Software goliath hopes its entry will stir demand for WMV-based mobile devices.

March 30, 2005

Microsoft unveiled a new video download service for mobile devices on Wednesday in a move many say is aimed at creating larger demand for smartphones, pocket PCs, and the company’s Portable Media Centers.

MSN Video Downloads will offer daily TV programs for download to devices using the Windows Mobile Video (WMV) operating system. After Microsoft introduced its Portable Media Centers last summer, customers said they needed more content to run on it, said Jason Gordon, product manager for Microsoft’s mobile group.

Yet analysts said the move is not so much a reaction to demand for video content as it is a way to entice consumers to purchase mobile devices. “It’s hard to convince the consumer why they want to spend more money on something [mobile devices] when they don’t see the value of it,” said David Linsalata, an analyst at IDC. Mr. Linsalata said a service like this gives people a reason to consider purchasing a smartphone, PC, or other portable gadget.

For $19.99 a month, subscribers will be able to access shows from the Food Network, HGTV, MSNBC.com, and Fox Sports, as well as special comedy and children’s videos. The amount of lifestyle and child-oriented content seems aimed toward a demographic beyond on-the-go business executives or hardcore technophiles who make up the current market.

Mr. Linsalata said that of the 700 million mobile phones shipped worldwide, only 50 million of them are smart phones with video capabilities. He said Windows Mobile products only have 7 percent of market share worldwide.

“I think part of the grand scheme of things is, all these devices support video, but there’s no video to be supported,” said Josh Martin, an analyst with IDC. “The way it exists today, there’s not a lot of money to be made in these video downloads yet.”

The move could place Microsoft in a strong position to work with numerous content providers and mobile makers. Mr. Martin said that since its operating system is “rather pervasive,” with its partnerships with numerous mobile device makers, providers’ participation in MSN Downloads would ensure bigger distribution. It makes sense for providers to work directly with the Redmond company rather than with, for example, PalmOne, which would only target users of that company’s devices.

Mr. Gordon declined to say how many subscribers Microsoft expects, and he also declined to talk about royalties PC makers might pay to Microsoft, or royalties Microsoft might pay to content providers. But he supported the idea of increasing the market: “We clearly see a demand for a broader audience.”

The audience for video downloads in general has been inundated with Internet companies already offering similar services. Scott Kessler, an analyst with Standard & Poors, called the move “no big deal,” explaining, “companies like Real Networks and Yahoo were primary trial-blazers in this particular area.”

He noted that Verizon has a similar program. “We’re an on-demand society,” said Mr. Kessler. “This sort of offering plays into that trend.”