CES: Gates to mark progress in digital entertainment

Microsoft Corp. Chairman Bill Gates is expected to mark progress in the company's strategy to provide digital content through a host of Internet-based channels and devices as he makes his final appearance at the International Consumer Electronics Show (CES) as a full-time Microsoft employee Sunday.

In a keynote address on Sunday, Gates and Robbie Bach, president of Microsoft's entertainment and devices division, are expected to reveal new partnerships for Microsoft's MSN, Xbox Live and Mediaroom IPTV services in an effort to provide more video content under Microsoft's consumer entertainment strategy. It will mark the 12th keynote at CES for Gates, who plans to go part time at Microsoft midyear to focus on philanthropic efforts through The Bill and Melinda Gates Foundation, which he runs with his wife.

In particular, Microsoft will unveil an exclusive deal with NBC to provide 2,200 hours of live event coverage through its MSN portal of the Beijing Summer Olympics, which is scheduled to begin Aug. 8, said Microsoft spokesman Tom Pilla. NBC will use Microsoft's Silverlight browser technology for video playback to provide not only live coverage of the games on MSN, but also 3,000 hours of on-demand access to events for users.

Other key partnerships Microsoft will reveal at CES are for its Mediaroom service. The company is dealing with cable providers and set-top box makers to deliver IP-based television to homes. Microsoft is teaming up with TNT, Showtime and CNN to provide new user experiences through a combination of programming, Microsoft's service and applications built into set-top boxes. For example, an application delivered through the partnerships would allow television viewers to watch programming from a camera angle of their choice, Pilla said.

Also, the company is expected to unveil a DVR Anywhere service for Mediaroom that will allow users to watch on-demand content from the service on a variety of devices, he added.

Another deal expected to be revealed Sunday will provide more entertainment through Xbox Live, the online service and community connected to Microsoft's most popular consumer electronics device, the XBox 360 game console. A deal with MGM will allow users to purchase and download films owned by the production company to their consoles to view whenever they want, Pilla said. To date, Microsoft has sold 17.7 million Xbox consoles, and Xbox Live has about 10 million members, according to company figures.

For the past several years, Microsoft has been building up a strategy to provide digital content, such as video and television programming, on a variety of devices and through various IP-based channels through several product lines, including Windows, Mediaroom, and its MSN and Live Internet portals. These products and how they may converge have been the focus of Gates' speeches at CES for the past several years, but for a time, it seemed the company's strategy was more vision than reality.

This year, Microsoft seems to be making some progress as it both battles and partners with companies in several sectors, including consumer electronics providers such as Sony Corp., Internet companies like Google Inc. and Yahoo Inc., major television networks, and cable television providers.

But the company still has a long way to go to boost the revenue model for its entertainment strategy, which revolves primarily around selling advertising online through content delivered through its Web and entertainment platforms. Google seems firmly affixed at the top of that market, and according to analysts, Microsoft is third behind Yahoo, which is in no danger of catching up to Google anytime soon.

"The MSN/Live business has been flat for years from a revenue standpoint," said Danielle Levitas, an analyst at market research company IDC. "No one is going to catch up with Google in the foreseeable future ... but Microsoft does need to figure out that space."

Levitas said Microsoft's plan to provide online services and content to support this plan has so far been spread out through disparate product divisions that act like "separate companies." She said it will be interesting at CES this year to see how Microsoft begins to tie all of these together into a cohesive consumer entertainment strategy.

Even as it enhances its Web-based content-delivery channels, the heart of Microsoft's consumer electronics strategy remains the Windows-based PC and its related designs, and hardware partners are expected to display new PCs and devices during Sunday's keynote. Among them will be the IdeaPad from Lenovo Group Ltd., an ultralight 11-in. notebook. Gateway Inc. and Dell Inc. will also be on hand to show off new computers based on Windows Vista, for which Microsoft has said it has surpassed the 100 million-license mark for both business and consumer versions.

Another hardware partnership highlighted during the keynote is one with Samsung Group, which plans to build Microsoft's Windows Media Center extender into televisions. The extender enables a wireless connection between Windows and TVs so people can view high-definition content from a Windows device on a TV screen.

On Sunday, Microsoft also plans to highlight its Milan surface computer, a tabletop device it revealed in May that uses wireless autosync and touch-screen capabilities. Microsoft is pitching the new size to industries such as hospitality and will demonstrate some early-adopter scenarios on stage during Gates' keynote, Pilla said.

Microsoft also plans to reveal some future-looking prototypes that use voice, touch and visual interface features, which Gates has long promoted as part of his concept of how people can interact with technology. One of those will be a so-called mobile navigator device, which he is expected to demonstrate at the end of his keynote.

One new consumer electronics product that Gates and Bach likely won't mention Sunday is Zune, Microsoft's digital media player that competes with the iPod, a device that is also part of the company's broader entertainment plan. According to IDC's Levitas, this is not surprising, considering how unsuccessful the product has been for the company.

"Zune is such a dog that they don't want to talk about it that much," she said.

Copyright © 2008 IDG Communications, Inc.

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