Shortly before Microsoft chairman and chief software architect, Bill Gates, gave the opening keynote address at the 2006 International Consumer Electronics Show (CES) in Las Vegas, IDG's Marc Ferranti sat down with company chief executive officer, Steve Ballmer, to explore how the software giant's new emphasis on Internet services, particularly via Windows Live, plays in the consumer market.
I thought we'd take this opportunity to give a global update about what Microsoft is doing in the digital lifestyle realm. The Gates-Ozzie (Microsoft CTO, Ray Ozzie) memo that leaked out in November, on Web 2.0 services and Live, was widely examined in regard to the business realm but not so much on the entertainment and consumer side.
Ballmer: On the consumer or digital lifestyle front, I think we are in the early phase of the most significant inflection point in many years. It's an inflection point where really early adopters have lived the full digital lifestyle but we haven't gotten to mass market.
In the next 12-24 months we'll go from being early adopter to literally an explosion. It's a little bit like 1995, when the PC went from being early adopter to mainstream, with Windows 95 as a catalyst. I happen to think Vista is an important part of the catalyst, to go from early adopter to mainstream digital lifestyle. An important part of that of course is the PC but also the gaming system, the TV system and the phone. The unifying factor almost across all of these experiences frankly is the service infrastructure. I think a lot of what we're trying to do with Live is support this transition of the world to what we call a mainstream digital lifestyle.
Is it almost wishful thinking on your part to think that the digital lifestyle explosion has not happened already? - look at iTunes and Google ...
Ballmer: No, no, many things have certainly taken off, don't get me wrong, the Internet isn't just taking off today, but digital music is still in its infancy. People like to talk about iTunes, but more people don't have digital music as a fundamental mode of operation than do today. That's why we have had a surge in early adoption [but] in some cases we haven't - take HD [high definition], we're still under 10 per cent penetration in the US.
How important for Microsoft's growth is the consumer arena - can you quantify it?
Ballmer: It's very hard to attribute revenue to segments. When we sell a Windows machine I can't tell you whether it's being used for consumer purposes or [other] purposes. Probably a pretty fair guess is that something like 30-40 per cent of our business is consumer, very small business-related, and maybe 60 per cent of our business is business-related.
How do you see that changing over time?
Ballmer: Probably in the next year or two we will see pretty good escalation on the business side because of the work we're doing with Office 12 and some of our servers. At the same time, with Xbox and IPTV and what we are doing with Live and MSN, I expect to see a rapid acceleration on the consumer side.