Mr iPlayer works his magic on Microsoft

Despite Jerry Yang stepping down as Yahoo!s chief executive and easing the way towards a fresh round of takeover negotiations, the prospects for suitor Microsoft seem little enhanced by the opportunity. Microsofts online business, even with Yahoo!s search business on board, would be as unlikely to turn a profit as ever. So far behind Google are they, even when their market share is combined.

Despite Jerry Yang stepping down as Yahoo!’s chief executive and easing the way towards a fresh round of takeover negotiations, the prospects for suitor Microsoft seem little enhanced by the opportunity. Microsoft’s online business, even with Yahoo!’s search business on board, would be as unlikely to turn a profit as ever. So far behind Google are they, even when their market share is combined.

So why has the visionary Ashley Highfield – father of the BBC iPlayer – skipped Project Kangaroo, the online video joint venture embracing ITV, Channel 4 and BBC Worldwide, to become Microsoft’s UK managing director of, yes, its somewhat troubled consumer online properties?

All right, the largely free Kangaroo service looked as if it was going nowhere slowly, entangled in an impenetrable thicket of regulatory discussions over the video-on-demand market. But that was no reason to jump from the frying pan into the fire.

And yet his move is not the self-immolation it appears at first sight. Highfield has a number of qualities which mark him out as very suitable for the challenge ahead of him. Although he has little formal experience of sales and marketing (an important aspect of the new job), he is supremely gifted in understanding what consumers want from new technology and distilling its frightening complexity into a simple and compelling proposition (not least that, whatever it is, it works properly).He’s at home in the culture of big brands (the BBC and NBC before that), so acutely aware of their bureaucratic shortcomings. And, most unusually perhaps for an entrepreneurial type, he’s capable of great patience. Those who believe he may become disillusioned with Microsoft’s robotic culture should remember he spent nearly four years championing iPlayer before it became the runaway success it is today.

That said, what is Highfield’s big idea for Microsoft? A clue can be gained from his speech at the Edinburgh International Television Festival two years ago, in which he presented a persuasive view of television’s future. The gist is that the TV industry is going to be whipped by the (long) tail of its own content archive. Consumers will spend increasing time –thanks to more sophisticated search tools and filters – creating their own schedules, wrapped around a considerable amount of user-generated material. The winners in this new contest for the consumer’s attention are likely to be the best brand aggregators, who have locked down their intellectual property, secured on-demand rights to what they don’t own, and invested in the right technology. Prophetically, perhaps, he even speculated upon Microsoft’s Digital Home “working successfully [in a hypothetical 2011] where it is now a piece of cake to throw video around the house from PC to TV.”

Microsoft may have lost the battle for search, but the battle to become a major home entertainment hub has only just begun. In the world of on-demand video, it is less obvious that Google will be the winner. YouTube, for all its popularity, is struggling to find a commercial rationale. Hulu.com, sponsored by News Corporation and NBC, is beginning to show how a licensed content alternative might work. Highfield has definitely got the vision, but will he succeed in getting past all the rights issues which are a pre-condition to making Microsoft a major consumer online hub? That is the question.

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