David Bloom is a contributor to Deadline.
Microsoft’s announcement this morning that Steve Ballmer, the oldest of the old guard at what was once the biggest of the big tech companies, is leaving as CEO should be a major deal in Hollywood as well as Silicon Valley. After all, Ballmer and the tech giant he’s helped run for more than three decades have spent billions of dollars on countless entertainment-related initiatives trying to take their tech success to Tinseltown, including the latest big hire of former CBS network chief Nancy Tellem as president of Microsoft’s entertainment and digital media division. But will Hollywood notice Ballmer’s departure? Not really. He doesn’t even do the big CES keynote address anymore. And Hollywood’s likely indifference says a lot about Ballmer, Microsoft and the challenges the entire tech industry continues to have in decrypting Hollywood (and to be fair, vice versa).
Related: Microsoft CEO Steve Ballmer To Retire Within Next Year
At the May unveiling of the Xbox One, Tellem got on stage to say her unit is producing video programming for the console across every genre. She intimated that the studio’s programming would move far beyond traditional television, to take full advantage of the connectivity, motion-detection, emotion-detection and other interactive capabilities of the Xbox One. Less clear is whether that interactive programming will find an audience, especially given Xbox One’s high price, poor E3 showing and competition from a new Sony device and lots of far cheaper and more mobile alternatives. Audience sizes, especially in the first couple of years of the new console, will almost certainly be uncomfortably small for yet another expensive entertainment venture.
To head off some of that, as Deadline’s Nikki Finke and David Lieberman wrote, Ballmer recently joined Tellem on a series of meetings with Hollywood big-shots. The June trip was designed to both test support for their programming initiatives and build more interest among talent, dealmakers and producers. What hasn’t surfaced is whether those conversations have turned into anything substantive.
Related: Nancy Tellem Talks Xbox Entertainment Studios, Finally
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Related: What Does Ballmer’s Departure Mean For Microsoft In Hollywood?
Steve Ballmer succeeded Microsoft co-founder Bill Gates as CEO in 2000. On announcing his retirement this morning, he said, “There is never a perfect time for this type of transition, but now is the right time.” One question Ballmer’s exit brings up is how this might affect Microsoft’s nascent Xbox Entertainment Studios. Ahead of the E3 confab in June, Ballmer was escorted around town by the division’s president Nancy Tellem to lobby her closest Hollywood pals with an intimate preview of the new Xbox One capabilities. It was part of Ballmer’s effort to drum up exclusive content for Xbox One’s new customized TV and entertainment apps. But it was also, an insider told Deadline at the time, “to reiterate Microsoft’s commitment to transitioning its business to devices and services and to explaining that Hollywood entertainment is a big part of that. Microsoft in the past has just dipped a toe but now has a real commitment.” In July, Microsoft announced a sweeping reorganization that created teams to focus on various functions rather than dividing the company by products. In his statement today, Ballmer said, “My original thoughts on timing would have had my retirement happen in the middle of our company’s transformation to a devices and services company. We need a CEO who will be here longer term for this new direction.” MarketWatch notes that Microsoft has more than tripled in size since Ballmer took over, but revenue growth has stalled recently as PC sales have declined. In a memo to employees, Ballmer said he would continue as one of Microsoft’s “largest owners.” Prior to today, Microsoft stock had gained 21% this year. Shares were up more than 7% after this morning’s opening bell. Here’s Microsoft’s official release:
REDMOND, Wash. — Aug. 23, 2013 — Microsoft Corp. today announced that Chief Executive Officer Steve Ballmer has decided to retire as CEO within the next 12 months, upon the completion of a process to choose his successor. In the meantime, Ballmer will continue as CEO and will lead Microsoft through the next steps of its transformation to a devices and services company that empowers people for the activities they value most.
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The reorganization is so sweeping that the company gave it a brand: One Microsoft. The goal is to “see our product line holistically, not as a set of islands,” CEO Steve Ballmer tells staffers in a memo today. Instead of dividing the company by products, the new structure includes 12 teams that focus on functions including Engineering, Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, HR, Legal, and COO. In addition, Ballmer says, each major initiative “will have a champion who will be a direct report to me or one of my direct reports” and be empowered to “drive a cross-company team for success.” Among other things, Microsoft will “focus on completely reinventing experiences like creating or viewing a creative document” or communicate at work and home. “We are going to immerse people in deep entertainment experiences that let them have serious fun in ways so intense and delightful that they will blur the line between reality and fantasy.” Investors seem to like the change. Microsoft shares are up about 2% in mid-day trading. But BGC Financial analyst Colin Gillis warns that “you don’t make massive sweeping changes like this unless something is wrong.” Microsoft will be harder to break up, he adds, and the reorg “increases the power of the CEO” because it eliminates heads of business groups. “Major reorgs such as this can serve as a negative distraction for months before potentially offering benefits.”
Listen to (and share) episode 38 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s Executive Editor talks with host David Bloom about the recent trip by Microsoft’s Steve Ballmer and Nancy Tellem to romance Hollywood moguls with the Xbox One ahead of next week’s E3 videogame convention; Google’s pitch for movie marketers for their ad dollars; whether Amazon Prime can move beyond the shadow of Netflix with deals such as this week’s Viacom arrangement; and why Wall Street punished Tivo’s stock price after its latest lawsuit settlements.
Deadline Big Media, Episode 38 (MP3 format)
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