Founders at Work.pdf

188 Founders at Work
adopt other technologies that they felt might be competitive, and the fact it was
just a large organization, no worse than any other large organization, I’m sure,
but, nonetheless, it was a large organization with a lot of politics—it became
unbearable.
But I think in the end they recognized that WebTV was a profitable thing
for them, because they ended up investing in it more, and now it’s become
MSNTV. And it actually is a significant profit sector. WebTV was marginally
profitable in its 18th month of operation and has been profitable every month
since then, to this day. In 2005, 10 years after founding, WebTV (now called
MSNTV) grossed about $150 million for Microsoft with 65 percent gross margins.
Over its 8 years in the market, WebTV has grossed over $1.3 billion. We
never expected people would still be using a dial-up connection and browsing
on their TV in 2005, but there’s still a significant market there for a device like
WebTV, primarily for older people who want to be connected to the Web and
email, but just will never buy a computer.
The other things we did with it that I was very excited about—that I was
hoping to really capitalize on, which was moving to satellite with DVR and
adding more interactivity and eventually moving to broadband cable—they
have not been successful at pursuing. I think with the satellite stuff they actually
introduced a couple of reasonably good products, but they got tripped up in
the business negotiations with that, and the cable operators are very resistant to
working with Microsoft.
Now their new thrust, which I think there’s some significant opportunity
with, is with IPTV. And that sort of is what the legacy of WebTV moved into.
Peter Barrett is heading up that effort. He was the person who created the first
browser on WebTV. And here he is still at Microsoft—over 10 years later, if you
can believe it—and he’s now trying to get television to work through the
Internet, while what we started doing was trying to get the Internet to work
through a television.
Livingston: What has the potential to go most wrong in the first year when a
startup is such a fragile organization?
Perlman: The worst thing that can happen to a startup is if the founding
team—or the people who are leading the thing—do not get along. And it’s
deadly when they don’t get along in front of the troops. I’ve come to realize
over the years that companies are just the people that make them up. We like to
think of them as business enterprises and having this value and that value. Well,
if you are going to distill it down to just patents and you are just going to go after
people for infringing your patents, I agree. Those companies are simply made
up of intellectual property assets. But any organization that actually has a product
they are trying to ship and/or service they are trying to provide, it mainly
comes down to the people. And the attitude of the company distills from
the top.
In an organization that is very large and has existing businesses that have
been running for a long time, you could have some not-so-great things happen
in the top of the company, and it doesn’t have as much impact. Maybe the