Microsoft Surface Tablets: A Core Strategic Change For Microsoft.

Yesterday, in a much-hyped announcement, Microsoft unveiled its future tablet offerings — both an ARM and an Intel-based 10.6-inch tablet running their respective flavours of Windows 8.

While no pricing details have been announced, these aren’t budget devices: they are likely to be on par with premium Android tablets ($500) and the iPad ($650) for the ARM-based device and approaching Ultrabook prices ($700 to $1000) for the Intel-based tablet. I’ve written previously about how the tablet war wouldn’t really kick off until Microsoft arrived, so what can we draw from these initial announcements?

  • The Intel tablet will clearly be targeted at business, at least initially. Microsoft has been running interference over the past two years around businesses adopting iPads as core employee devices. When the Intel-based Surface ships (probably early 2013), it will at last have a proper solution for its big enterprise customers — and one that it can supply directly rather than relying on the vagaries of OEM support. Given a reasonable price point, proven compatibility with legacy Windows applications, and robust security and remote management abilities, I would envisage high levels of interest in the product.
  • Ouch! Talk about kicking OEMs when they are down. Dell, HP, and Acer are all reporting poor financials, mainly thanks to the lacklustre PC market (Lenovo is an exception here, doing rather well, thank you very much). Imagine you are in their position; suddenly, the biggest software supplier you work with has decided to build hardware — and not just any hardware, but the new premium form factor you were planning to use to relaunch your business. Sure, this might “prime the pump” for Windows 8 tablets from other OEMs (as Ballmer hopes) or it could be like partnering with Nokia on phones — instantly alienating other manufacturers like HTC, Samsung, etc.
  • The Windows RT Surface — hmm. Windows RT on ARM seemed like a great idea when announced last year, but in the subsequent months, Intel has pulled a rabbit out of its hat and got x86 architectures performing almost as well as ARM while not being power hogs. So, you’ll now have the choice of a premium ARM tablet running Windows RT (admittedly with free MS Office) but doing little else that people would recognize as Windows — or an x86 tablet running “proper” Windows 8 with full (or nearly full) backward compatibility for more or less the same price. This is not a difficult choice. Admittedly, given that Microsoft is targeting businesses initially with the x86 tablet, its version will be more expensive, but expect one of the OEMs to have a cost-comparable 10-inch tablet running full Windows 8 at or just after launch.
  • It’s time for Android to step up. Android tablets have represented the only really viable alternative to the iPad to date, and yet most have failed to make a mark with buyers. We’re finally getting some good devices (like the ASUS Transformer and Samsung Galaxy Tab), and the Google Nexus tablet is — allegedly — just around the corner. If manufacturers (and Google, of course) want to stay in competition, they need to up their game and produce more stable, aggressively priced devices that can either undercut the Windows/iOS devices (like the Amazon Fire) or offer something better.
  • Are apps the be all and end all? Much discussion is already centring on whether the Surface tablets will have a sufficiently developed apps marketplace to thrive. Certainly, the iPad has been driven by the legacy success of the iPhone apps marketplace; certain categories of applications, such as games, social media clients, and photo manipulation, figure highly in terms of what people use their tablets for. Given that this is effectively a new platform, the ARM Surface will need apps to survive, but the x86 Surface may be able to flourish (at least initially) without this. Why? Windows 8 (on x86) will be the first OS designed for a tablet with backward compatibility (and no — backward compatibility with a phone doesn’t count); on day one, it will already have access to more apps than all the other platforms (although, admittedly, many of these won’t work well with the Metro UI out of the gate).

Overall, while we’re still awaiting vital details, the Surface announcements do at least show that Microsoft is prepared to make a major strategic shift into hardware to protect its position. I have high hopes for the x86 Surface (and the competing OEM that it might spur), but I see the ARM Surface device as falling between multiple stools — a tiny apps market, not as polished as an iPad, not as cheap as an Android device, and not as practical as its own stablemate.

E3 2012: A Quiet Year For Videogaming

E3 took place in LA last week, perhaps for the last time, but it failed to really hit the headlines in the way it usually does. Why? Well, as expected, it was a very quiet year for announcements, with most firms recognizing that now is not a great time to heavily invest in the industry (see the recent game retail crisis, etc.). It was common knowledge that Sony and Microsoft were unlikely to announce new consoles, but even Nintendo failed to excite, despite the Wii U coming out later this year. However, there was some interesting news aside from the inevitable announcements of game title sequels.

  • Microsoft focused on the “home entertainment” angle. The Xbox has always been a potential Trojan horse to get Microsoft into consumers’ living rooms — and it demonstrated this strategy at this year’s E3: new music services, deals on video streaming, and, most interestingly, SmartGlass technology to link various Microsoft-based platforms.
  • Sony played it straight. Along with some new game announcements (mainly sequels, of course), it announced a revamp of PlayStation Plus — adding more free full games to make the service even better value. Sony’s interesting new product was Wonderbook: Book of Spells, an augmented reality (AR) book tied to the Harry Potter franchise that works with the Move peripherals. Sadly, while Sony has years of interesting AR/video products (dating all the way back to EyeToy in 2003 and EyeToy:Chat in 2005), these never seem to draw in consumers in sufficient numbers.
  • Nintendo snatched defeat from the jaws of victory. It should have walked away with the conference, but instead it failed to impress — failing to confirm pricing or launch details for the Wii U. Still, we got Pikmin 3 — finally! Luckily for Nintendo, at least some of the third-party publishers announced some interesting Wii U titles.

Elsewhere, the show highlighted a slew of sequels from the major publishers and the continuing resurgence of the indie developer sector. Most interestingly, Peter Molyneux’s new firm 22Cans announced Curiosity; it’s not really a game but more of a social media experiment. Elder Scrolls Online also got its first real showing. Whether the franchise can reverse the ongoing trend toward free-to-play (F2P) MMOs remains to be seen; it’s a strong brand but, arguably, not Star Wars strong and The Old Republic is losing subscribers.

What is E3 good for?

Slow years like this inevitably lead to questions about whether E3 is as relevant as it once was. After all, many of the new game announcements were trailed or leaked prior to the show; with so many online sources (Eurogamer, Joystiq, Kontaku, Spong) covering gaming every day of the year, E3’s no longer a great way of getting that big-hit mainstream press coverage. However, E3 is:

  • Great for doing proper business. While the gaming media (and gamers) bemoaned the move to a much smaller show in Santa Monica in 2007 as lacking in glamour, you can bet just as much useful business was done between distributors, retailers, developers, and publishers.
  •  A useful date in the diary for an industry temperature check. E3’s June date puts it right at the point when vital Q4 titles and hardware have been finalized — meaning distributors, developers, and the media get hands-on with near-final game builds or hardware. Admittedly, given that some titles have already slipped to 2013, the usefulness of the timing has been somewhat diminished this year.
  • A great venue for the whole gaming ecosystem to have a meeting of minds (hopefully). E3 was born in the PC gaming age, just as consoles were enjoying their second coming (e.g., original PlayStation, Sega Saturn). It has continued to be dominated by these platforms — mostly the consoles and their portable stable mates. While recent years have seen some embracing of mobile gaming, the booming casual/social game market hasn’t been particularly well represented. This is changing: Zynga was at the show this year for the first time — albeit on more of a recruitment drive rather than to demonstrate its wares — and the pace of change should accelerate, turning E3 into a truly platform-agnostic forum for the industry.