Microsoft, Sony to Develop Interactive TV Products

Microsoft Corp. and Sony Corp. announced an alliance Monday under which the Japanese consumer electronics giant will develop an interactive television set-top box to be available next year.

The agreement is the latest of more than a dozen announced alliances through which Microsoft, the leader in software for personal computers, is seeking to extend its dominance in the emerging area of interactive TV.

Analysts said Redmond, Wash.-based Microsoft can benefit from Sony’s expertise in consumer electronics, but they noted that it faces intense competition in a market not yet fully defined.

Officials of Microsoft and Sony said they signed a letter of intent to cooperate last July and after months of negotiations have agreed to focus at first on two products: a set-top box for consumers and a video server for private networks.

Analysts believe the set-top box--a small, relatively inexpensive computerized device that would expand the capabilities of the television--will be a critical component of any interactive television system.

Alan Yates, an executive with Microsoft’s advanced consumer technology group, said set-top boxes made by Sony and other manufacturers based on Microsoft architecture could be available to consumers by 1996.

“The general plan is for us to roll out to consumers in ‘96,” Yates said. “Sony would certainly be right there.”

NEC Corp., Hewlett-Packard Co. and General Instrument Corp. are also working with Microsoft to develop set-top boxes.

“There would be four different set-top boxes using the same software,” said Yates, business development manager for the Microsoft group.

Microsoft has been spending $150 million a year on research and development of interactive television and other advanced technologies that go beyond its basic software business.

In the company’s most notable alliance, Microsoft and Tele-Communications Inc., the nation’s biggest cable TV provider, are testing an interactive television system based on Microsoft’s Tiger technology, which uses linked microprocessors rather than supercomputers to deliver video on demand.

Microsoft has also signed up several other cable and telecommunications companies to help it test the Tiger system, which would compete with rival approaches being developed by Oracle Corp., Silicon Graphics Inc. and others.

Peter Rogers, an analyst with Bear Stearns, said it is “way too early to tell” whether Microsoft will be successful in competing against such giants as Time Warner Inc. and Bell Atlantic Corp.