Microsoft launch an advertising campaign called Laptop Hunters where they give people a set amount of money to find a laptop to meet their needs. If they get it for less they keep the cash. The recent commercial has a kid and his mom shopping for a new laptop.

This marketing campaign does get enough credit for being smart and effective. Microsoft’s response to Apple’s commercials has been direct and bold. Given the current economic environment, people are much more focused on making every dollar count. And these commercials hit and the heart of Apple’s premium pricing which has helped them amass a war chest of cash. Now that premium pricing will be under pressure.

The bigger question is how Jeff Bezos can scale this beyond the Kindle device. Even though he has found a niche hardware business that is probably profitable it doesn’t scale to 100s of millions of people.  Beyond the tech savvy affluent few, not many people are going to be shelling out $350 on a device with a singular purpose. Especially when you can get a netbook for roughly the same price.

We have seen the netbook PC category explode over the last two years and Microsoft was forced to make a key decision. Give up market share to Linux or lower the price of Windows. With the average price of a netbook selling for around $400 Microsoft made a smart business decision and sold Windows XP at a discount. Microsoft now has over 80% of the netbook running Windows. But Windows Vista would never be a credible alternative on netbooks. It required too much hardware to run optimally and Microsoft was worried about cannibalization.

 In comes Windows 7, when I first booted Windows 7 the first time I could tell something was different. It was snappier and more responsive. Applications loaded fast and even with the minimum hardware requirements the Windows Aero interface was enabled and performed like my desktop running Vista. After using it for a while I can only describe it with one word, solid. There are not any flashy features but several enhancements that you quickly become accustom to. Microsoft has clearly taken a different approach with the design of Windows 7 and it shows running on netbooks. Windows 7 is by far the best Windows beta I have ever seen come out of Redmond. It looks like Microsoft is starting to get its mojo back.

Netflix and LG Electronics announced that LG will soon introduce TV sets that can stream Netflix movies directly from the Web without an external box. “It’s hugely symbolic,” said Netflix’s chief executive, Reed Hastings. “The holy grail has always been to give the TV an Internet jack in addition to the cable jack. It’s an early glimpse of the long-term future.”

Netflix has been hard at work practically equiping every consumer electronic in the home with the capability of instant movie viewing.  From Tivo and DVD players to Xbox 360, Netflix has been fast to lock up as many devices as it can. This partnership with LG is really significant because it is a big step forward in making the TV become a connected device in the home.

LG’s line of LCD and plasma televisions will be called Broadband HDTVs and are expected to cost around $300 more than comparable models without Internet access, said Tim Alessi, director of product development at LG Electronics. Owners of the televisions will not be able to browse the Web freely–the TVs’ processors and memory chips are not up to that task. But the Broadband HDTVs will have access to a variety of specific video sites

Netflix subscribers who buy one of these devices can hook it up to their TVs to watch movies that can be downloaded from the Internet instantly, as part of their monthly rental plan. The televisions will be able to stream any of the 12,000 films and television shows in Netflix’s Watch Instantly library, many of which are provided by Starz, the premium cable television service.

In a new booked called The Race For A New Game Machine, he describes how the project went off the rails, ending up with IBM engineers creating the processing chips for two rival video game consoles. In the process IBM sold parts of the cell processor design to Microsoft for their Xbox 360 and Microsoft benefited from over $400 million in R&D funded by IBM, Sony, and Toshiba. The R&D teams worked in the same building and in some cases Shippy met with Microsoft engineers right after meeting with Sony engineers. Ultimately Microsoft benefited a great deal from Sony’s work on the cell processor. Microsoft launched their Xbox 360 a year before Sony launched their PlayStation 3 and the rest is history.

Early in December photos leaked on the OPhone and it was rumored to be built on Google’s Android platform. This would be a big step up from Google’s G1 device in many ways. Lenovo and China Mobile could have a legitimate iPhone killer on their hands. Time will tell but if this is build on Android, Google is quickly closing the gap on Apple.

Sony made two big bets with PlayStation 3. First was the cell processor which promised to be a breakthrough in computing power and bridge the gap between x86 architecture and specialized hardware. It proved to be challenging to develop for. The second big bet was on the Blu-rayDVD format. This bet was a mixed blessing. The shift from standard DVD to HD DVD has been much slower than other industry format changes. Sony ultimately won the format battle with Toshiba but they might have lost the war. The Blu-ray drive which is included in every Sony Playstation 3 causes the price of the PlayStation 3 to be $200 more than other consoles like the Xbox 360.

PlayStation 3’s run rate has a compounding negative impact on Sony. Game developers are less likely to build blockbuster titles something the PlayStation 3 has lacked.  Even more important are the third party royalties that come with licensing the PlayStation 3 platform and contribute a majority of profit to Sony’s gaming business. The PlayStation 3 has become a big boat anchor on Sony’s bottom line.

The Wii has been a run away success from a unit perspective. Nintendo cracked the code, broadening the gaming category by pioneering physical game play. Xbox 360 took the next gen gaming console to a new level by creating games in full HD. Microsoft also created an online service with Xbox Live that made games more interactive and social. Microsoft also addressed the expense of game development by creating a tools platform with XNA that makes it easily and cheaper to develop games. All in all Nintendo and Microsoft have both made significant strides in the console wars. Sony seems to be left in the dust.

Apple had launched the iPod Nano a year earlier and the game was over. Apple’s unit volumes went up exponential and in no time,  everyone that was ever going to own a music device on the planet had an iPod. In Zune’s 2nd generation Microsoft started to get the software right and in many ways its superior to the iPod software but it seems too little too late. The puck is already shifting away from pure play music devices. 

At first you would think that this is a razor blade business. Sell the razor (hardware) for little to no profit and make all the money on selling razor blades (content and services). Except the paid content business is a horrible business. There is no money in that business, it just adds value to the device you are using. Apple makes all their profit selling hardware. So what is the future of Zune?

There has been a lot of specualtion that Zune will become a Microsoft phone. All of these rumors could not be farther from the truth. Zune is about the software. Its more of a strategy to compete with the growing dominance of iTunes than it is anything else. Microsoft needs a simple way to distribute software and services across the PC, phone, and TV. Right now Microsoft’s strategy for delivering digital content is extremely fragmented. For example, I cant get the same content on my Zune as I can on my Xbox 360. I also can’t easily share that content across other devices like my PC or phone. Microsoft has to fix this or they will never be able to compete with Apple for the consumer.

But the most interesting thing is how these types of devices are blurring the lines for multimedia experiences. With a 8MP camera on board it becomes a compelling multi purpose device. Now I only need to bring one device out with me.

The Samsung Pixon offers a compelling replacement to my point and shoot camera. I can now take high quality photos that are not just good enough to post on Facebook but can be printed and shared with family and friends.