Microsoft (NASDAQ: MSFT ) is reportedly working on a new video streaming dongle, according to a recent FCC filing. The filing, which calls the product the "Miracast Dongle," states that the device will use 2.4GHz Wi-Fi direct connections and come with USB and HDMI cables.
While comparisons with Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ) Chromecast are inevitable, Miracast is a completely different type of technology. Let's take a look at what the key differences could mean for Microsoft's mobile and media strategies.
Miracast vs. Chromecast
Introduced in 2012, Miracast is a screen-mirroring standard for Wi-Fi connected devices. With Miracast, a mirrored device cannot perform other tasks while beaming its screen to another device.
Chromecast, by comparison, parses content from a device to the dongle, which handles the busy work and frees up the transmitting device for other uses -- like launching companion apps for shows. This is an appealing feature, since a recent study from NATPE and CES revealed that 44% of Americans use a mobile device as a "second screen" while watching TV.
Since Miracast runs on a direct connection instead of a networked one, it runs smoother. Unlike Chromecast, Miracast doesn't need a Wi-Fi network to work, since its devices "talk" wirelessly with one another -- which can be handy for mirroring a device's screen to the TV without the hassle of entering network passwords.
The first mobile devices that supported Miracast were Samsung's (NASDAQOTH: SSNLF ) Galaxy S III and LG's Optimus G. Microsoft recently added Miracast support to Windows Phone 8.1, and Android devices above 4.2 support both Miracast and Chromecast. Other Miracast dongles, such as Ezcast and Belkin Miracast, are also available.
Microsoft's Miracast Dongle will notably run Linux instead of a stripped-down version of Windows. By comparison, Chromecast runs a slimmed down hybrid of Chrome OS and Android, Apple (NASDAQ: AAPL ) TV runs a lighter version of iOS, and Roku uses a proprietary version of Linux called Roku OS.
Shifting gears with streaming media
Introducing a streaming dongle marks a major shift in Microsoft's media strategy. When Microsoft launched the Xbox One last November, it had a grand vision of the console conquering living rooms as an all-in-one media center controlled by voice and gesture commands through the Kinect. Unfortunately, Microsoft crippled the console by requiring an Xbox Live Gold membership for essential services like Netflix, and disabling DLNA streaming and USB drives for home networks. A steep price tag of $499 exacerbated the problem.
Microsoft eventually dumped the Xbox Live Gold paywall, allowed playback from DLNA and external USB devices, and removed the Kinect to lower the price to $399, but the console hasn't gained steam as a media center. That's why Microsoft recently shut down Xbox Entertainment Studios, which was intended to provide original video content for Xbox One owners.
With its dreams of taking over living rooms shattered, Microsoft realized it needed a simpler, cheaper approach to take over TVs. For now, streaming media from Windows computers, tablets, and phones could at least partially atone for the mistakes it made with the Xbox One.
The business of smart TVs
The global market for all video streaming devices -- which includes computers, mobile devices, smart TVs, consoles, and set-top boxes -- will grow from 4.3 billion units in 2013 to 8.2 billion units by 2017, according to research firm IHS. Within that growing market, Parks Associates estimates that 50 million streaming media players like Apple TV, Roku, and Chromecast will be in homes across the world by 2017.
According to Business Insider, Apple TV is the market leader in streaming devices in the U.S., with a market share of 43%, followed by Roku with 24%, and Chromecast with 14%. Apple TV and Roku are full-featured streaming set-top boxes that don't require a companion device like a computer, tablet, or smartphone.
Both Miracast and Chromecast require at least one companion device to function. That's why both devices are cheaper -- the Chromecast only costs $35 and Miracast dongles cost around $50, compared to $99 for the Apple TV and $50 to $100 for Roku devices. Apple TV offers screen mirroring via AirPlay. Roku has no native mirroring functions, but Android and iOS users can use third-party apps to stream content to its devices.
Streaming vs. mirroring
To understand why Microsoft and Google favor pure mirroring dongles instead of full-featured set-top boxes, we need to understand the past conflict between smart TV makers and media companies. Google TV, which is based on Android, spread quickly across early smart TVs for a simple reason: it was free, open source, and had a huge library of apps.
But media giants like Disney, Comcast, CBS, Viacom, and Fox all quickly blocked Google TV's access to Web-based content. They believed that Google TVs would cause Web-based content to cannibalize cable and broadcast content, resulting in lost ad revenues. That's why Google launched Chromecast -- it bypasses media companies' restrictions by mirroring any device's Chrome browser screen to a TV. Microsoft likely shares the same idea.
A Foolish final word
With the decision to mirror, rather than stream content, Microsoft seems to be positioning its Miracast dongle against the Google Chromecast. That said, differences in functionality reveal relative strengths, depending on the user preferences. In promoting the device alongside its new handsets, the company will focus on the ability to seamlessly beam Windows Phone content to any compatible device without a local Wi-Fi network.
Whether or not a new dongle will boost Windows Phones' anemic 2.5% market share remains to be seen, but at least Miracast is a solid departure from the top heavy media strategy that Microsoft clumsily attempted with the Xbox One.
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