CES: Ballmer Tries Harder, Sony Neglects Digital Upgrade to Catalogue

Microsoft CEO puts Netflix and Hulu on the Xbox and introduces a cool new screen; meanwhile, Sony lags in making its catalogue digital

Last Updated: January 6, 2011 @ 1:22 PM

Microsoft CEO Steve Ballmer’s presentation before an intimate group of 3,000 kicked off the Consumer Electronics Show in Las Vegas on Wednesday night, and his remarks were impressive indeed.

He showed off the full range of Microsoft’s grasp of the technology landscape — entertainment hardware in the new Xbox Kinect, the Windows 7 phone and a series of new laptops — including one that allows the keypad to double either as a screen or keyboard.

Among the new technologies he showed on stage — and that elicited applause from the crowd — was a new generation LED screen in which every tiny touch point has its own camera sensor.

Also read: CES 2011 — Tablets, Cord Cutters Are In; 3D TV, Not So Much

Thus, anything that touches the screen registers visually — like a hand creating ripples on a calm lake. He set down a piece of paper on the screen, and the sensors were able to see the paper, light as it was, and read what was written on it. Cool.

The Xbox is another consumer product that has new generation technology and that Microsoft believes can be a home entertainment hub. The company has just signed deals with Netflix and Hulu to carry their content over Xbox by the spring, and has done a deal with ESPN to connect its users over the device.

Kinect, Microsoft's new Wii-like, controller-free gaming system, is also continuing to develop — the company is introducing “AvatarKinect,” which allows users to create virtual selves to interact with one another.

It was hard not to notice that every new entertainment technology Ballmer introduced heaviy involved Facebook. He must have said "Facebook" 10 times during his  presentation. And when he said that Xbox Live has 30 million members, it was hard not to mentally compare that with Facebook’s 550 million global users.

But still, while Apple still has the cool quotient when it comes to creating consumer products, Microsoft showed that they haven’t given up on their ambition to be in the game.

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Everyone knows that digital sales of movies and TV shows are only a fraction of the revenue that can be produced from every other platform.

But it turns out that that is partly Hollywood’s own fault, at least in the case of one major studio.

At Sony, a catalogue of some 25,000 titles of films and television shows is barely being exploited digitally, I learned from one executive who I chatted with at CES.

The reason for that are multifold. But here’s one example: This executive estimated that the music has been licensed for digital use on only about 1,500 to 2,000 titles.

Why is that? Because to do so costs a major chunk of capital. That means a large expense will get added to some division head’s balance sheet, hurting his numbers for the year and subsequently eating into his bonus. The benefit will not outweigh the upfront cost for some time, so it’s not worth paying the price internally.

Other obstacles include the cost transferring titles from film or tape to digital so they can be sold — same problem. And another huge project involves adding metadata to every movie frame, a post-production add-on project that requires the latest face-recognition technology.

In short, unless Sony figures out a way to fund the necessary changes to its deep catalogue, it won’t be able to take advantage of the growing digital revenues that are available — even as the traditional DVD revenues sink.

Said this executive: “Half of what Sony owns can’t be exploited digitally, and that’s a conservative estimate.”

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