile business. There are clearly problems for Microsoft in its mobile business. All the various iterations of its mobile phone software over the years have failed to make significant market impact as Apple and, now, Google, make the running. Microsoft’s biggest problem is that consumer is still a relatively small and fragmented part of its overall business. It’s losing out to Apple, and others, in the consumer market because its primary corporate focus continues to be business users of Windows. Apple, which, not through lack of effort, never achieved prominence in business markets, has been able to focus its strategy on the consumer space without the hindrance of adhering to a corporate software strategy. From Microsoft’s perspective it might seem logical to group Xbox, music players and mobile phones under one roof, but this makes less obvious sense to the outside world. Xbox has been successful largely because it has been left alone to formulate its own strategy focused on games, entertainment and the digital home. Dan Mattrick, whom I met last summer to discuss Xbox strategy, should now try to persuade Ballmer that the Xbox team needs to remain a discrete unit with liberty to forge its own direction, and if necessary outside of the demands of the corporate Windows strategy if necessary. With the launch of Natal imminent, the continued ramping up of online services based around the Xbox 360, and the plateauing of Xbox 360 sales, Microsoft can ill afford a dilution in focus because of this disruption to the senior management team. David Mercer Other Blog Posts Of Interest: PS3 Global Market Share Reached 31% in Q1 2010 Sony’s PS3 to Win Current Games Console Battle; SA Forecasts 47.5 Million Global Console Market in 2010 Sky Player Finally Arrives Where It Belongs, But Work Still to be Done TV or Videogame? 1 vs 100 on Xbox Live Offers Lifeline To Appointment Viewing Client Reading: Taming the Waves: Games Console Life Cycles and Platform Competition

As our recent report pointed out, the potential of internet and IPTV has failed to materialise. One area of untapped potential is interactive or targeted advertising. In spite of more than a decade of red button adverts in the UK these services have never proved commercially viable and in fact were recently withdrawn completely by Sky. Trials of new technologies continue, however, and Sky has just completed a trial called Adsmart. Its partner was Mediacom, using technology from Packetvision and ads from Nat West, the UK bank. Mediacom's Managing Partner of Implementation & Futures Rhys McLachlan, presenting at this morning's Broadcast and Beyond conference, called the trial a technical success, but went on to describe the key findings, most of which seemed to present targeted TV ads not so much as an uphill battle as an attempt at Mount Everest. The first conclusion is that current television audience segmentations are 'rudimentary' at best. In spite of using Sky's own extensive customer database, McClachlan concluded that the segmentations currently used 'cannot be validated'. As far as advertisers are concerned there is simply no consensus on how such audience data should be employed. Mediacom also found that it was very difficult to find the right metric for audience measurement, and that, critically, it was very difficult to prove the ROI from targeted ads. Finally, in spite of the advanced technology used, there was simply no proof that advertisements had been delivered and viewed. Effectiveness measurement depended simply on ‘good faith and intuition'. In spite of these challenges investment in advanced advertising trials continues, and broadband is the key to the future success, according to McClachy. The biggest challenge of all is developing technology which can help advertisers differentiate between single and multi viewer consumption. As we have also noted previously, asking TV viewers to log in, as some emerging services do, does not solve this problem. Even with the latest advanced technologies in the IPTV world, it seems there is still a long way to go before advertisers will be convinced to spend money on using them. David Mercer Client Reading: Chasing the Elusive IPTV Business Model: NDS, Cisco and Comcast to the Rescue?

Sony’s newest home console gained market share in terms of global sales in the first quarter of 2010. PS3 sales reached 2.2 million units, out of a total for the three main rivals of 7.2 million, giving it a 31% share. This compares to an 18% share a year earlier, and 28% in the previous quarter, Q409. In spite of declining sales, the Wii actually maintained its market share in Q1, with 49% of sales. It was the Xbox 360 which lost share compared to the previous quarter, selling 1.5 million and giving it 21% of global sales. This was, however, an increase in a year ago, when the 360 had 19% of the market. The companies’ data remain pretty much in line with Strategy Analytics’ own projections for full year 2010 performance, as published in March 2010 in our report, “Taming the Waves: Games Console Life Cycles and Platform Competition”. There are three major uncertainties for 2010 sales: the extent of the decline in sales of the Wii; whether system enhancements can improve the performance of the Xbox 360 in the second half; and whether improvements in the PS3’s sales can be sustained through the rest of the year. For the moment we continue to predict global PS3 sales of 14.0 million in 2010, compared to 17.5 million Wiis and 10.5 million Xbox 360s. This will represent an overall decline in current generation console sales of 9%. David Mercer Client Reading: Taming the Waves: Games Console Life Cycles and Platform Competition

The Connected TV World Summit takes place in London next Tuesday, 18^th May. Key speakers includes Griff Parry from Sky, Harris Morris, the CEO of Harris, Ian Mecklenburgh of Virgin Media, and Neale Dennett, Head of VOD, ITV plc.   My colleague, Peter King, will be giving the keynote analyst presentation. He will present our own independent analysis of the connected TV opportunity. He will also be giving the audience insights into the changing behaviours exhibited by early adapters of connected TV products and services. This research will be drawn from our Digital Home Observatory, which uses ethnographic techniques to explore emerging attitudes and behaviours in the digital home environment. 

You can attend the conference in person, or watch the event on line and free of charge. Registration details are here: http://connectedtvsummit.com/register.html.

David Mercer Client Reading: Global Audiovisual Market Forecast  �