CES - Gates to mark progress in digital entertainment

Bill Gates will mark progress in Microsoft's strategy to provide digital content in his CES keynote.

Microsoft 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 CES as a full-time Microsoft employee Sunday.

In a keynote address 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 to drive Microsoft's consumer entertainment strategy. It will mark the 12th keynote at CES for Gates, who plans to go part-time at Microsoft mid-year 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 August 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 consumer homes. Microsoft is teaming up with TNT, Showtime and CNN to provide new television-watching 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 TV viewers to watch programming from a camera angle of their choice, Pilla said.

The company also 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 converge have been the focus of Gates' speech at CES for the last 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 like Sony, Internet companies like Google and Yahoo, 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 with 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.

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Elizabeth Montalbano

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