How Does Buying Skype Help Microsoft?

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STEVE INSKEEP, host:

Lets follow-up, now, on Microsofts announcement that it is buying the Internet phone service Skype. We want to find out what new technologies, or services we might expect down the line in the public, so weve called Bloomberg News' technology analyst Rich Jaroslovsky.

Welcome back to the program.

Mr. RICH JAROSLOVSKY (Technology columnist, Bloomberg News): Thank you.

INSKEEP: How do these companys products fit together anyway?

Mr. JAROSLOVSKY: Well, that will be a really interesting question to see. Microsoft has enormous businesses, in terms of Windows and Microsoft Office, but that market isn't really growing. Whats exploding is the demand for mobile services. Microsoft needs to come up with cool services that it can use to revive its phone business, for example. Microsoft also has an enormous business in terms of the Xbox and the Xbox Live service and this new product that they came out with last year called the Kinect, which is a game controller. But you can see how Skype may well fit with Kinect in terms of being able to video conference over the Xbox platform.

INSKEEP: So they might merge the video conferencing service they already have with what Skype currently does? How would the video games work into this?

Mr. JAROSLOVSKY: Well, it isn't so much about gaming, but theres going to be a huge struggle thats already going on for who controls the living room, who controls the TV, who controls the connectivity of the TV. And the Xbox is kind of a stealth entry from Microsoft because its hooked up to so many TVs, its increasingly hooked up to the Internet, and the Kinect controller is a game controller. But if you ever saw things like the movie "Minority Report," for example, where you are that you can be sort of in an immersive virtual world and interacting with other people, you could see how something like Skype would fit with that kind of a future.

INSKEEP: Explain that a little more. What do you mean?

Mr. JAROSLOVSKY: Well, what Kinect does is use your entire body as a controller, you don't hold anything. So imagine that sort of an immersive environment for being able to communicate with people and be in their world, be in their living room, for example, and you could do that just as easily as you could sit in your den and play a game.

INSKEEP: Now the last time that we talked, you also mentioned the battle for the living room. You talked about Apple may be wanting to go from the iPhone to the iPad, to basically running or owning or making your television set. And you're saying this is what's happening again with Microsoft. They've got the game technology already in the living room; they want to own the whole living room.

Mr. JAROSLOVSKY: I think that's part of what's happening, but this is much more than just the living room. I think they see Skype as digital glue that can tie together all sorts of disparate products and what Skype is, is a way of hooking the things on up.

INSKEEP: Let me ask one other thing. As many people will know, the most basic Skype service is simply talking with a video accompanying from one computer to another. That service is free. You pay nothing right now. But as they made this announcement, the heads of companies talked about commercialization or monetization of Skype. Does that mean they're going to start charging me for that?

Mr. JAROSLOVSKY: My guess is no. I don't think that it's necessarily about putting up toll booths on things that are free now. It's not about taking something away from people that they now enjoy and that has helped make Skype as successful as it's been, but rather look for new opportunities.

INSKEEP: Rich Jaroslovsky is the technology columnist for Bloomberg News.

Thanks very much.

Mr. JAROSLOVSKY: Thank you.

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