Why the Xbox 360 Will Be Microsoft's iPhone

If Microsoft (Nasdaq: MSFT  ) could build and sell operating systems in the same way it develops, builds, and sells its game console system, it would be a much stronger player than it is today. As it stands, Microsoft's future flagship may not be so much Windows as the Xbox 360 and Kinect.

No, I don't claim that Microsoft will turn the Xbox 360 into a phone. What I do claim, however, is that the Xbox 360 will be able to do for Microsoft what the iPhone has done for Apple (Nasdaq: AAPL  ) . Kinect is an inflection point in Microsoft's history, probably much more than we can see today. The platform shows all the genes to transform the way we interact with computers in the not-too-distant future. The next-generation Kinect will open up the door to a human-machine interaction environment that has been envisioned in countless science-fiction movies.

It is right in front of us. Wolfgang Gruener pointed out in a recent article how Microsoft plans to evolve Kinect from simply recognizing a human player to scanning a human player and rendering a person as a surrogate -- and inject the virtual you into a video game. If you think about it for a while, you may see a strategy behind Kinect and what a powerful product this really is.

Perception and evolution
I believe that, like the original iPod and the iPhone, Kinect is vastly underestimated for what it can do, even if its features right now are rather limited, because of the low resolution of its camera and limited processing horsepower. The Kinect body-scan patent, however, indicates that Microsoft is taking Kinect on a slow evolutionary path, similar to what Apple has done with the iPod and iPhone. The fact that it has not been taken seriously by its rivals in the past has given Microsoft a considerable time and experience advantage: Microsoft now owns natural data input, and if it is clever, it won't have to surrender this lead for years to come. Let's be realistic: No matter what Sony and Nintendo do, video games and countless other types of applications that require data input will take the route to body and gesture recognition -- without the need for additional devices.

Platform play
The iPhone and its iOS operating system are not isolated products. They are the most important cornerstone of Apple today, generating more than 50% of company revenue (including the iPad and iPod touch). Kinect could go the same route: If Microsoft is developing future products, especially Windows or future versions of Windows, with strong support for touch control, we could see an ecosystem evolve around Kinect: products that interact with Kinect; products that all run the same underlying software that connect to the same applications. Imagine a Kinect ecosystem at home that includes appliances, as well as computing and communication devices that are all capable of scanning and rendering your body. Wolfgang went in his article even a bit further and speculated that Microsoft could be walking down the path to a Matrix-like world with this technology. Microsoft could be taking a gradual-improvement approach and updating the platform once or twice a year to keep its rivals at distance.

Halo effect
The iPod and iPhone have had a huge impact on Apple's entire product line and reputation. If there's one product in Microsoft's product line that carries similar emotion and enthusiasm, it is the Xbox 360. Microsoft could easily capitalize on this foundation, and we are still stunned that Microsoft isn't using its Xbox 360 more for the marketing of its Windows Phone 7. In tandem with Kinect, the Xbox 360 brand is powerful enough and respected enough to pull Microsoft into the future. As a central platform that serves as a showcase for Microsoft's core products, there may be marketing and sales opportunities Microsoft has not had since the launch of Windows 95.

We are absolutely convinced that Kinect will be quickly evolving into a technology that is far more than just a video-game controller for comical sports games. This could turn into Microsoft's most valuable technology besides Windows -- and it may shift the company's core business to a new, evolving product that leads to a new generation of computer products.

Keep an eye on Kinect. We are about to witness the start of a new era in computing.

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  • Report this Comment On May 15, 2011, at 10:43 AM, marv08 wrote:

    "Microsoft now owns natural data input"

    Like, say, "touch" and "speech"? What planet do you live on?

    "No matter what Sony and Nintendo do, video games and countless other types of applications that require data input will take the route to body and gesture recognition -- without the need for additional devices."

    You do realize, that the Kinect IS an additional device, right?

    This is a typical case of "starting with a thesis, and than bending the truth to support it".

    Yes, body scanners will play an important role in the future. But until now, they are wardrobe-sized and developed by a list of companies, MS is not even on. The computing horsepower required to make "Minority Report" like input methods feasible (they would have to be at least as precise as a mouse or trackpad today, so we talk between 800 and 3200 dpi!) will remain out of reach for consumers for at least another decade. Who will be a major player by then is up for grabs.

    The iPhone is here, and it generates billions for Apple. The Xbox has mainly been an exercise in writing off losses in the billions.

  • Report this Comment On May 15, 2011, at 11:20 AM, FreeRange1 wrote:

    "the Xbox 360 brand is powerful enough and respected enough to pull Microsoft into the future"

    ROFLOL

    Xbox is a niche device that has lost MSFT BILLIONS of dollars. It also has had a horrible reputation for reliability, and is in no way even close to being as respected as Apple products. Further, Kinect is based on technology that MSFT purchased, not developed. And as part of one of the most mismanaged tech companies in the world right now, it doesn't have much hope of doing a whole hell of a lot for the company. The only reason Xbox has had as much success as it has, at least in terms of market share, is because MSFT has bought into the market by buying up game companies and stopping development of key games on other devices. This is not a company that knows, or is even capable, of innovating.

  • Report this Comment On May 15, 2011, at 1:29 PM, usmcj80 wrote:

    I would have to disagree with FreeRange1 and Marv08 on a couple points here.

    First FreeRange1 stated thet "This Company (Microsoft) is not a company that knows, or is even capable, of Innovating." While they may not have come up with all the ideas for the products they put out themselves sometimes it is just as innovative to know which companies to buy up and put them to use in the specific dynamic that you see fit. Mr. Ford may not have known a lot about cars or even what people would consider "General Knowledge", but he was able to understand that if he just surrounded himself with people that had the knowledge he lacked, coupled it with his own know-how and made a killing after a few years and really did a ton for an industry that was almost non-existent when he came about. I believe Micrsoft is capable of this same philosophy and thus they are pioneering something that may be a completely new era of computing (which they have done in the past), even if they did not necessarily come up with it themselves.

    Marv08 stated that the computing power needed for the type of "Minority Report" input won't be around for another decade and I do not know if I agree with that comment either. If we go back only 30 years or so to the beginning of the1980's home computing was virtually nonexistent in the way of input power. With as far as we have come with technology in the past 30 years i think that within the next 3 to 4 years that you may see the data and input power needed to accomplish what Microsoft seems to be shooting for here. Just looking back to the first computer I bought myself 10 years ago and compare it to my wife's Droid X she owns now and the Droid X blows my power little Gateway Laptop out of the water. With Intel announcing their new faster chip they have coming out and the recent advances of going to a 64 bit operating system for computers I would say anything is possible in the next 5 years.

    So just because the technology of the Kinect and what Microsoft is going for is in its toddler phase of development (we are already past the infancy) and they have a long way to go before it is in full maturity, the fact that Microsoft is already doing what otehrs haven't been able to do in the past and they have done it before anyone else, puts the way out in front of everyone. These things show that Microsoft has innovation and that they may be on to something that will once again set them far apart from their competitors and leave everyone else wondering why they didn't think of it themselves.

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