Windows 7 Tablet + Xbox: Why Microsoft Needs An “XPad”

In the two weeks since I guest posted on Ars Technica about the iPad and its role in a phenomenon I’m calling “Curated Computing,” comments have been heated and very interesting. Eliot VanBuskirk frames the debate this way on the Wired Epicenter blog:

“Curation is the positive flip side of Apple’s locked-down approach, decried as a major, negative development in computing by many observers, present company included. Who would have thought that in 2010, so many people would pay good money for a computer that only runs approved software?

It runs counter to the idea, prized by geeks, that computing equals freedom. If it were Microsoft doing this, we’d all be storming the Gates with torches and pitchforks.”

I don’t think that you have to exercise Apple’s level of control (e.g., not letting developers use third-party tools like Flash, not approving apps that threaten your business model, etc.) to create a compelling, curated experience — an experience in which content and functionality are deliberately restricted to serve a new form factor like a touchscreen tablet or a wearable device.

In fact, I think Microsoft could — and should, as J.P. Gownder and I argue in our new report — create its own Curated Computing device to compete with the iPad. Microsoft can draw from its experience designing other streamlined, stylish devices like the Kin phones to create successful a Windows 7 tablet, either on its own or with partners like HP, Dell, Lenovo, Samsung, ASUS, et al. A Microsoft tablet that synchs with the Xbox 360 — and its upcoming Natal interface — would be a killer hub of the digital home. Windows 7 already enables your PC to act like a DVR for Internet video — what if a Windows 7 tablet could stream that video to your Xbox so you could watch it on your TV, and likewise, the Xbox could stream games to and offer Xbox Live connectivity on your tablet? Apple left a huge window (pun intended) open by not integrating the iPad with the TV (it has no direct HDMI output, for example). A Microsoft tablet could do a better job than the iPad of replacing your living-room laptop, and it could be an incredibly powerful portable gaming device. As of today, iTunes lists nine of the top 20 paid apps for the iPad as games.

Tablets are creatures of multi-PC households; the iPad especially is a tethered device that requires another PC for activation and synchronization. If you consider the ecosystem of devices in which a tablet exists, Microsoft has claims on the digital home that could be made stronger with a successful tablet. According to Forrester’s data, as of Q4 2009, 90% of US online consumers said that their primary home computer ran some version of Windows, versus 5% that run a Mac OS (an additional 5% said Linux, other, or “don’t know”). The same survey found that 18% of US online consumers said that they own and use an Xbox 360. Only 1% said that they own an Apple TV.

Microsoft knows the stakes are high. Microsoft’s recent reorganization of its Entertainment & Devices division underscores the pressure Microsoft feels to improve its consumer device business, which accounted for 11% of its revenue last year, according to The Wall Street Journal. Microsoft’s unwillingness to bring the Courier tablet prototype to market suggests that the company still has work to do to make a viable iPad competitor.

At stake for Microsoft is no less than the future of the OS: For Microsoft to remain relevant to consumers, it needs to adapt its operating system to new form factors beyond the traditional PC. Forrester estimates that tablets will outsell netbooks in the US starting in 2013, and tablets will constitute 20% of all PC sales in the US in 2015. Microsoft needs its operating system on those tablets. Now it needs to convince its partners — and consumers — that they need Microsoft, too.