11 Microsoft Acquires WebTV and Gains Control of Key Consumer Channel

Microsoft's acquisition of WebTV for $425 million at first seemed like the conspicuous consumption of a wealthy entrepreneur indulging himself with a new toy. Although the service represented a new frontier in media, its capabilities were immature by present day standards. WebTV, for example, could not access Web sites running Java applications. But what WebTV lacked in capability, it more than made up for in potential. The Internet-TV provider had successfully brought the information-rich public network into a ubiquitous household device. And with Microsoft's resources, the potential of this media hybrid became boundless-and so too Microsoft's influence on mainstream America.

As the chief architect of the Internet-TV medium, Microsoft could control both the context in which Americans view content and the "pipes" that they use to access it in this medium. Consumers would look to WebTV to organize and deliver their financial services information, for example, depending on the Internet-TV provider to select the financial services providers that best meet their needs. And if this selection service results in a transaction, Microsoft could also require a referral fee.

While this proposition is frightening to banks who see the potential of WebTV as a customer disintermediation medium, it is arguably a future that they must learn to work within, say sources. It is also a medium that could deliver a mass audience to financial service companies that create content and services that consumers relate to and request.

The alternative is for banks to attempt to develop a similar service themselves; historically speaking, that approach has cost them dearly. Rather than try to control the infrastructure, says Lee Spirer, principal in Booz Allen & Hamilton's financial services group, let the technology companies build the pipes. Banks need to concentrate on creating value within the framework so that they become necessary players in any financial services content offering. J.Bers